MESSAGE FROM THE CHAIRMAN
Table of Contents Page
Message from the Chairman 1
Special Feature:
Q&A with Tom Kenny 3
Special Feature:
Investment Strategy in Action
Denver Airport Bonds 8
Fund Reports
Franklin Arizona Insured
Tax-Free Income Fund 10
Franklin Florida Insured
Tax-Free Income Fund 13
Franklin Insured
Tax-Free Income Fund 16
Franklin Massachusetts Insured
Tax-Free Income Fund 21
Franklin Michigan Insured
Tax-Free Income Fund 26
Franklin Minnesota Insured
Tax-Free Income Fund 31
Franklin Ohio Insured
Tax-Free Income Fund 36
Statement of Investments 41
Financial Statements 95
Notes to Financial Statements 102
October 15, 1996
Dear Shareholder:
It's a pleasure to bring you the Franklin Tax-Free Trust's semi-annual report
for the period ended August 31, 1996.
The reporting period might well be described as six months of frequent
interest-rate fluctuations, as the 30-year U.S. Treasury bond bounced between
6.67% and 7.00%.* Some of this movement can be attributed to investors and
economists who have overreacted to anticipated actions by the Federal Reserve
Board (the Fed). Indeed, newspaper headlines in the last six months declared the
economy was overheating one day and stalling the next -- all of which seems to
suggest a slow growth trend.
Our Municipal Bond Department has recently been very active in sales of
pre-refunded bonds. Generally, we look to sell these securities to preserve the
share price of the fund. I encourage you to read the following interview with
Tom Kenny, Director of Franklin Templeton's Municipal Bond Department, which
discusses pre-refunded bonds in more detail.
*Source: Micropal.
We expect that the funds in the Franklin Tax-Free Trust should perform well if
the economy maintains its relatively slow growth pattern. Although the economy
appears stable at the moment, market uncertainties persist.
This uncertainty prompts us to continue to encourage individual investors to
maintain a long-term perspective. It is prudent to periodically consult with
your investment representative to ensure your investments match these goals.
This long-term orientation will help minimize undue concern caused by short-term
market volatility.
As a Franklin Templeton fund shareholder, you receive the benefits of
professional management and dedicated service. Should you have any questions
concerning the funds in the Franklin Tax-Free Trust, we would welcome the
opportunity to answer them.
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
Glossary of Investment Terms
Call Protection: the length of time during which a bond cannot be redeemed by
its issuer.
Coupon: the interest rate on a bond the issuer promises to pay to the holder
until the bond matures.
Full Coupon Bond: a bond with a coupon rate that is near or above current market
interest rates.
High Grade Bond/High Quality Bond: a bond rated AAA or AA by Standard &
Poor's(R) or Moody's rating services.
Investment Grade Bond: a bond with a rating of AAA to BBB.
Pre-Refunded Bond: a second bond is issued to pay off a first bond at the first
call date.
Primary Market: the market for new issues of securities; a market is "primary"
if the issuer of the securities receives the proceeds of the sale.
Secondary Market: a market where previously issued securities are bought and
sold; the selling dealers and investors receive the proceeds, not the issuer.
Tax Loss Carryforward: a tax benefit that allows a company or individual to use
past losses to reduce future tax liability.
Underwriter: an investment banker who agrees to purchase a new issue of
securities from an issuer and distribute it to investors, making a profit on the
underwriting spread.
Underwriting Spread: the difference between the amount paid to an issuer of
securities in a primary distribution and the public offering price.
SPECIAL FEATURE: Q&A WITH TOM KENNY
Tom Kenny, director of Franklin's Municipal Bond Department, discusses several
current topics, including interest rates and his outlook for the municipal bond
market.
GRAPHIC PICTURE OMITTED
Tom Kenny, Senior Vice President,
Director, Franklin Municipal
Bond Department
Tom, purchasing a municipal bond is considered a pretty safe investment. In the
last few years, however, we've experienced incredible volatility in bond
markets. Is this going to subside in the future, or is this the new way for bond
markets?
It's an interesting observation and -- you're right -- the bond markets didn't
seem to be as volatile a few years back. If you look at the recent bond market,
say since 1992-1993, you'll see that we've had three consecutive years of 200
basis point swings in opposite directions (See Fig. 1). Historically, that level
of volatility is unusual.
I think there are several reasons for the increased volatility. First, we need
to look at the Federal Reserve Board. The Federal Reserve Board has been slow to
adjust short-term rates in response to economic conditions, which has increased
uncertainty and speculation within the fixed-income markets. Thus, market
participants have reacted toward short-term economic data rather than focusing
on the big picture. Since the Fed has not made frequent adjustments to
short-term rates, the increased speculation has created a pendulum effect where
the market tends to overreact in the adjustment of long-term rates.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
So the Federal Reserve Board's restraint has helped to cause some unpredictable
market movement?
Just look at the number of times recently where market expectations of both
growth and inflation have changed dramatically. Earlier this year, nine out of
10 economists said we were going to be in a recession by the end of the first
quarter. Weeks later, they changed their outlook and expected growth at a 4%-5%
annual rate with fears of an overheating economy. Just in the last few weeks,
we've heard, "Well, maybe the economy is not growing that fast after all." So
the market's become very short-term focused -- that's one reason we're seeing
increased volatility.
Second, we are part of a much more global market today than ever before. Funds
tend to flow very freely from market to market.
Third, we have seen an increased use of hedge funds, which often take large
risks with speculative strategies. They've become very popular over the last two
to three years. Hedge fund managers tend to be very short-term focused, trying
to take advantage of undervalued situations. So they're in and out of markets
very quickly.
Last, I think the creation and use of derivatives, where speculators can control
huge amounts of bonds with very little capital at risk, has also caused some of
this volatility.
The increased volatility will probably remain as long as these themes exist.
Have these factors affected your investment strategy?
We try to stay abreast of economic conditions and interest rates in general, but
we don't try to second-guess the market in terms of the direction of rates, or
alter our fundamental philosophy and strategy because of short-term economic
changes.
Our approach is straightforward. With few exceptions, we seek credit safety and
income. I don't think shareholders want the volatility that might be generated
by chasing capital appreciation. If you look at the interest rate chart (Fig. 1)
and think of the number of times you had to be right if you were speculating on
the direction and absolute change in interest rates, you may have called one
swing correctly; but if you missed the other leg of it, you may have given away
everything you gained on the way up or down.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
We have a well-seasoned portfolio management team (the five senior portfolio
managers have over 170 years of collective experience) that manages our funds
for tax-free income. We believe that over the long term, income drives total
return. Total return is important. But, how you achieve total return is even
more important. Income has been responsible for more than 90% of the total
return of municipal bonds over the last 10 years (Fig. 2), as measured by the
unmanaged Lehman Brothers 20-year Municipal Bond Index.
So, by consistently investing for income, you should generate good total-return
performance. We think our shareholders, particularly those in tax-free funds,
are better served by using this consistent, long-term-oriented approach. It is
what distinguishes Franklin from most of its peers.
We have seen more insured bonds, particularly in California. Is this a long-term
industry trend?
I believe so, but it's more pronounced in California. The national percentage of
insured issues now coming to market is in the 54%-55% range. In California, it's
a little bit ahead of that.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Why are there more insured issues now?
It's a function of a couple of things, I think. Supply is still relatively low
when compared with 1992-1993, when we had record volume of long-term bonds
coming to the market. Overall supply dropped more than 45% from 1993, into the
$155-$160 billion range last year. This year, it's probably going to be up
somewhat -- maybe in the 10%-15% range.
Since we haven't seen a heavy supply of bonds coming to market, some insurance
companies have become very aggressive in trying to gain market share. They have
the capital, the capacity, the staffing, and the willingness to price their
premiums aggressively. As a result, it's been comparatively cheap for issuers to
obtain insurance.
How much has pre-refunding influenced your investment strategy recently, and can
you briefly describe what pre-refunding is?
A pre-refunded bond is one that will be paid off at its first call date, using
the proceeds of a second bond carrying a lower interest rate. Let's say a
municipality issues a bond paying 8% interest that will mature in 2025. Some
time later, interest rates drop significantly, as they did in the late 1980s and
in the 1992-1993 period, and comparable bonds are now paying, say, 6%.
Naturally, the issuer would prefer to pay this new, lower rate on its debt, just
as you or I would want to refinance our home mortgage.
One way issuers can reduce their borrowing expense is to refund higher-paying
bonds before they mature. To raise money to refund the higher-rate bonds, they
issue a second bond at the market's now, lower interest rate. The proceeds of
the second bond are invested in U.S. Treasuries, set to mature at the original
bond's first call date, which may be only five or six years away. The bond is
then termed "pre-refunded" to the call date.
When the bond becomes pre-refunded, the price can rise dramatically -- providing
an opportunity to sell it at a premium. Generally, a pre-refunded bond will
maximize its value when there is approximately five years remaining to the call
date.
That first bond sells at a premium now because it's backed by U.S. Treasuries
and it's still paying the higher interest rate?
Yes -- in addition, it is now a bond with a much shorter maturity -- i.e., the
call date versus the original maturity date.
What if you don't sell it?
Well, we know that in five years that bond will be called at 100%-102% of par.
It's currently selling at a premium of, say, 115% of par. If we do nothing right
now, the price of that bond will decline, from 115% of par to the call price,
thereby eroding its value over the next five years. No matter what interest
rates do, that bond price is going down.
Generally, when a bond hits the five-year mark, we look for an opportunity to
sell it, capture the premium, then reinvest the proceeds in the current interest
rate environment.
How does this benefit shareholders?
Shareholders can benefit in a couple of ways. We may purchase a new bond that
can't be called for at least 10 years -- so we've extended our call protection.
Also, if we can capture that premium, we can now buy 115% worth of new bonds at
today's current interest rates. We've protected the fund's share value from
eroding and also helped maintain the earning power of the fund over the long
term.
GRAPHIC PICTURE OMITTED
What sets your municipal bond department apart from others in the industry?
We use a very consistent, team-oriented approach to portfolio management. All of
our managers are using the same consistent strategy in our efforts to meet the
same overall investment objectives. Many times you'll see some other fund
companies where each manager operates on his/her own strategy.
Also, we're one of the few companies that truly manages for income. We believe
Franklin understands fixed-income and what investors look for.
Many of our competitors have come from an equity-oriented background and then
added a fixed-income side in recent years to round out their product line. This
perspective may not sound important, but we think it is. Some of our competitors
compensate their portfolio managers on a total return-oriented basis each
quarter. We don't.
Why not?
We believe if you're a fixed-income portfolio manager who is being compensated
on quarterly total return, you're probably going to be more inclined to make
short-term bets and take risks that you might not take otherwise. So your
interests may not be clearly aligned with the shareholders' interests. It does
really make a big difference.
Another thing that sets us apart is our research staff. Since we purchase over
95% of our portfolio holdings in the primary market, we spend a lot of time
analyzing credits up front, such as performing site visits, addressing legal
issues, and structuring issues to meet both our credit and portfolio
requirements.
Tom, thanks for your time.
My pleasure.
INVESTMENT STRATEGY IN ACTION: DENVER AIRPORT BONDS
This special feature demonstrates the research efforts made by the Franklin
Templeton Municipal Bond Department in selecting securities for our portfolios.
Please note that we may not currently hold these securities in any portfolio.*
The Denver International Airport -- a massive construction project meant to
replace an outdated Stapleton Airport -- became one of the nation's largest
public works projects, bringing thousands of jobs to the Denver area to build
the first new airport in the U.S. in 20 years. On the whole, we have been a
supporter of this project since the beginning, feeling that it was needed and
well-backed at the federal level. Between 1990 and 1994, we made five trips to
visit the airport site and meet with the Denver Airport Authority.
Bonds for the Denver Airport Credit were originally issued in May of 1990. We
did not purchase any during the initial release as we felt that the risk
outweighed the benefits at that time. Patience worked in our favor: shortly
after the original issue in May 1990, Continental Airlines -- one of the two
main carriers based in Denver -- filed for bankruptcy. As a result, Denver
Airport bonds deteriorated in price. At this point, we began to purchase in
quantity, acquiring various bonds yielding at or above the 9% level --
approximately 2.0% to 2.5% above the high quality bond market. Since 1990, we've
purchased approximately $320 million worth of Denver Airport bonds for several
of our tax-free portfolios.
Demand for Denver Airport bonds cooled somewhat until late 1993, when several
opening delays occurred and baggage system problems became apparent. These
complications, coupled with a general bond market sell-off in early 1994, caused
Denver Airport bond prices to plummet. At that time, the airport was
substantially completed and we had an opportunity once again to purchase bonds
at very attractive rates (yielding approximately 1.75% above high quality
bonds).
*This information is reported to give investors an insight into our portfolio
selection process. It is not intended to provide investment advice and the
opinions expressed herein may change at any time, for example, in response to
economic and market conditions.
In our opinion, August 1994 presented us with the last bargain opportunity for
this project: the authority raised $250 million for additional pre-opening
costs, including a new, standard baggage system. High quality bonds were
yielding around 6.10%, and we were able to purchase Denver Airport bonds
yielding 8.05%.
By the time the airport opened in February 1995, however, perceived credit
quality had improved and yields on these bonds dropped dramatically, leaving an
approximate .5% spread between them and high quality bonds. The last Denver
airport issue came to market in November 1995, consisting of insured bonds
yielding around 5.95%, roughly .20% above high quality bonds. We purchased these
bonds for our Franklin Insured Tax-Free Income Fund.
We employ an investment strategy of buying what we believe are fundamentally
solid investments during times of temporary weakness. This was the case with the
Denver Airport bonds. We purchased these securities when they were out of favor
with the market, based upon the airport's long-term fundamentals, and this
decision has greatly benefited our funds. In fact, these bonds have been one of
the best performers in the Franklin Colorado Tax-Free Income Fund's portfolio.
And, throughout 1995, the Denver Airport bonds were upgraded by most rating
agencies, and insurance companies have provided insurance for these bonds in the
primary and secondary markets -- a strong show of confidence in the airport's
ability to repay its long-term debt.
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
Your Fund's Objective
Seeks 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.*
State Update
Arizona's population reached 4.2 million in 1996, growing 15.4% since 1990.
Growth is expected to continue as the state shifts toward the service and
manufacturing sectors and away from cattle, cotton and copper -- Arizona's
traditional economic mainstays. An abundance of land, even in urban areas,
should help keep housing prices attractive and factor into the competitive wage
rates that attract businesses to the state.**
Franklin Arizona Insured Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
---------------------------------------
Education 34.2%
Utilities 33.0%
Hospitals 9.1%
General Obligations 7.1%
Industrial 5.0%
Sales Tax 2.9%
Certificates of
Participation 2.7%
Housing 2.6%
Miscellaneous 1.4%
Pre-Refunded 1.0%
Transportation 1.0%
---------------------------------------
For a complete list of portfolio holdings, please see page 41 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
The 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.
**Standard & Poor's Creditweek Municipal, July 8, 1996.
Performance Summary
The Franklin Arizona Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined 29 cents from $10.36 on February 29, 1996, to $10.07
on August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.25%,
based on an annualization of the current monthly dividend of 4.6 cents ($0.046)
per share and the maximum offering price of $10.52 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Arizona state personal income tax bracket of 43.0% would need to earn 9.21% from
a taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Arizona Insured Tax-Free Income Fund
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
----------------------------------------
March 4.6 cents
April 4.6 cents
May 4.6 cents
June 4.6 cents
July 4.6 cents
August 4.6 cents
Total 27.6 cents
----------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Arizona Insured Tax-Free Income Fund
Periods ended August 31, 1996
Since
Inception
1-Year 3-Year (4/30/93)
-------------------------------------------------------------------------
Cumulative Total Return1 5.53% 13.57% 19.19%
Average Annual Total Return2 1.02% 2.84% 4.04%
Distribution Rate3 5.25%
Taxable Equivalent Distribution Rate4 9.21%
30-Day Standardized Yield5 5.37%
Taxable Equivalent Yield4 9.42%
-------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 4.6 cent per share monthly dividend
and the maximum offering price of $10.52 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Arizona personal income tax rate of 43.0%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
The fund's manager agreed in advance to waive a portion of management expenses,
which reduces operating expenses and increases yield, distribution rate and
total return to shareholders. Without these reductions, the fund's distribution
rate would have been lower and yield for the period would have been 4.69%. The
fee waiver may be discontinued at any time upon notification to the fund's Board
of Trustees.
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal income taxes
through a portfolio consisting primarily of insured Florida municipal bonds.* In
addition, the fund's shares are free from Florida's annual intangibles tax.
State Update
Economic expansion in the state moved along at a strong pace, and Florida's
economic forecast expects growth to continue throughout the remainder of 1996.
Service, construction and trade sectors led state growth, with more than 64% of
Florida's workforce employed in these areas. Unemployment is estimated at 5.9%
through the end of 1996 -- which is down from the recessionary peak of 8.2% in
1992.
Florida's steady economic performance led to a slightly upward revision of the
1996 revenue forecast. Year-end results for fiscal 1996 are projected at $50.9
million in working capital reserve and a $261 million budget stabilization
reserve.**
Franklin Florida Insured Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
---------------------------------------
Utilities 51.0%
Other Revenue 14.9%
Hospitals 11.5%
Certificates of
Participation 7.4%
Sales Tax 4.9%
Housing 2.4%
Transportation 1.8%
Pre-Refunded 1.6%
Education 1.5%
Industrial 1.5%
General Obligations 1.5%
---------------------------------------
For a complete list of portfolio holdings, please see page 44 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Standard & Poor's Creditweek Municipal, July 22, 1996.
Performance Summary
The Franklin Florida Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined 25 cents from $10.02 on February 29, 1996, to $9.77 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.18%,
based on an annualization of the current monthly dividend of 4.4 cents ($0.044)
per share and the maximum offering price of $10.20 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum federal personal
income tax bracket of 39.6% would need to earn 8.58% from a taxable investment
to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Florida Insured Tax-Free Income Fund
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
----------------------------------------
March 4.4 cents
April 4.4 cents
May 4.4 cents
June 4.4 cents
July 4.4 cents
August 4.4 cents
Total 26.4 cents
----------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Florida Insured Tax-Free Income Fund
Periods ended August 31, 1996
Since
Inception
1-Year 3-Year (4/30/93)
-----------------------------------------------------------------------
Cumulative Total Return1 5.57% 11.65% 15.63%
Average Annual Total Return2 1.11% 2.24% 3.10%
Distribution Rate3 5.18%
Taxable Equivalent Distribution Rate4 8.58%
30-Day Standardized Yield5 5.17%
Taxable Equivalent Yield4 8.56%
-----------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 4.4 cent per share monthly dividend
and the maximum offering price of $10.20 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
The fund's manager agreed in advance to waive a portion of management expenses,
which reduces operating expenses and increases yield, distribution rate and
total return to shareholders. Without these reductions, the fund's distribution
rate would have been lower and yield for the period would have been 4.72%. The
fee waiver may be discontinued at any time upon notification to the fund's Board
of Trustees.
FRANKLIN INSURED TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal income taxes
through a portfolio consisting primarily of insured municipal bonds.*
Throughout this reporting period, nearly half the number of bonds coming to
market were insured by one of the four major municipal insurance companies. We
feel that increased competition within the insurance industry, rather than
municipal credit quality concerns, has played a significant role in the increase
of insured bonds available for purchase. The availability of these bonds enabled
us to concentrate our efforts on managing the portfolio instead of searching for
suitable investments.
We reduced the portfolio's holdings of bonds that were pre-refunded during the
low interest-rate period of 1992 and 1993. As indicated by the table to the
right, pre-refunded bonds represented only 17.6% of the portfolio's total
long-term investments on August 31, 1996, compared with 20.9% six months
earlier. With the proceeds of these sales, we purchased bonds with higher
current yields than were available earlier in the year. This pro-active move
should help bolster the fund's income and support our efforts to maintain the
dividend paid to our shareholders. (Please see the special Q&A feature on page 3
of this report for more information on pre-refunded and insured bonds.)
Franklin Insured Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
---------------------------------------
Utilities 27.6%
Hospitals 18.7%
Pre-Refunded 17.6%
Education 9.0%
Transportation 8.1%
Housing 6.0%
General Obligations 4.2%
Certificates of Participation 3.9%
Other Revenue 2.8%
Industria l0.7%
Sales Tax 0.6%
Miscellaneous 0.6%
Tax Allocation 0.1%
Marks-Roos 0.1%
---------------------------------------
For a complete list of portfolio holdings, please see page 46 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
Performance Summary
Class I
The Franklin Insured Income Fund's share price, as measured by net asset value,
declined 27 cents from $12.27 on February 29, 1996, to $12.00 on August 31,
1996.
At the end of this reporting period, the fund's distribution rate was 5.46%,
based on an annualization of the current monthly dividend of 5.7 cents ($0.057)
per share and the maximum offering price of $12.53 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum federal personal
income tax bracket of 39.6% would need to earn 9.04% from a taxable investment
to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Insured Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
---------------------------------------
March 5.9 cents
April 5.9 cents
May 5.9 cents
June 5.9 cents
July 5.9 cents
August 5.9 cents++
Total 35.4 cents
---------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 5.9 cents ($0.059) to 5.7 cents ($0.057) on August 22, 1996. The 8/31/96
distribution rate has been calculated using the new dividend.
Franklin Insured Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year 10-year (4/3/85)
-----------------------------------------------------------------------------
Cumulative Total Return1 4.92% 40.33% 99.93% 154.56%
Average Annual Total Return2 0.45% 6.09% 6.71% 8.12%
Distribution Rate3 5.46%
Taxable Equivalent Distribution Rate4 9.04%
30-Day Standardized Yield5 4.69%
Taxable Equivalent Yield4 7.76%
-----------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.7 cent per share monthly dividend
and the maximum offering price of $12.53 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Insured Tax-Free Income Fund's share price, as measured by net
asset value, declined 26 cents from $12.31 on February 29, 1996, to $12.05 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.09%,
based on an annualization of the current monthly dividend of 5.16 cents
($0.0516) per share and the offering price of $12.17 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum federal personal
income tax bracket of 39.6% would need to earn 8.43% from a taxable investment
to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Insured Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
-----------------------------------------
March 5.40 cents++
April 5.30 cents
May 5.30 cents
June 5.30 cents
July 5.36 cents
August 5.36 cents++
Total 32.02 cents
-----------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 5.3 cents ($0.053) per
share and an adjustment of +.10 cents to reconcile the 12b-1 fee differential
between Class I and Class II shares.
++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 5.36 cents ($0.0536) to 5.16 cents ($0.0516) cents per share on August 22,
1996. The 8/31/96 distribution rate has been calculated using the new dividend.
Franklin Insured Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
----------------------------------------------------------------------
Cumulative Total Return1 4.48% 7.71%
Average Annual Total Return2 2.48% 4.19%
Distribution Rate3 5.09%
Taxable Equivalent Distribution Rate4 8.43%
30-Day Standardized Yield5 4.26%
Taxable Equivalent Yield4 7.05%
----------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 5.16 cent per share monthly dividend
and the offering price of $12.17 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and
Massachusetts state personal income taxes through a portfolio consisting
primarily of insured Massachusetts municipal bonds.*
Commonwealth Update
Massachusetts continues an economic recovery that started in 1992 following a
deep regional recession. The commonwealth has implemented substantial budget
program changes over the last several years, reducing expenditure pressures and
contributing significantly to the stabilization of its financial position.
Massachusetts' $17 billion fiscal 1996 budget maintains service levels and also
includes $230 million in increased expenditures to fund the education reform law
passed during the 1993 fiscal year. It is estimated that education expenditures
will continue to increase, growing between $225 million and $275 million by the
end of the decade. Factoring into the increased expenditures is the limited
revenue-raising flexibility of townships, which could hamper the commonwealth's
ability to reduce local aid.**
Franklin Massachusetts Insured
Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
---------------------------------------
Hospitals 33.2%
Education 18.0%
Pre-Refunded 15.8%
General Obligations 14.5%
Health Care 6.1%
Housing 3.9%
Utilities 3.9%
Transportation 3.2%
Certificates of Participation 1.4%
---------------------------------------
For a complete list of portfolio holdings, please see page 68 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Standard & Poor's Creditweek Municipal, June 10, 1996.
Performance Summary
Class I
The Franklin Massachusetts Insured Tax-Free Income Fund's share price, as
measured by net asset value, declined 27 cents from $11.65 on February 29, 1996,
to $11.38 on August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.25%,
based on an annualization of the current monthly dividend of 5.2 cents ($0.052)
per share and the maximum offering price of $11.89 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Massachusetts personal income tax bracket of 46.8% would need to earn 9.88% from
a taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Massachusetts Insured
Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
---------------------------------------
March 5.5 cents
April 5.5 cents
May 5.5 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents++
Total 33.0 cents
---------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 5.5 cents ($0.055) to 5.2 cents ($0.052) per share on August 22, 1996. The
8/31/96 distribution rate has been calculated using the new dividend.
Franklin Massachusetts Insured Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
---------------------------------------------------------------------------
Cumulative Total Return1 4.85% 39.93% 92.90% 133.04%
Average Annual Total Return2 0.39% 6.03% 6.33% 7.28%
Distribution Rate3 5.25%
Taxable Equivalent
Distribution Rate4 9.88%
30-Day Standardized Yield5 4.45%
Taxable Equivalent Yield4 8.37%
---------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.2 cent per share monthly dividend
and the maximum offering price of $11.89 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Massachusetts personal income tax rate of 46.8%, based on
the federal income tax rate of 39.6%. 5. Yield, calculated as required by the
SEC, is based on the earnings of the fund's portfolio for the 30 days ended
August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Massachusetts Insured Tax-Free Income Fund's share price, as
measured by net asset value, declined 27 cents from $11.69 on February 29, 1996,
to $11.42 on August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 4.87%,
based on an annualization of the current monthly dividend of 4.68 cents
($0.0468) per share and the offering price of $11.54 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Massachusetts personal income tax bracket of 46.8% would need to earn 9.16% from
a taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 10 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Massachusetts Insured
Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
-----------------------------------------
March 5.07 cents++
April 4.94 cents
May 4.94 cents
June 4.94 cents
July 4.98 cents
August 4.98 cents++
Total 29.85 cents
-----------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.93 cents ($0.0493)
per share, which increased from 4.90 cents, and an adjustment of .14 cents to
reconcile the 12b-1 fee differential between Class I and Class II shares.
++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 4.98 cents ($0.0498) to 4.68 cents ($0.0468) per share on August 22, 1996.
The 8/31/96 distribution rate has been calculated using the new dividend.
Franklin Massachusetts Insured Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
------------------------------------------------------------------
Cumulative Total Return1 4.23% 7.49%
Average Annual Total Return2 2.17% 4.06%
Distribution Rate3 4.87%
Taxable Equivalent Distribution Rate4 9.16%
30-Day Standardized Yield5 4.03%
Taxable Equivalent Yield4 7.58%
------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 4.68 cent per share monthly dividend
and the offering price of $11.54 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Massachusetts personal income tax rate of 46.8%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
Your Fund's Objective
Seeks 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.*
State Update
Michigan's economy performed well in the first half of 1996, continuing a steady
trend present since the effects of the recession of the early 1990s. In fact,
the state's administration has maintained several actions during that period,
which have had a positive impact on Michigan's financial operations. This,
coupled with effective expenditure controls and periods of strong economic
growth, enhanced the state's fiscal position.
Looking forward, we anticipate that Michigan's economy should continue to
improve through its efforts to replenish reserve funds and correct budget
imbalances.
Franklin Michigan Insured Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
---------------------------------------
Education 24.9%
Pre-Refunded 23.6%
Hospitals 15.2%
Utilities 13.6%
General Obligations 13.6%
Other Revenue 3.6%
Transportation 2.4%
Housing 1.7%
Industrial 0.8%
Health Care 0.5%
Sales Tax 0.1%
---------------------------------------
For a complete list of portfolio holdings, please see page 73 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
Performance Summary
Class I
The Franklin Michigan Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined 27 cents from $12.09 on February 29, 1996, to $11.82
on August 31, 1996.
Due to reduced income earned by the fund, we adjusted the fund's monthly
dividend to 5.5 cents ($0.055) from 5.7 cents ($0.057) per share, effective with
the March 1996 distribution. Past performance is not predictive of future
results.
At the end of this reporting period, the fund's distribution rate was 5.35%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $12.34 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Michigan personal income tax bracket of 42.3% would need to earn 9.27% from a
taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Michigan Insured Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
----------------------------------------
March 5.5 cents
April 5.5 cents
May 5.5 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents
Total 33.0 cents
----------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Michigan Insured Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
--------------------------------------------------------------------------
Cumulative Total Return1 4.86% 40.36% 98.08% 142.93%
Average Annual Total Return2 0.40% 6.09% 6.61% 7.67%
Distribution Rate3 5.35%
Taxable Equivalent
Distribution Rate4 9.27%
30-Day Standardized Yield5 4.58%
Taxable Equivalent Yield4 7.93%
--------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.5 cent per share monthly dividend
and the maximum offering price of $12.34 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Michigan personal income tax rate of 42.3%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Michigan Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined 26 cents from $12.14 on February 29, 1996, to $11.88
on August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.00%,
based on an annualization of the current monthly dividend of 5.00 cents
($0.0500) per share and the offering price of $12.00 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Michigan personal income tax bracket of 42.3% would need to earn 8.67% from a
taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Michigan Insured Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
-----------------------------------------
March 4.67 cents++
April 4.91 cents
May 4.91 cents
June 4.91 cents
July 5.00 cents
August 5.00 cents
Total 29.40 cents
-----------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.91 cents ($0.0491)
per share, which decreased from 5.10 cents, and an adjustment of -.24 cents to
reconcile the 12b-1 fee differential between Class I and Class II shares.
Franklin Michigan Insured Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
------------------------------------------------------------------
Cumulative Total Return1 4.39% 7.79%
Average Annual Total Return2 2.37% 4.24%
Distribution Rate3 5.00%
Taxable Equivalent Distribution Rate4 8.67%
30-Day Standardized Yield5 4.16%
Taxable Equivalent Yield4 7.21%
------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 5.00 cent per share monthly dividend
and the offering price of $12.00 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Michigan personal income tax rate of 42.3%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
Your Fund's Objective
Seeks 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.*
State Update
Economic weakness in the early 1990s tested Minnesota's historically strong
financial management, forcing the state to implement stiff budgetary and
expenditure controls. Recent improvements in the economy and corresponding
growth in revenue, however, have enabled Minnesota to restore its general fund
balance to acceptable levels. Income and sales tax revenues also increased
during that period, and the revised 1994-95 general fund expenditures totaled
$15.0 billion -- a modest 7% increase over the previous biennium. General fund
expenditures for the 1996-97 biennium are projected at $18.0 billion, and
revenue trends continue to be strong for fiscal 1996.**
Franklin Minnesota Insured Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
---------------------------------------
Pre-Refunded 20.5%
Utilities 19.9%
Housing 15.3%
Education 13.9%
Hospitals 13.4%
Health Care 5.8%
General Obligations 4.9%
Certificates of Participation 2.3%
Other Revenue 2.2%
Tax Allocation 1.5%
Transportation 0.3%
---------------------------------------
For a complete list of portfolio holdings, please see page 82 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable. The
fund seeks to comply with Minnesota requirements for pass-through of tax-exempt
income.
**Standard & Poor's Creditweek Municipal, January 15, 1996.
Performance Summary
Class I
The Franklin Minnesota Insured Tax-Free Income Fund's share price, as measured
by net asset value, declined 29 cents from $12.14 on February 29, 1996, to
$11.85 on August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.23%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $12.38 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Minnesota personal income tax bracket of 44.7% would need to earn 9.46% from a
taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Minnesota Insured Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
---------------------------------------
March 5.6 cents
April 5.6 cents
May 5.6 cents
June 5.6 cents
July 5.6 cents
August 5.6 cents++
Total 33.6 cents
---------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 5.6 cents ($0.056) to 5.4 cents ($0.054) per share on August 22, 1996. The
8/31/96 distribution rate has been calculated using the new dividend.
Franklin Minnesota Insured Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
--------------------------------------------------------------------------
Cumulative Total Return1 4.22% 37.21% 92.81% 143.71%
Average Annual Total Return2 0.18% 5.62% 6.32% 7.70%
Distribution Rate3 5.23%
Taxable Equivalent
Distribution Rate4 9.46%
30-Day Standardized Yield5 4.64%
Taxable Equivalent Yield4 8.39%
--------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.4 cent per share monthly dividend
and the maximum offering price of $12.38 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Minnesota personal income tax rate of 44.7%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Minnesota Insured Tax-Free Income Fund's share price, as measured
by net asset value, declined 28 cents from $12.17 on February 29, 1996, to
$11.89 on August 31, 1996.
At the end of this reporting period the fund's distribution rate was 4.87%,
based on an annualization of the current monthly dividend of 4.87 cents
($0.0487) per share and the offering price of $12.01 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Minnesota personal income tax bracket of 44.7% would need to earn 8.81% from a
taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Minnesota Insured Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
--------------------------------------
March 4.95 cents++
April 5.01 cents
May 5.01 cents
June 5.01 cents
July 5.07 cents
August 5.07 cents++
Total 30.12 cents
---------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 5.01 cents ($0.0501)
per share, which increased from 5.00 cents, and an adjustment of -.06 cents to
reconcile the 12b-1 fee differential between Class I and Class II shares.
++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 5.07 cents ($0.0507) to 4.87 cents ($0.0487) per share on August 22, 1996.
The 8/31/96 distribution rate has been calculated using the new dividend.
Franklin Minnesota Insured Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
----------------------------------------------------------------------
Cumulative Total Return1 3.70% 6.74%
Average Annual Total Return2 1.70% 3.48%
Distribution Rate3 4.87%
Taxable Equivalent Distribution Rate4 8.81%
30-Day Standardized Yield5 4.22%
Taxable Equivalent Yield4 7.63%
----------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 4.87 cent per share monthly dividend
and the offering price of $12.01 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Minnesota personal income tax rate of 44.7%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996. All total return
calculations assume reinvestment of dividends and capital gains at net asset
value. Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
Your Fund's Objective
Seeks 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.*
State Update
The 1991-1992 recession damaged many of Ohio's revenue sources and placed
pressure on the funding of human services programs. As a result, available
reserves were depleted, forcing the state to end the fiscal biennium with just
$111 million in the general revenue fund, including $21 million in the budget
stabilization fund.
However, recent economic expansion enabled Ohio to end fiscal years 1994 and
1995 with relatively strong financial performances. Total spending for fiscal
1995 was $933.2 million below the estimates, primarily in the areas of human
services (Medicaid and welfare). Ohio ended 1995 with a general revenue fund
balance of $928 million. For the first six months of fiscal 1996, revenues and
expenditures were on target.**
Franklin Ohio Insured Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
---------------------------------------
Utilities 24.6%
Education 20.9%
Hospitals 15.0%
Pre-Refunded 14.3%
General Obligations 11.3%
Housing 5.8%
Certificates of Participation 3.0%
Industrial 2.5%
Transportation 2.4%
ORB 0.2%
---------------------------------------
For a complete list of portfolio holdings, please see page 87 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Standard & Poor's Creditweek Municipal, January 22, 1996.
Performance Summary
Class I
The Franklin Ohio Insured Tax-Free Income Fund's share price, as measured by net
asset value, declined 24 cents from $12.22 on February 29, 1996, to $11.98 on
August 31, 1996.
Due to decreased income earned by the fund, we adjusted the monthly dividend to
5.5 cents ($0.055) from 5.7 cents ($0.057) per share, effective with the March
1996 distribution. Past performance is not predictive of future results.
At the end of this reporting period, the fund's distribution rate was 5.28%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $12.51 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Ohio personal income tax bracket of 44.1% would need to earn 9.45% from a
taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Ohio Insured Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
---------------------------------------
March 5.5 cents
April 5.5 cents
May 5.5 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents
Total 33.0 cents
---------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Ohio Insured Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
-------------------------------------------------------------------------
Cumulative Total Return1 4.89% 40.08% 99.18% 143.87%
Average Annual Total Return2 0.40% 6.04% 6.67% 7.71%
Distribution Rate3 5.28%
Taxable Equivalent
Distribution Rate4 9.45%
30-Day Standardized Yield5 4.69%
Taxable Equivalent Yield4 8.39%
-------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.5 cent per share monthly dividend
and the maximum offering price of $12.51 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Ohio personal income tax rate of 44.1%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Ohio Insured Tax-Free Income Fund's share price, as measured by net
asset value, declined 23 cents from $12.26 on February 29, 1996, to $12.03 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 4.87%,
based on an annualization of the current monthly dividend of 4.93 cents
($0.0493) per share and the offering price of $12.15 on August 31, 1996. This
tax-free rate is generally higher than the after tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Ohio personal income tax bracket of 44.1% would need to earn 8.71% from a
taxable investment to match the fund's tax-free distribution rate.
GRAPHIC MATERIAL 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Ohio Insured Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
-----------------------------------------
March 4.87 cents++
April 4.91 cents
May 4.91 cents
June 4.91 cents
July 4.93 cents
August 4.93 cents
Total 29.46 cents
-----------------------------------------
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.90 cents ($0.0490)
per share, which decreased from 5.1 cents, and an adjustment of -.03 cents to
reconcile the 12b-1 fee differential between Class I and Class II shares.
Franklin Ohio Insured Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
------------------------------------------------------------------------
Cumulative Total Return1 4.52% 7.89%
Average Annual Total Return2 2.51% 4.32%
Distribution Rate3 4.87%
Taxable Equivalent Distribution Rate4 8.71%
30-Day Standardized Yield5 4.27%
Taxable Equivalent Yield4 7.64%
------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 4.93 cent per share monthly dividend
and the offering price of $12.15 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Ohio personal income tax rate of 44.1%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Arizona Insured Tax-Free Income Fund (Note 1)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.0%
$ 900,000 Arizona State Power Authority, Power Resources Revenue, Refunding, Hoover Uprating Project,
MBIA Insured, 5.375%, 10/01/13 ................................................................. $ 859,788
1,000,000 Arizona State University Revenues, Refunding, Series A, MBIA Insured, 5.50%, 07/01/19 ........... 953,700
750,000 Arizona State Management Authority, Financial Assistance Revenue,
AMBAC Insured, 5.75%, 07/01/15 ................................................................. 739,755
400,000 Casa Grande Excise Tax Revenue, FGIC Insured, 6.00%, 04/01/10 ................................... 411,232
525,000 Douglas Municipal Property Corp., Municipal Facilities Excise Tax Revenue, MBIA Insured, 5.75%,
07/01/15 ....................................................................................... 521,372
1,000,000 Gilbert GO, Projects of 1988, Series C, MBIA Insured, 5.50%, 07/01/23 ........................... 960,650
480,000 La Paz County School District No. 4, Quartzsite Elementary School Improvement, MBIA Insured, 5.70%,
07/01/16 ....................................................................................... 467,179
700,000 Maricopa County School District No. 3, Tempe Elementary, Refunding, AMBAC Insured, 6.00%,
07/01/13 ....................................................................................... 721,399
500,000 Maricopa County School District No. 8, Osborn, Series A, FGIC Insured, Refunding, 5.875%, 07/01/14 507,830
700,000 Maricopa County School District No. 11, Peoria Unified, Refunding, AMBAC Insured, 6.10%, 07/01/10 735,931
500,000 Maricopa County School District No. 28, Kyrene Elementary, Series B, FGIC Insured, 6.00%, 07/01/14 511,210
570,000 Maricopa County School District No. 31, Series A, AMBAC Insured, 6.20%, 07/01/13 ................ 595,433
100,000 Maricopa County School District No. 41, Series A, FGIC Insured, Pre-Refunded, 5.40%, 07/01/13 ... 104,478
Maricopa County School District No. 68, Alhambra Elementary, Refunding & Improvement,
AMBAC Insured,
500,000 5.125%, 07/01/13 ............................................................................. 472,215
100,000 5.625%, 07/01/13 ............................................................................. 100,261
Maricopa County School District No. 98, Fountain Hills,
500,000 AMBAC Insured, 5.75%, 07/01/12 ............................................................... 506,385
235,000 MBIA Insured, Pre-Refunded, 6.20%, 07/01/10 .................................................. 255,922
500,000 Maricopa County UHSD No. 216, 1988 Project, FGIC Insured, 5.30%, 07/01/11 ....................... 485,475
700,000 Maricopa County USD No. 80, Chandler, Refunding, FGIC Insured, 5.85%, 07/01/13 .................. 710,899
400,000 Maricopa County USD No. 95, Queens Creek, Series A, AMBAC Insured, 5.70%, 07/01/14 .............. 400,280
610,000 Mohave County Hospital District No. 1, Refunding, Kingman Regional Medical Center Project,
FGIC Insured, 6.50%, 06/01/15 .................................................................. 644,075
Navajo County PCR, Arizona Public Service Co., Series A,
2,400,000 AMBAC Insured, 5.50%, 08/15/28 ............................................................... 2,233,368
1,500,000 MBIA Insured, 5.875%, 08/15/28 ............................................................... 1,475,505
100,000 Northern Arizona University Revenues, Refunding, Series A, AMBAC Insured, 5.75%, 06/01/07 ....... 102,117
700,000 Oro Valley Municipal Property Corp. Revenue, Municipal Water System, MBIA Insured, 5.55%,
07/01/17 ....................................................................................... 675,654
100,000 Peoria GO, Projects of 1990, AMBAC Insured, 6.25%, 07/01/12 ..................................... 104,058
1,000,000 Phoenix Civic Improvement Corp., Municipal Facilities Excise Tax Revenue, MBIA Insured,6.90%,
07/01/21 ....................................................................................... 1,085,670
800,000 Phoenix Civic Improvement Corp., Waste Water Systems Lease Revenue, Refunding, MBIA Insured,
5.00%, 07/01/18 ................................................................................ 712,208
Phoenix Civic Improvement Corp., Water Systems Revenue, Junior Lien,
500,000 AMBAC Insured, 5.50%, 07/01/21 ............................................................... 472,195
1,000,000 FGIC Insured, 5.50%, 07/01/24 ................................................................ 937,780
925,000 Pima County IDA, SFMR, GNMA Secured, 6.625%, 11/01/14 ........................................... 954,498
845,000 Puerto Rico Commonwealth GO, MBIA Insured, 6.45%, 07/01/17 ...................................... 897,576
800,000 Puerto Rico Electric Power Authority Revenue, Series R, FSA Insured, 6.25%, 07/01/17 ............ 826,360
840,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities,
Financing Authority, Hospital Revenue, Hospital Auxilio Mutuo, Series A, Obligation Group, MBIA
Insured, 6.25%, 07/01/24 ...................................................................... 864,360
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
1,500,000 Refunding, Series D, 5.50%, 01/01/25 ......................................................... 1,400,205
1,500,000 Refunding, Series D, 6.25%, 01/01/27 ......................................................... 1,536,060
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue, (cont.)
$ 1,000,000 Series C, 5.50%, 01/01/28 .................................................................... $ 929,650
120,000 Series C, MBIA Insured, 5.75%, 01/01/20 ...................................................... 117,277
250,000 Santa Cruz County USD, No. 1, Nogales, Series B, AMBAC Insured, Pre-Refunded, 6.10%, 07/01/14 ... 268,940
1,000,000 Scottsdale IDA, Hospital Revenue, Refunding, Scottsdale Memorial Hospital, Series A, AMBAC Insured,
5.70%, 09/01/15 ................................................................................ 971,770
360,000 Sierra Vista Municipal Property Corp. Facilities Revenue, AMBAC Insured, 6.15%, 01/01/15 ........ 369,929
375,000 Tucson Airport, Inc., Authority Revenue, Refunding, MBIA Insured, 5.70%, 06/01/13 ............... 371,374
Tucson GO,
500,000 Series A, MBIA Insured, 5.375%, 07/01/19 ..................................................... 472,045
650,000 Series G, 1984, FGIC Insured, 6.25%, 07/01/18 ................................................ 675,545
University of Arizona COP, Administrative & Packaging Facility, MBIA Insured, 6.00%,
500,000 07/15/16 ..................................................................................... 510,020
1,625,000 07/15/23 ..................................................................................... 1,651,439
1,000,000 University of Arizona COP, Residence Life Project, Series A, CGIC Insured, 5.80%, 09/01/13 ...... 1,001,490
1,050,000 University of Arizona Medical Center Corp., Hospital Revenue, Refunding, MBIA Insured, 5.00%,
07/01/21 ....................................................................................... 923,843
1,000,000 University of Puerto Rico, University Revenue, Series M, MBIA Insured, 5.25%, 06/01/25 .......... 922,100
200,000 Yavapai County Community College District, Refunding, FGIC Insured, 5.40%, 07/01/10 ............. 197,302
250,000 Yavapai County, Elementary School District No. 6, Cottonwood-Oak Creek, 1993 Project, AMBAC Insured,
Series B, 6.70%, 07/01/09 ...................................................................... 272,803
775,000 Yavapai County, Elementary School District No. 028, Refunding, Camp Verde, FGIC Insured, 6.00%,
07/01/09 ....................................................................................... 812,425
300,000 Yavapai County USD No. 22, Humboldt, Series A, FGIC Insured, 5.95%, 07/01/14 .................... 303,069
500,000 Yuma County Elementary School District No. 1, Series A, MBIA Insured, 5.75%, 07/01/14 ........... 505,509
-----------
Total Long Term Investments (Cost $36,759,557)............................................. 37,219,613
-----------
aShort Term Investments .8%
100,000 Maricopa Co., Pollution Control Corp., PCR, Refunding, Arizona Public Service Council, Series D,
Daily VRDN and Put, 3.75%, 05/01/29 ............................................................ 100,000
100,000 Pinal County, IDA, PCR, Magma-Copper/Newmont Mining Corp, Daily VRDN and Put, 3.75%, 12/01/09 ... 100,000
100,000 Pinal County, IDA, PCR, Daily VRDN and Put, 3.75%, 12/01/09 ..................................... 100,000
-----------
Total Short Term Investments (Cost $ 300,000) ............................................. 300,000
-----------
Total Investments (Cost $37,059,557) 98.8%............................................ 37,519,613
Other Assets and Liabilities, Net 1.2% ............................................... 471,148
-----------
Net Assets 100.0% .................................................................... $37,990,761
===========
At August 31,1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $37,059,557 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 767,713
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (307,657)
-----------
Net unrealized appreciation ................................................................... $ 460,056
===========
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CGIC - Capital Guaranty Insurance Co.
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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Florida Insured Tax-Free Income Fund (Note 1)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 96.2%
$ 2,435,000 Citrus County PCR, Refunding, Florida Power Co., MBIA Insured, 6.625%, 01/01/27 ................. $ 2,628,972
1,000,000 Clay County Utilities System Revenue, Series B, FGIC Insured, 5.25%, 11/01/13 ................... 952,120
1,000,000 Cocoa Beach Improvement Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/20 ...................... 942,260
1,000,000 Florida State Board of Education GO, Capital Outlay, Series E, MBIA Insured, 5.80%, 06/01/24 .... 989,010
1,000,000 Gainesville Public Improvements, Guaranteed, Refunding, AMBAC Insured, 5.50%, 08/01/17 .......... 967,390
1,915,000 Gulf Breeze Revenue, Local Government Loan Program, FGIC Insured, 6.05% 12/1/15.................. 1,956,326
2,000,000 Hernando County Water and Sewer Revenue, Refunding & Improvement, FGIC Insured, 6.00%,
06/01/19 ....................................................................................... 2,028,160
2,000,000 Hillsborough County IDA, IDR, University Community Hospital, MBIA Insured, 5.80%, 08/15/24 ...... 1,975,380
1,500,000 Hillsborough County IDA, PCR, Refunding, MBIA Insured, 6.25%, 12/01/34 .......................... 1,560,795
1,600,000 Florida State HFA, Spinnaker Cove Apartments, Series G, 6.50%, 7/1/36............................ 1,603,728
1,250,000 Indian River County Water & Sewer Revenue, FGIC Insured, 5.50%, 9/01/26 ......................... 1,185,088
1,090,000 Indian Trail Water Control District Improvement Bonds, MBIA Insured, 5.75%, 8/1/16............... 1,080,997
1,000,000 Jacksonville Sales Tax Revenue, River City Renaissance Project, FGIC Insured, 5.375%, 10/01/18 .. 952,190
1,000,000 Jacksonville Water & Sewer Revenue, United Water Project, AMBAC Insured, 6.35%, 08/01/25 ........ 1,031,680
1,415,000 Lake Clarke Shores, Utility Systems Revenue, Refunding & Improvement, FGIC Insured, 5.80%,
10/01/18 ....................................................................................... 1,415,991
1,000,000 Lake Mary Public Improvement Revenue, FGIC Insured, 5.25%, 09/01/15 ............................. 939,370
2,490,000 Lakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding,
MBIA Insured, 5.25%, 11/15/16 .................................................................. 2,339,330
500,000 Lakeland Utility Tax Revenue, Refunding & Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 .. 509,810
3,000,000 Lee County Capital and Transportation Facilities Revenue, Refunding, Series A, MBIA Insured, 5.55%,
10/01/18 ....................................................................................... 2,907,120
Lee County Industrial Development Authority, Utilities Revenue, Refunding, MBIA Insured, 6.05%
2,000,000 11/01/15 ..................................................................................... 2,025,700
1,500,000 11/01/20 ..................................................................................... 1,513,170
2,000,000 Lee County Solid Waste Systems Revenue, MBIA Insured, 5.375%, 10/01/15 .......................... 1,874,120
1,000,000 Lynn Haven Capital Improvement Revenue, Series A, MBIA Insured, 5.75%, 12/01/16 ................. 993,980
1,000,000 Martin County Consolidated Utilities Systems Revenue, Refunding & Improvement, FGIC Insured, 6.00%,
10/01/24 ....................................................................................... 1,015,800
1,000,000 Martin County Improvement Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/14 .................... 1,023,460
2,000,000 Miramar Wastewater Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25 ................ 2,171,260
1,000,000 Okeechobee Utility Systems Authority Revenue, Acquisition and Improvement, Refunding, MBIA Insured,
5.60%, 10/01/25 ................................................................................ 965,200
1,300,000 Orange County Capital Improvement Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/22 ............ 1,317,329
Orange County Health Facilities Authority Revenue,
2,400,000 Refunding, Orlando Regional Healthcare Hospital, Series A, MBIA Insured, 6.00%, 11/01/24 ..... 2,439,960
1,000,000 Sunbelt Adventist Health, Series B, CGIC Insured, 6.75%, 11/15/21 ............................ 1,072,200
1,000,000 Orange County Public Services Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ........................ 1,016,930
Orange County Sales Tax Revenue, FGIC Insured,
500,000 6.125%, 01/01/19 ............................................................................. 509,815
1,000,000 5.375%, 01/01/24 ............................................................................. 925,270
1,900,000 Osceola County School Board COP, Series A, AMBAC Insured, 6.00%, 06/01/19 ....................... 1,929,165
1,225,000 Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured, 6.10%, 04/01/17 ... 1,255,478
1,000,000 Palm Beach County, Criminal Justice Facilities Revenue, FGIC Insured, 6.00%, 06/01/15 ........... 1,019,080
1,250,000 Pinellas County Sewer Revenue, FGIC Insured, 6.00%, 10/01/24 .................................... 1,270,688
4,000,000 Port Orange Water and Sewer Revenue, Refunding, Junior Lien, AMBAC Insured, 5.25%, 10/01/21 ..... 3,671,440
1,000,000 Puerto Rico Commonwealth GO, FSA Insured, 6.00%, 07/01/22 ....................................... 1,016,730
1,000,000 Puerto Rico Electric Power Authority Revenue, Series P, CGIC Insured, Pre-Refunded, 7.00%, 07/01/21 1,120,100
3,000,000 Sarasota County Solid Waste System Revenue, AMBAC Insured, 5.50%, 10/1/21........................ 2,870,220
Seminole County School Board COP, Series A, MBIA Insured, 6.125%,
1,000,000 07/01/14 ..................................................................................... 1,032,290
1,000,000 07/01/19 ..................................................................................... 1,028,500
Stuart Utilities Revenue, FGIC Insured,
$ 500,000 6.70%, 10/01/14 .............................................................................. $ 542,345
500,000 6.80%, 10/01/24 .............................................................................. 545,265
490,000 Titusville, Water and Sewer Revenue, MBIA Insured, 6.20%, 10/01/14 .............................. 510,840
1,500,000 Vero Beach Electric Revenue, Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 ................ 1,410,223
500,000 West Melbourne Water and Sewer Revenue, Refunding & Improvement, FGIC Insured, 6.75%,
10/01/14 ....................................................................................... 555,935
1,500,000 West Palm Beach Utility Systems Revenue, Series B, FGIC Insured, 5.40%, 10/01/23 ................ 1,410,690
-----------
Total Long Term Investments (Cost $67,412,512)............................................. 68,018,900
-----------
aShort Term Investments 1.8%
700,000 Dade County Florida Industrial Development Authority, Daily VRDN and Put, 3.75%, 04/01/20 ....... 700,000
600,000 Pinellas County Florida Health Facilities Authority Revenue, Daily VRDN and Put, 3.75%, 12/01/15 600,000
-----------
Total Short Term Investments (Cost $1,300,000)............................................. 1,300,000
-----------
Total Investments (Cost $68,712,512) 98.0%............................................ 69,318,900
Other Assets and Liabilities, Net 2.0% ............................................... 1,366,657
-----------
Net Assets 100.0% .................................................................... $70,685,557
===========
At August 31, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $68,712,512 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 1,579,715
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (973,327)
-----------
Net unrealized appreciation ................................................................... $ 606,388
===========
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Corp.
FSA - Financial Security Assistance
GO - General Obligation
HFA - Housing Finance Authority/Agency
IDA - Industrial Development Authority
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Insured Tax-Free Income Fund (Note 1)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.1%
Alabama 2.5%
Alabama HFA, SFMR,
$ 4,600,000 HMR Program, Series A-1, GNMA Secured, 7.80%, 10/01/20 ................................... $ 4,766,888
1,340,000 Series 1986-A, MBIA Insured, 7.125%, 10/01/14 ............................................ 1,367,550
1,000,000 Alabama State Board Educational Revenue, Southern Union State Junior College, MBIA Insured,
6.50%, 07/01/12 ............................................................................. 1,066,820
Alabama Water Pollution Control Authority, Revolving Fund Loan, AMBAC Insured,
100,000 6.25%, 08/15/14 .......................................................................... 102,639
2,000,000 Series A, 5.60%, 08/15/16 ................................................................ 1,934,660
1,655,000 Auburn Governmental Utility Services Corp., Waste Water Revenue, Merscot-Auburn, FGIC Insured,
7.30%, 01/01/12 ............................................................................. 1,764,760
Daphne Utilities Board, Water, Gas and Sewer Revenue, FGIC Insured,
4,030,000 Refunding, Series 1990-B, 7.30%, 06/01/10 ................................................ 4,354,496
2,000,000 Series B, Capital Improvement Bonds, 7.35%, 06/01/20 ..................................... 2,143,980
1,100,000 Druit Community Hospital Health Care Authority, Facilities Revenue, MBIA Insured, Pre-Refunded,
7.875%, 06/01/07 ............................................................................ 1,153,064
3,550,000 Fort Payne Waterworks, Board of Water Revenue, MBIA Insured, 5.45%, 07/01/21 ................. 3,325,285
2,285,000 Houston County Health Care Authority, Hospital Revenue, Refunding, Alabama Medical Center,
MBIA Insured, 5.50%, 10/01/19 ............................................................... 2,132,339
300,000 Huntsville Health Care Facilities Authority Revenue, Series A, MBIA Insured, 6.375%, 06/01/22 310,326
1,500,000 Marshall County Limited Obligation, AMBAC Insured, Pre-Refunded, 7.00%, 02/01/12 ............. 1,655,775
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 ................................................ 533,085
4,000,000 Montgomery Health Care Facilities Revenue, Jackson Hospital and Clinic, Refunding,
AMBAC Insured, 6.00%, 03/01/26 ............................................................... 3,988,960
1,960,000 Phenix City GO, Refunding, AMBAC Insured, 5.75%, 03/01/13 .................................... 1,962,332
4,000,000 University of Alabama, University Hospital Revenues, Refunding, Huntsville, Series A, MBIA Insured,
5.50%, 05/01/18 ............................................................................. 3,791,400
5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant Co., Series C, MBIA Insured,
6.05%, 05/01/23 ............................................................................. 5,038,550
-----------
41,392,909
-----------
Alaska 4.1%
Alaska Energy Authority Power Revenue, Bradley Lake Hydro Project,
5,795,000 MBIA Insured, 7.25%, 07/01/21 ............................................................ 6,319,853
5,000,000 Series 1, BIG Insured, 7.25%, 07/01/09 ................................................... 5,357,250
4,765,000 Series 1, BIG Insured, 7.25%, 07/01/16 ................................................... 5,127,664
3,205,000 Series 1, BIG Insured, 6.25%, 07/01/21 ................................................... 3,245,864
18,500,000 Alaska Energy Utilities Revenue, City and Boro of Sitka, Refunding, CGIC Insured, 6.75%, 07/01/20 19,763,157
6,000,000 Alaska State HFC, Refunding, Series A, MBIA Insured, 5.875%, 12/01/30 ........................ 5,748,240
5,000,000 Anchorage Electric Utility Revenue, Refunding, Senior Lien, Series A, MBIA Insured, 7.125%,
06/01/06 .................................................................................... 5,390,350
Anchorage GO, AMBAC Insured,
2,765,000 General Purpose, Pre-Refunded, 7.30%, 08/01/10 ........................................... 3,021,703
5,000,000 Refunding, 7.20%, 06/01/17 ............................................................... 5,337,300
3,505,000 Refunding, 6.25%, 06/01/23 ............................................................... 3,536,966
5,100,000 Anchorage Water Revenue, Refunding, Senior Lien, MBIA Insured, 7.25%, 08/01/14 ............... 5,407,224
500,000 University of Alaska COP, Series 1990, CGIC Insured, 7.375%, 10/01/07 ........................ 545,030
250,000 University of Alaska Revenues, Series B, AMBAC Insured, 6.50%, 10/01/17 ...................... 258,835
-----------
69,059,436
-----------
Arizona 3.6%
Arizona State Municipal Financing Program, COP, BIG Insured,
$ 2,250,000 Phoenix Water, Series 10, BIG Insured, Pre-Refunded, 7.90%, 08/01/17 ..................... $ 2,353,590
6,000,000 Series 1986-20, ETM, 7.70%, 08/01/10 ..................................................... 7,014,480
10,000,000 Series 1986-26, 7.70%, 08/01/05 .......................................................... 10,614,600
2,200,000 Chandler Water and Sewer Revenue, Refunding, FGIC Insured, 7.00%, 07/01/12 ................... 2,350,106
Cochise County USD No. 68, Sierra Vista, FGIC Insured,
500,000 Refunding, 7.50%, 07/01/10 ............................................................... 590,515
3,000,000 Series B, Pre-Refunded, 7.625%, 07/01/10 ................................................. 3,343,020
300,000 Maricopa County IDA, Hospital Facility Revenue, Samaritan Health Services, Series A, Refunding,
MBIA Insured, 7.00%, 12/01/16 ............................................................... 343,689
Maricopa County USD No. 80, Chandler, FGIC Insured, Pre-Refunded,
775,000 7.20%, 07/01/07 .......................................................................... 852,190
825,000 7.20%, 07/01/08 .......................................................................... 907,170
500,000 7.25%, 07/01/09 .......................................................................... 550,665
1,000,000 Maricopa County USD No. 98, Fountain Hills, Series A, FGIC Insured, Pre-Refunded, 7.10%,
07/01/10 .................................................................................... 1,080,510
1,000,000 Maricopa UHSD No. 216, Refunding & Improvement, FGIC Insured, 6.70%, 07/01/11 ................ 1,082,250
1,000,000 Mesa IDA, Health Care Facilities Revenue, Refunding, Western Health Network, Inc., Series B-2,
BIG Insured, 7.50%, 01/01/08 ................................................................ 1,067,340
500,000 Mohave County USD No. 1, Lake Havasu Project, Series 1991-B, AMBAC Insured, 5.375%,
07/01/11.................................................................................... 486,275
3,925,000 Navajo County Pollution Control Corp. Revenue, Refunding, MBIA Insured, 5.875%, 08/15/28 ..... 3,860,905
2,700,000 Phoenix Civic Imrpovement Corp., Waste Water Systems Lease Revenue, Refunding, MBIA Insured,
5.00%, 07/01/18 ............................................................................. 2,403,702
890,000 Phoenix GO, Refunding, Series B, MBIA Insured, 5.50%, 07/01/16 ............................... 850,635
Pima County Sewer Revenue, FGIC Insured,
230,000 6.75%, 07/01/15 .......................................................................... 252,264
270,000 Pre-Refunded, 6.75%, 07/01/15 ............................................................ 290,444
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
1,150,000 Refunding, Series A, FGIC Insured, 5.50%, 01/01/19 ....................................... 1,094,582
10,000,000 Refunding, Series C, MBIA Insured, 5.00%, 01/01/13 ....................................... 9,152,400
300,000 Series A, MBIA Insured, 6.50%, 01/01/22 .................................................. 312,720
5,000,000 Tucson Local Development Corp., Leasehold Revenue, Series F, FGIC Insured, Pre-Refunded,
7.30%, 07/01/10 ............................................................................. 5,303,600
5,000,000 Tucson Water Revenue, MBIA Insured, 6.00%, 07/01/21 .......................................... 5,045,850
-----------
61,203,502
-----------
Arkansas .2%
Arkansas State Development Finance Authority Water Revenue, Series A, MBIA Insured,
1,400,000 Pre-Refunded, 7.00%, 06/01/14 ............................................................ 1,545,208
2,000,000 Refunding, 6.50%, 07/01/10 ............................................................... 2,201,860
25,000 Pulaski County Health Facilities Board, Hospital Revenue, St. Vincent's Infirmary, MBIA Insured,
Pre-Refunded, 10.00%, 09/01/12 .............................................................. 28,790
-----------
3,775,858
-----------
California 3.8%
3,750,000 California State Public Works, Board Lease Revenue, University of California Projects, Series A,
AMBAC Insured, 6.40%, 12/01/16 .............................................................. 3,937,838
2,000,000 Concord RDA, Tax Allocation, Central Concord Redevelopment Project, Refunding, Senior Lien,
AMBAC Insured, 5.25%, 07/01/19 .............................................................. 1,842,620
15,000,000 Corona COP, Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/20 ................ 19,817,250
1,515,000 Lancaster RDA, Refunding, Residential Redevelopment, MBIA Insured, 6.10%, 08/01/19 ........... 1,542,997
California (cont.)
$ 12,000,000 Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue Proposition, Series A,
AMBAC Insured, 5.00%, 07/01/25 .............................................................. $ 10,541,040
3,000,000 Los Angeles County Sanitation Districts Financing, MBIA Insured, 5.25%, 10/01/19 ............. 2,745,150
Los Angeles Department of Water and Power, Electric Plant Revenue, FGIC Insured,
2,500,000 5.375%, 02/15/34 ......................................................................... 2,292,150
2,200,000 Second Issue, 5.25%, 11/15/26 ............................................................ 1,976,546
2,535,000 Northern California Public Power Agency Revenue, Refunding, Hydroelectric Project No. 1, Series A,
MBIA Insured, 5.50%, 07/01/23 ............................................................... 2,389,288
250,000 Oakland RDA, Refunding, Central District Redevelopment, AMBAC Insured, 5.50%, 02/01/14 ....... 243,703
5,500,000 Sacramento Municipal Utility District, Refunding, Series D, MBIA Insured, 5.25%, 11/15/20 .... 5,022,160
1,000,000 San Diego Regional Building Authority, Lease Revenue, Refunding, San Miguel Fire Protection,
Series A, MBIA Insured, 5.65%, 01/01/20 ..................................................... 977,110
2,000,000 San Francisco Bay Area Rapid Transit, District Sales Tax Revenue, FGIC Insured, 5.50%, 07/01/20 1,915,400
1,000,000 Santee Public Financing Authority Revenue, Redevelopment, Refinancing, City Hall Project,
MBIA Insured, 5.45%, 02/01/14 ............................................................... 964,020
2,250,000 Stockton, East Water District, 1992 Project, Series A, AMBAC Insured, 6.40%, 04/01/22 ........ 2,364,773
4,630,000 Suisun-Solano Water Authority Revenue, Refunding, CGIC Insured, 5.55%, 05/01/17 .............. 4,529,436
-----------
63,101,481
-----------
Colorado 6.1%
3,500,000 Adams and Weld Counties GO, Brighton School District No. 27-J, MBIA Insured, 6.30%, 12/01/12 . 3,666,985
1,000,000 Arapahoe County Building Finance Corp., COP, CGIC Insured, Pre-Refunded, 7.50%, 12/01/10 ..... 1,109,610
8,695,000 Arapahoe County COP, Refunding, CGIC Insured, 6.625%, 12/01/16 ............................... 9,338,082
1,500,000 Castle Pines Metropolitan District, Refunding & Improvement, Series 1990, CGIC Insured, 7.625%,
12/01/15 .................................................................................... 1,652,895
Colorado Health Facilities Authority Revenue,
2,500,000 Children's Hospital Association Project, MBIA Insured, 5.25%, 10/01/26 ................... 2,249,775
1,174,000 Community Provider Project, Series 1991-A, CGIC Insured, 7.25%, 07/15/17 ................. 1,265,466
3,000,000 Rose Medical Center, MBIA Insured, Pre-Refunded, 7.00%, 08/15/21 ......................... 3,339,000
Colorado Mountain College Residence Hall Revenue, MBIA Insured,
1,900,000 5.625%, 06/01/12 ......................................................................... 1,875,414
3,000,000 5.75%, 06/01/23 .......................................................................... 2,939,520
Colorado Post Secondary Educational Facilities Authority Revenue, Connie Lee Insured,
1,000,000 6.625%, 06/01/13 ......................................................................... 1,045,810
1,000,000 Refunding, University of Denver Project, 6.00%, 03/01/10 ................................. 1,012,580
2,700,000 University of Denver Project, 6.25%, 03/01/12 ............................................ 2,791,530
2,700,000 University of Denver Project, 6.25%, 03/01/18 ............................................ 2,767,986
2,455,000 Colorado Springs Hospital Revenue, Refunding, MBIA Insured, 6.00%, 12/15/24 .................. 2,462,709
1,000,000 Colorado Springs Utilities Revenue, Refunding and Improvement, Series A, MBIA Insured, 5.125%,
11/15/18 .................................................................................... 910,440
Colorado State Board of Agriculture Revenue, University of Aux Facilities, Refunding and
Improvement, MBIA Insured, 6.40%,
800,000 03/01/11 ................................................................................. 843,136
1,000,000 03/01/17 ................................................................................. 1,044,730
2,000,000 Colorado Water Resources and Power Development Authority Revenue, Series A, FGIC Insured,
6.70%, 11/01/12 ............................................................................. 2,132,280
Denver City and County Airport Revenue, MBIA Insured,
4,290,000 Series A, 5.60%, 11/15/20 ................................................................ 4,119,515
4,280,000 Series C, 5.60%, 11/15/25 ................................................................ 4,022,644
8,000,000 Series C, 6.125%, 11/15/25 ............................................................... 7,982,880
1,500,000 Denver City and County Board, Water Commissioner, COP, FGIC Insured, 6.625%, 11/15/11 ........ 1,599,090
Colorado (cont.)
$ 3,000,000 Denver City and County Hospital Revenue, Children's Hospital Association Project, FGIC Insured,
6.00%, 10/01/15 ............................................................................. $ 3,048,030
2,000,000 Denver City and County Revenue, Mercy Medical Center Project, MBIA Insured, Pre-Refunded,
7.75%, 05/01/14 ............................................................................. 2,150,580
1,170,000 Denver City and County SFMR, GNMA Secured, Series A, 8.125%, 12/01/20 ........................ 1,208,294
2,000,000 Douglas County School District No. 1, Douglas and Elbert Counties COP, Series D, FGIC Insured,
6.80%, 12/01/11 ............................................................................. 2,159,220
625,000 El Paso County SFMR, Series 1990-A, GNMA Secured, 8.00%, 09/01/22 ............................ 652,075
3,600,000 Garfield, Pitkin and Eagle Counties, Reorganized School District No. 1, MBIA Insured, Pre-Refunded,
6.60%, 12/15/14 ............................................................................. 3,986,640
2,000,000 Goldsmith Metropolitan District, Refunding, MBIA Insured, 6.125%, 12/01/12 ................... 2,059,740
1,000,000 Havana Water and Sanitary District Sewer Revenue, CGIC Insured, Pre-Refunded, 7.375%,
09/15/14 .................................................................................... 1,066,490
2,000,000 Inverness Water and Sanitation District GO, Arapahoe and Douglas Counties, Refunding and
Improvement, BIG Insured, Pre-Refunded, 8.125%, 12/01/05 .................................... 2,041,040
Jefferson County COP, MBIA Insured,
2,000,000 Pre-Refunded, 7.125%, 12/01/10 ........................................................... 2,231,480
5,000,000 Refunding, 6.65%, 12/01/08 ............................................................... 5,359,950
5,000,000 Jefferson County School District No. R-1, AMBAC Insured, 6.25%, 12/15/12 ..................... 5,223,700
410,000 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ................... 433,128
3,000,000 La Plata County School District No. R-9, Durango City, FGIC Insured, 6.55%, 11/01/12 ......... 3,203,220
1,000,000 Morgan County PCR, Refunding, First Mortgage, Public Service Co., Series A, MBIA Insured, 5.50%,
06/01/12 .................................................................................... 964,210
1,600,000 Parker Water and Sanitation District, Water and Sewer Revenue, Refunding, FGIC Insured, 6.20%,
10/01/15 .................................................................................... 1,656,752
2,400,000 Pueblo School District No. 60, Project A, COP, MBIA Insured, Pre Refunded, 7.25%, 12/01/09 ... 2,612,088
2,500,000 Regional Transportation District, Sales Tax Revenue, Refunding and Improvement, FGIC Insured,
6.25%, 11/01/12 ............................................................................. 2,605,150
-----------
102,833,864
-----------
Connecticut .6%
Connecticut Health and Educational Facilities Authority Revenue,
2,000,000 Danbury Hospital, Series E, MBIA Insured, 6.50%, 07/01/14 ................................ 2,089,180
1,000,000 Day Kimball Hospital, Series A, FSA Insured, 5.375%, 07/01/26 ............................ 911,030
2,000,000 Trinity College, Series D, FGIC Insured, 6.125%, 07/01/24 ................................ 2,021,100
2,900,000 Yale-New Haven Hospital, Issue I, MBIA Insured, Pre-Refunded, 7.10%, 07/01/25 ............ 3,197,801
2,000,000 New Haven Air Rights Parking Facility Revenue, Refunding, MBIA Insured, 6.50%, 12/01/15 ...... 2,115,440
-----------
10,334,551
-----------
Delaware .3%
1,000,000 Delaware State EDA, PCR, Refunding, Series B, AMBAC Insured, 6.75%, 05/01/19 ................. 1,070,630
2,900,000 Delaware State Health Facilities Authority Revenue, Refunding, Medical Center, MBIA Insured,
7.00%, 10/01/15 ............................................................................. 3,095,837
250,000 Delaware Transportation Authority System Revenue, MBIA Insured, Pre-Refunded, 7.75%,
07/01/08 .................................................................................... 269,233
-----------
4,435,700
-----------
District of Columbia .2%
875,000 District of Columbia HFA, RMR, Series 1986-1, FGIC Insured, 7.75%, 09/01/16 .................. 898,739
2,000,000 District of Columbia Revenue, Howard University, Series A, MBIA Insured, 8.00%, 10/01/17 ..... 2,113,760
-----------
3,012,499
-----------
Florida 4.2%
$ 1,800,000 Cape Coral, Franchise Fees Revenue, AMBAC Insured, 5.40%, 12/01/13 ........................... $ 1,741,032
2,750,000 Dade County Health Facilities Authority, Hospital Revenue, Mt. Sinai Medical Center Project,
CGIC Insured, Pre-Refunded, 8.40%, 12/01/17 ................................................. 2,947,945
200,000 Dade County Seaport Revenue, Refunding, Series E, MBIA Insured, 8.00%, 10/01/08 .............. 244,670
15,000 Dade County, Series DD, MBIA Insured, 7.75%, 10/01/18 ........................................ 15,333
725,000 Florida HFA, SFMR, Series 1, FGIC Insured, 8.00%, 12/15/13 ................................... 749,266
2,000,000 Florida North Port Utility Revenue, FGIC Insured, 6.20%, 10/01/12 ............................ 2,083,560
200,000 Florida State Municipal Power Agency Revenue, Refunding, Stanton Project, MBIA Insured, 6.00%,
10/01/15 .................................................................................... 202,054
Florida Turnpike Authority Revenue, Series A,
3,000,000 AMBAC Insured, Pre-Refunded, 7.20%, 07/01/11 ............................................. 3,365,160
710,000 FGIC Insured, 6.35%, 07/01/22 ............................................................ 734,900
1,290,000 FGIC Insured, Pre-Refunded, 6.35%, 07/01/22 .............................................. 1,398,824
7,400,000 FGIC Insured, 5.625%, 07/01/25 ........................................................... 7,168,676
25,000 Fort Myers Utility Revenue, Refunding, Series A, BIG Insured, 6.00%, 10/01/19 ................ 25,214
1,000,000 Hillsborough County IDAR, PCR, Refunding, MBIA Insured, 6.25%, 12/01/34 ...................... 1,040,530
3,000,000 Hillsborough County IDA, IDR, University Community Hospital, MBIA Insured, 5.80%, 08/15/24 ... 2,963,070
2,000,000 Lakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding,
MBIA Insured, 5.25%, 11/15/25 ............................................................... 1,824,980
Lee County Industrial Development Authority, Utilities Revenue, MBIA Insured, 6.05%
1,000,000 11/01/15 ................................................................................. 1,012,850
1,000,000 11/01/20 ................................................................................. 1,008,780
2,000,000 Lee County Solid Waste Systems Revenue, MBIA Insured, 5.375%, 10/01/15 ....................... 1,874,120
5,000,000 Manatee County School Board, Certificates of Participation, MBIA Insured, 6.125%, 07/01/21 ... 5,085,750
100,000 Miami, Refunding, MBIA Insured, Pre-Refunded, 7.40%, 04/01/05 ................................ 108,953
2,800,000 Naples Hospital Revenue, Refunding, Naples Community Hospital, Inc. Project, MBIA Insured,
5.25%, 10/01/09 ............................................................................. 2,735,208
1,000,000 Opa-Locka Capital Improvement Revenue, Refunding, FGIC Insured, 6.125%, 01/01/24 ............. 1,023,770
960,000 Orange City Utilities System Revenue, Refunding and Improvement, AMBAC Insured, Pre-Refunded,
7.20%, 10/01/17 ............................................................................. 1,035,754
100,000 Orange County Capital Improvement Revenue, Series B, MBIA Insured, Pre-Refunded, 7.70%,
10/01/18 .................................................................................... 108,769
1,000,000 Orange County Health Facilities Authority, Hospital Revenue, Orlando Regional Health Care,
Series A, Refunding, MBIA Insured, 6.00%, 11/01/24 .......................................... 1,016,650
Orlando and Orange County Expressway Authority Revenue, FGIC Insured,
100,000 Junior Lien, 6.50%, 07/01/10 ............................................................. 110,401
225,000 Junior Lien, 6.50%, 07/01/12 ............................................................. 247,293
2,765,000 Refunding, Senior Lien, 5.25%, 07/01/23 .................................................. 2,548,556
1,000,000 Osceola County School Board COP, Refunding, Series A, AMBAC Insured, 5.50%, 06/01/19 ......... 953,780
1,000,000 Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured, 6.10%, 04/01/17 1,024,880
4,000,000 Palm Beach County Solid Waste Authority Revenue, BIG Insured, 8.375%, 07/01/10 ............... 4,245,760
1,000,000 Panama City Water and Sewer Revenue, Refunding and Improvement, AMBAC Insured, 5.625%,
06/01/19 .................................................................................... 971,800
1,000,000 Polk County IDAR, Winter Haven Hospital, Series 2, MBIA Insured, 6.25%, 09/01/15 ............. 1,029,050
3,500,000 Reedy Creek Improvement District, Utilities Revenue, Refunding, Series 1, MBIA Insured, 5.00%,
10/01/19 .................................................................................... 3,105,515
1,970,000 Royal Palm Beach Utilities System Revenue, Series B, AMBAC Insured, Pre-Refunded, 8.875%,
10/15/15 .................................................................................... 2,111,584
3,910,000 Saint Petersburg Public Utilities Revenue, MBIA Insured, 5.60%, 10/01/18 ..................... 3,789,494
2,010,000 Sarasota-Manatee Airport Authority Revenue, Refunding, MBIA Insured, 5.625%, 08/01/14 ........ 1,982,001
250,000 Sumter County School District Revenue, Multi-District Loan Program, CGIC Insured, 7.15%,
11/01/15 .................................................................................... 292,868
Florida (cont.)
$ 2,000,000 Tamarac Water and Sewer Utility Revenue, AMBAC Insured, Pre-Refunded, 8.25%, 10/01/11 ........ $ 2,046,520
1,200,000 Temple Terrace Water and Sewer Revenue, FGIC Insured, 6.25%, 10/01/12 ........................ 1,248,996
3,200,000 Vero Beach Electric Revenue, Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 ............. 3,008,480
-----------
70,232,796
-----------
Georgia 1.1%
2,860,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded, 8.00%,
09/01/15 .................................................................................... 3,119,659
1,535,000 Brunswick Water and Sewer Revenue, Refunding and Improvement, MBIA Insured, 6.10%, 10/01/14 .. 1,603,615
2,000,000 Burke County Development Authority, PCR, Georgia Power Co.,Vogtle Project, MBIA Insured,
Seventh Series, 6.625%, 10/01/24 ............................................................ 2,112,840
1,000,000 Cherokee County Water and Sewage Revenue, Refunding, MBIA Insured, 6.90%, 08/01/18 ........... 1,081,470
1,500,000 Columbia County Water and Sewage Revenue, Refunding, AMBAC Insured, 6.25%, 06/01/12 .......... 1,552,695
1,055,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A, MBIA Insured,
6.50%, 07/01/24 ............................................................................. 1,072,851
200,000 Fulton de Kalb Hospital Authority Revenue, COP, Grady Memorial Hospital Project, AMBAC Insured,
Pre-Refunded, 6.90%, 01/01/15 ............................................................... 220,118
5,000,000 Georgia Municipal Electric Authority, Power Revenue, Series EE, AMBAC Insured, 6.65%,
01/01/21 .................................................................................... 5,119,350
Marietta Development Authority Revenue, Life College,
1,000,000 CGIC Insured, Pre-Refunded, 7.20%, 12/01/09 .............................................. 1,100,300
1,085,000 Refunding, First Mortgage, Series A, FSA Insured, 5.80%, 09/01/19 ........................ 1,060,750
10,000 Metropolitan Atlanta Rapid Transit Authority, Sales Tax Revenue, Series J, FGIC Insured,
Pre-Refunded, 8.00%, 07/01/18 ................................................................ 10,850
-----------
18,054,498
-----------
Hawaii 1.1%
Hawaii County GO, Refunding & Improvement, Series A, FGIC Insured, 5.60%,
1,000,000 05/01/12 ................................................................................. 999,910
1,000,000 05/01/13 ................................................................................. 994,560
5,000,000 Hawaii State Airports System Revenue, Second Series, FGIC Insured, 7.50%, 07/01/20 ........... 5,493,900
Hawaii State Department of Budget and Finance, Special Purposes Mortgage Revenue,
3,000,000 Hawaii Electric Co., MBIA Insured, 6.55%, 12/01/22 ....................................... 3,155,400
335,000 Refunding, Queens Medical Center Project, FGIC Insured, Pre-Refunded, 6.50%, 07/01/12 .... 349,134
4,000,000 Refunding, St. Francis Medical Centers, CGIC Insured, 6.50%, 07/01/22 .................... 4,225,080
Hawaii State Harbor Capital Improvement Revenue, FGIC Insured, 6.40%,
535,000 07/01/05 ................................................................................. 574,777
605,000 07/01/06 ................................................................................. 648,403
610,000 07/01/07 ................................................................................. 650,443
Kauai County GO, Refunding, MBIA Insured, Pre-Refunded,
385,000 7.40%, 08/01/06 .......................................................................... 408,258
415,000 7.45%, 08/01/07 .......................................................................... 440,444
445,000 7.45%, 08/01/08 .......................................................................... 472,283
-----------
18,412,592
-----------
Idaho .1%
1,000,000 Idaho State University at Boise Revenues, Student Fee, MBIA Insured, 6.50%, 04/01/19 ......... 1,089,860
-----------
Illinois 4.2%
40,000 Aurora, Series B, MBIA Insured, Pre-Refunded, 7.25%, 01/01/19 ................................ 42,830
545,000 Aurora SFMR, GNMA Secured, AMBAC Insured, 7.80%, 12/01/15 .................................... 559,802
270,000 Bloomingdale Waterworks and Sewer Revenue, MBIA Insured, 7.80%, 05/01/06 ..................... 276,761
1,350,000 Cary Waterworks and Sewerage Revenue, Series A, MBIA Insured, Pre-Refunded, 6.40%, 05/01/17 .. 1,450,926
Illinois (cont.)
$ 100,000 Central Lake County Joint Action Water Agency, Interim Revenue, Series A, AMBAC Insured,
Pre-Refunded, 7.00%, 05/01/19 ............................................................... $ 109,428
320,000 Chicago Board of Education Lease, Series A, Refunding, MBIA Insured, 6.25%, 01/01/09 ......... 339,181
Chicago Central Public Library, Series B, AMBAC Insured,
1,800,000 6.70%, 01/01/06 .......................................................................... 1,963,422
1,800,000 6.75%, 01/01/07 .......................................................................... 1,963,152
100,000 Chicago Heights, MBIA Insured, Pre-Refunded, 7.40%, 12/01/03 ................................. 111,564
Chicago Public Building Commission Revenue, Community College District No. 508,
1,600,000 Series A, MBIA Insured, ETM, 7.70%, 01/01/08 ............................................. 1,698,224
4,000,000 Series B, BIG Insured, ETM, 8.75%, 01/01/07 .............................................. 4,133,960
100,000 Chicago Waste Water Transmission Revenue, AMBAC Insured, Pre-Refunded, 7.20%, 11/15/19 ....... 109,613
1,500,000 Cicero GO, CGIC Insured, 6.90%, 12/01/12 ..................................................... 1,631,685
Cook County Community College District No. 508, COP, FGIC Insured,
7,470,000 8.50%, 01/01/02 .......................................................................... 8,723,242
5,000,000 8.75%, 01/01/05 .......................................................................... 6,193,800
4,935,000 Decatur Hospital Revenue, Decatur Memorial Hospital, Series B, MBIA Insured, 6.85%, 10/01/16 . 5,217,183
750,000 Des Plains Hospital Facility Revenue, Refunding, Holy Family Hospital, AMBAC Insured, 9.25%,
01/01/14 .................................................................................... 759,938
2,000,000 Evergreen Park, Village of, Hospital Facility Revenue, Refunding, Little Co. of Mary Hospital, Inc.,
MBIA Insured, 7.75%, 02/15/09 ............................................................... 2,110,860
500,000 Franklin Park Alternate Revenue, AMBAC Insured, Pre-Refunded, 6.85%, 07/01/22 ................ 560,955
Illinois Health Facilities Authority Revenue,
4,452,000 Community Provider Pooled Loan Program, Series A, CGIC Insured, 7.35%, 08/15/10 .......... 4,947,908
2,635,000 Methodist Health Services Corp., Series G, BIG Insured, 8.00%, 08/01/15 .................. 2,858,817
4,280,000 Michael Reese Hospital, Series A, CGIC Insured, ETM, 7.60%, 02/15/05 ..................... 4,791,460
403,000 Refunding, Series B, MBIA Insured, ETM, 7.90%, 08/15/03 .................................. 462,692
47,000 Series 1990, CGIC Insured, 7.75%, 08/15/10 ............................................... 57,461
2,583,000 Series 1990, CGIC Insured, ETM, 7.75%, 08/15/10 .......................................... 2,864,082
2,314,000 Series B, MBIA Insured, 7.90%, 08/15/03 .................................................. 2,392,931
1,000,000 Silver Cross Hospital, MBIA Insured, 7.00%, 08/15/21 ..................................... 1,065,970
5,750,000 Illinois State COP, CGIC Insured, 6.95%, 07/01/13 ............................................ 6,219,833
Joliet GO, Series 1987, BIG Insured, Pre-Refunded, 8.00%,
560,000 01/01/09 ................................................................................. 589,109
605,000 01/01/10 ................................................................................. 636,448
650,000 01/01/11 ................................................................................. 683,787
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 ....................... 214,770
300,000 Macon County and Decatur COP, Decatur Public Building Commission, FGIC Insured, 6.50%,
01/01/06 .................................................................................... 325,035
2,000,000 Onterie Center Project, HFC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 7.05%,
07/01/27 .................................................................................... 2,098,780
300,000 Regional Transportation Authority, Series A, AMBAC Insured, 7.20%, 11/01/20 .................. 344,733
2,040,000 Southwestern Development Authority, Capital Improvement Revenue, McKendre College Project,
CGIC Insured, 7.375%, 02/01/11 .............................................................. 2,146,570
-----------
70,656,912
-----------
Indiana 1.6%
1,000,000 Carroll County Consolidated School Building Corp., Refunding, First Mortgage, AMBAC Insured,
7.625%, 01/01/04 ............................................................................ 1,054,060
Fort Wayne Hospital Authority Revenue, Ancillary System, Inc.,
250,000 Parkview Memorial Hospital Project, Series A, FGIC Insured, 7.50%, 11/15/11 .............. 271,015
2,000,000 Refunding, Series C, BIG Insured, Pre-Refunded, 8.125%, 07/01/18 ......................... 2,213,480
Indiana (cont.)
Indiana Health Facility Financing Authority Hospital Revenue, MBIA Insured,
$ 3,500,000 Community Hospitals of Indiana, Pre-Refunded, 7.00%, 07/01/21 ............................ $ 3,896,165
250,000 Refunding and Improvement, Community Hospital Project, 6.40%, 05/01/12 ................... 258,518
10,000,000 Indianapolis Airport Authority, International Airport Revenue, BIG Insured, 8.30%, 07/01/18 .. 10,733,200
500,000 Indianapolis Gas Utility Revenue, Refunding, Series B, FGIC Insured, 4.00%, 06/01/15 ......... 385,055
500,000 Jasper County PCR, Refunding, Northern Indiana Public Service, MBIA Insured, 7.10%, 07/01/17 . 536,720
6,000,000 Monroe County Hospital Authority Revenue, Refunding, Bloomington Hospital Project, BIG Insured,
7.125%, 05/01/11 ............................................................................ 6,266,520
1,500,000 Patoka Lake Regional Water and Sewer District, Waterworks Revenue, Series A, AMBAC Insured,
6.45%, 01/01/15 ............................................................................. 1,553,475
185,000 Rockport PCR, Refunding, Michigan Power Co., Series B, FGIC Insured, 7.60%, 03/01/16 ......... 205,352
-----------
27,373,560
-----------
Iowa .4%
4,040,000 Davenport Hospital Facility Revenue, Mercy Hospital Project, MBIA Insured, 6.625%, 07/01/14 .. 4,280,622
200,000 Davenport Hospital Revenue, St. Lukes Hospital, Series A, AMBAC Insured, 7.40%, 07/01/20 ..... 218,194
2,140,000 Greater Iowa Housing Assistance Corp., Mortgage Revenue, Refunding, Logan Park Project,
Series B, MBIA Insured, 6.50%, 01/01/24 ..................................................... 2,182,158
-----------
6,680,974
-----------
Kansas .6%
3,350,000 Burlington PCR, Refunding, Kansas Gas & Electric Co. Project, MBIA Insured, 7.00%, 06/01/31 .. 3,662,924
1,330,000 Cowley and Shawnee Counties, SFMR, GNMA Secured, AMBAC Insured, 7.35%, 12/01/11 .............. 1,391,446
1,330,000 Kansas State Development Finance Authority, Health Facility Revenue, MBIA Insured, 5.80%,
11/15/21 .................................................................................... 1,297,202
2,000,000 Wichita Hospital Revenue, Refunding & Improvement, St. Francis, MBIA Insured, 6.25%, 10/01/10 2,097,940
1,000,000 Wichita Water and Sewer Utility Revenue, Refunding and Improvement, Series B, FGIC Insured,
6.00%, 10/01/12 ............................................................................. 1,017,720
-----------
9,467,232
-----------
Kentucky 1.0%
2,000,000 Danville Multi-City Lease Revenue, Sewer and Drain System, MBIA Insured, Pre-Refunded, 6.75%,
03/01/11 .................................................................................... 2,209,900
1,000,000 Jefferson County Health Facilities Revenue, Jewish Hospital Services, Inc., AMBAC Insured, 6.55%,
05/01/22 .................................................................................... 1,051,410
Kentucky Economic Development Financing Authority,
2,000,000 Hospital Facilities Revenue, Baptist Healthcare System, Refunding, MBIA Insured, 5.00%,
08/15/24 ................................................................................ 1,720,840
2,375,000 Hospital Facilities Revenue, St. Elizabeth Medical Center Project, Series A, FGIC Insured, 6.00%,
12/01/22 ................................................................................ 2,394,594
1,000,000 Medical Center Revenue, Refunding and Improvement, Ashland Hospital Corp., Series A,
FSA Insured, 6.125%, 02/01/12 ........................................................... 1,028,000
1,750,000 Kenton County Water District No. 001, Waterworks Revenue, Series B, FGIC Insured, 5.70%,
02/01/20 .................................................................................... 1,703,608
40,000 Kentucky HFC, MFMR, Series A, BIG Insured, 8.875%, 07/01/19 .................................. 40,503
1,450,000 Louisville and Jefferson County Regional Airport Authority, Airport System Revenue,
Louisville International Airport, Series A, MBIA Insured, 5.625%, 07/01/25 .................. 1,360,651
Louisville and Jefferson County Metropolitan Sewer District Revenue,
2,000,000 AMBAC Insured, 6.75%, 05/15/25 ........................................................... 2,188,560
100,000 Pre-Refunded, FGIC Insured, 7.35%, 05/01/19 .............................................. 110,591
2,000,000 Northern Kentucky University COP, Student Housing Facilities, CGIC Insured, 7.25%, 01/01/12 .. 2,157,200
-----------
15,965,857
-----------
Louisiana .5%
$ 100,000 Alexandria Utilities Revenue, FGIC Insured, Pre-Refunded, 8.15%, 05/01/06 .................... $ 105,593
Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Memorial Hospital
Project, BIG Insured, Pre-Refunded,
1,000,000 8.40%, 12/01/12 .......................................................................... 1,070,720
850,000 7.50%, 12/01/18 .......................................................................... 885,318
15,000 East Baton Rouge Parish, Sales and Use Tax Public Improvement, MBIA Insured, Pre-Refunded,
7.25%, 02/01/12 ............................................................................. 16,160
1,700,000 Jefferson Sales Tax District, Special Sales Tax Revenue, Refunding, Series A, BIG Insured,
Pre-Refunded, 8.00%, 07/01/05 ............................................................... 1,852,575
300,000 Lafayette Public Improvement, Sales Tax Revenue, Refunding, FGIC Insured, Pre-Refunded, 8.00%,
03/01/08 .................................................................................... 321,834
3,000,000 Louisiana Public Facilities Authority Revenue, College and University of Loyola, FGIC Insured,
Pre-Refunded, 8.50%, 12/01/09 ............................................................... 3,093,570
150,000 Louisiana Regional Transit Authority Revenue, Refunding, FGIC Insured, 8.00%, 12/01/13 ....... 162,788
500,000 New Orleans Public Improvement, FGIC Insured, Pre-Refunded, 7.50%, 09/01/21 .................. 567,595
-----------
8,076,153
-----------
Maine .7%
Ellsworth, GO, MBIA Insured, 5.25%,
635,000 11/01/12 ................................................................................. 600,551
655,000 11/01/13 ................................................................................. 617,482
2,000,000 Maine Health and Higher Educational Facilities Authority Hospital Revenue, Eastern Maine
Health Care, FGIC Insured, 6.625%, 10/01/11 ................................................. 2,139,700
2,000,000 Maine Health and Higher Educational Facilities Authority Revenue, Series B, FSA Insured, 7.00%,
07/01/24 .................................................................................... 2,179,840
2,015,000 Maine Health and Higher Educational Facilities Authority Revenue, Series C, FSA Insured, 6.20%,
07/01/25 .................................................................................... 2,044,923
Maine State Turnpike Authority Revenue, MBIA Insured, 6.00%,
525,000 07/01/14 ................................................................................. 534,298
2,500,000 07/01/18 ................................................................................. 2,534,925
Old Orchard Beach, MBIA Insured, 6.65%,
1,180,000 09/01/11 ................................................................................. 1,274,011
535,000 09/01/12 ................................................................................. 579,630
-----------
12,505,360
-----------
Maryland .4%
Maryland State Health and Higher Educational Facilities Authority Revenue,
3,000,000 University of Maryland Medical System, Refunding, FGIC Insured, 5.00%, 07/01/20 .......... 2,622,000
200,000 University of Maryland Medical System, Series B, FGIC Insured, ETM, 7.00%,
07/01/22 ................................................................................ 233,096
Maryland State Housing and Community Development Administration Department, Infrastructure
Financing, Series A, AMBAC Insured,
2,000,000 6.625%, 06/01/12 ......................................................................... 2,134,440
820,000 6.70%, 06/01/22 .......................................................................... 861,746
-----------
5,851,282
-----------
Massachusetts 5.3%
3,700,000 Boston Water and Sewer Commission Revenue, Series A, FGIC Insured, 6.00%, 11/01/21 ........... 3,719,129
100,000 Massachusetts Bay Transportation Authority, Series A, MBIA Insured, Pre-Refunded, Series A,
MBIA Insured, Pre-Refunded, 7.625%, 03/01/15 ................................................ 111,285
4,455,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue, Refunding,
Series A, AMBAC Insured, 6.00%, 07/01/18 .................................................... 4,380,067
Massachusetts (cont.)
Massachusetts State Health and Educational Facilities Authority Revenue,
$ 10,000,000 Baystate Medical Center, Series E, FSA Insured, 6.00%, 07/01/26 .......................... $ 9,835,300
1,500,000 Berkshire Health System, Series A, MBIA Insured, Pre-Refunded, 6.75%, 10/01/19 ........... 1,576,005
1,500,000 Beverly Hospital, Series E, MBIA Insured, Pre-Refunded, 7.70%, 07/01/20 .................. 1,685,220
1,100,000 Capital Asset Program F-1, MBIA Insured, 7.30%, 10/01/18 ................................. 1,197,185
12,555,000 Fallon Health Care System, Series A, CGIC Insured, 6.75%, 06/01/20 ....................... 13,669,256
7,115,000 Lahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 07/01/23 .................... 6,489,734
9,220,000 Massachusetts General Hospital, Series F, AMBAC Insured, 6.25%, 07/01/20 ................. 9,287,214
1,000,000 Massachusetts Medical Center, Series A, AMBAC Insured, 7.10%, 07/01/21 ................... 1,082,690
1,085,000 Mclean Hospital, Series C, FGIC Insured, 6.625%, 07/01/15 ................................ 1,147,518
8,500,000 North Eastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ........................ 8,939,365
2,000,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.60%, 07/01/20 .................... 2,112,120
2,000,000 Youville Hospital, Refunding, Series B, MBIA Insured, 6.00%, 02/15/25 .................... 1,999,900
Massachusetts State Industrial Finance Agency Revenue,
3,000,000 Babson College, Series A, MBIA Insured, 6.50%, 10/01/22 .................................. 3,125,820
5,000,000 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 ............................. 5,286,150
5,000,000 Jewish Philanthropies, Series A, AMBAC Insured, 6.375%, 02/01/15 ......................... 5,183,800
4,000,000 Massachusetts State Port Authority Revenue, Series A, FGIC Insured, 6.00%, 07/01/23 .......... 3,900,720
2,000,000 Monson GO, School District, Series 1990, MBIA Insured, Pre-Refunded, 7.70%, 10/15/10 ......... 2,261,260
2,300,000 Palmer GO, Series B, AMBAC Insured, Pre-Refunded, 7.70%, 10/01/10 ............................ 2,598,310
-----------
89,588,048
-----------
Michigan 2.4%
100,000 Chippewa Valley School Building and Site, FGIC Insured, Pre-Refunded, 6.375%, 05/01/06 ....... 108,044
Detroit Sewerage Disposal Revenue, FGIC Insured, Pre-Refunded,
4,000,000 6.625%, 07/01/21 ......................................................................... 4,397,840
6,000,000 5.00%, 07/01/25 .......................................................................... 5,218,260
1,040,000 Howell Public Schools, Refunding, AMBAC Insured, 5.375%, 05/01/20 ............................ 972,005
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding and Improvement,
Bronson Methodist, MBIA Insured,
2,000,000 Series A, 6.375%, 05/15/17 ............................................................... 2,076,060
5,500,000 5.875%, 5/15/26 .......................................................................... 5,389,670
10,000,000 Kent Hospital Finance Authority, Health Care Revenue, Butterworth Health System, Series A,
MBIA Insured, 5.625%, 01/15/26 .............................................................. 9,315,200
5,000,000 Marquette City Hospital Finance Authority Revenue, Refunding, Marquette General Hospital,
Series D, 6.10%, 04/01/19 ................................................................... 5,065,950
135,000 Michigan State HDA, SFMR, Series 1986-A, FGIC Insured, 8.00%, 10/01/06 ....................... 138,214
Michigan State Hospital Finance Authority Revenue, St. John's Hospital, AMBAC Insured,
2,500,000 Refunding, Series A, 6.00%, 05/15/13 ..................................................... 2,543,750
3,000,000 5.25%, 05/15/26 .......................................................................... 2,674,350
Michigan State Strategic Fund Limited Obligation Revenue, Refunding, Detroit Edison Co.,
200,000 FGIC Insured, 6.875%, 12/01/21 ........................................................... 213,940
250,000 Series BB, AMBAC Insured, 7.00%, 05/01/21 ................................................ 290,155
2,400,000 Warren Consolidated School District, Refunding, Series II, FGIC Insured, 5.25%, 05/01/21 ..... 2,198,424
-----------
40,601,862
-----------
Minnesota 1.9%
2,000,000 Eden Prairie, Oympic Ridge Project, Series A, GNMA Secured, 6.25%, 01/20/31 .................. 2,014,380
2,450,000 Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured, 6.00%, 02/01/22 ...... 2,440,323
4,000,000 Minneapolis-St. Paul Housing Finance Board, MFMR, GNMA Secured, Mortgage Loan,
Riverside Plaza Project, 8.20%, 12/20/18 .................................................... 4,159,800
200,000 Northern Municipal Power Agency, Minnesota Electric System Revenue, Refunding, Series B,
AMBAC Insured, 5.50%, 01/01/18 .............................................................. 189,418
Minnesota (cont.)
$ 2,870,000 eSouthern Minnesota Municipal Power Agency, Power Supply System Revenue, Series A,
AMBAC Insured, 5.75%, 01/01/18 .............................................................. $ 2,824,711
8,200,000 St. Louis Park Health Care Facilities Revenue, Healthsystem of Minnesota - Obligated Group,
Refunding, Series A, AMBAC Insured, 5.20%, 07/01/16 ......................................... 7,471,184
1,200,000 Washington County Governmental Housing, Scandia II, Series B, FGIC Insured, 6.30%, 07/01/24 .. 1,251,228
2,415,000 Washington County, Raymie Johnson Apartments, Series C, Refunding, FGIC Insured, 6.30%,
01/01/20 .................................................................................... 2,518,096
8,775,000 Western Minnesota Municipal Power Agency, Power Supply Revenue, Series A, MBIA Insured,
6.125%, 01/01/16 ............................................................................ 8,739,637
-----------
31,608,777
-----------
Mississippi .1%
Harrison County Correctional Facilities Finance Authority, Special Obligation Revenue, FGIC Insured,
Pre-Refunded, 8.30%,
1,000,000 09/01/05 ................................................................................. 1,061,820
1,000,000 09/01/06 ................................................................................. 1,061,820
200,000 Harrison County Waste Water Management District Revenue, Refunding, Waste Water Treatment
Facilities, Series A, FGIC Insured, 8.50%, 02/01/13 ......................................... 264,278
15,000 Mississippi HFC, SFMR, Refunding, Series A, FGIC Insured, 7.70%, 10/15/08 .................... 15,415
-----------
2,403,333
-----------
Missouri 2.5%
2,000,000 Branson Reorganization School District No. R-4, Refunding and Improvement, CGIC Insured,
Pre-Refunded, 6.20%, 03/01/06 ............................................................... 2,087,800
1,000,000 Cape Girardeau County IDA, Health Care Facilities Revenue, Refunding, Southeast Missouri
Hospital Association, MBIA Insured, 5.25%, 06/01/16 ......................................... 925,790
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 ....................................... 4,285,440
2,000,000 Missouri Economic Development, Export and Infrastructure Board Lease Revenue,
Mental Health Office, Building Division, CGIC Insured, 6.30%, 12/01/08 ...................... 2,111,500
1,490,000 Missouri HDC, Series 1990-B, GNMA Secured, 7.75%, 06/01/22 ................................... 1,569,611
1,000,000 Missouri Health and Educational Facilities Authority, Health Facilities Revenue,
Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 ............................. 1,039,320
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 ............................. 8,097,900
1,000,000 Missouri School Board Lease Association, COP, Series R-III, School District Project, MBIA Insured,
re-Refunded, 6.875%, 03/01/11 ................................................................ 1,090,470
8,575,000 Sikeston Electric Revenue, MBIA Insured, Pre-Refunded, 6.25%, 06/01/22 ....................... 9,358,241
2,850,000 St. Charles County Public Facilities Authority Leasehold Revenue, FGIC Insured, 6.375%, 03/15/07 3,010,940
555,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19 ............................ 581,279
St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding & Improvement,
2,025,000 FGIC Insured, Pre-Refunded, 6.25%, 02/15/12 .............................................. 2,207,615
2,000,000 Series A, AMBAC Insured, 5.95%, 02/15/16 ................................................. 1,988,520
2,950,000 St. Louis School District GO, Refunding, FGIC Insured, 6.00%, 04/01/12 ....................... 3,053,280
1,250,000 Washington GO, Pauwels Transformers Project, Series A, FGIC Insured, 7.60%, 12/01/09 ......... 1,305,313
-----------
42,713,019
-----------
Montana 1.5%
Forsyth PCR, Refunding,
4,475,000 Puget Sound Power and Light Project, AMBAC Insured, 6.80%, 03/01/22 ...................... 4,798,408
5,000,000 Washington Water Co., Series A, MBIA Insured, 7.125%, 12/01/13 ........................... 5,409,700
750,000 Helena Water Revenue, Series C, FGIC Insured, 6.65%, 11/01/12 ................................ 805,095
Montana (cont.)
Montana State Board, Workers Compensation Investment Program,
$ 1,560,000 6.875%, 06/01/20 ......................................................................... $ 1,694,378
4,545,000 6.875%, 06/01/20 ......................................................................... 4,917,917
2,395,000 ETM, 6.875%, 06/01/20 .................................................................... 2,657,588
1,000,000 Montana State University Revenue, Higher Education Facilities, Acquisition and Improvement,
Series C, MBIA Insured, 6.00%, 11/15/14 ...................................................... 1,000,570
3,000,000 Montana Water System Revenue, Butte-Silver Bow Project, FGIC Insured, 6.50%, 11/01/14 ........ 3,204,900
-----------
24,488,556
-----------
Nebraska 1.5%
2,500,000 Cass County School District No. 001, Plattsmouth Community Schools, FGIC Insured, 6.35%,
12/01/19 .................................................................................... 2,570,625
5,000,000 Douglas County Hospital Authority Revenue, No. 2, Health Facilities, Series C, MBIA Insured,
5.50%, 11/15/21 ............................................................................. 4,701,450
2,500,000 Lancaster County Hospital Authority Revenue, Bryan Memorial Hospital Project No. 1, MBIA Insured,
6.70%, 06/01/22 ............................................................................. 2,693,825
5,000,000 Lincoln Electric System Revenue, Refunding, Series A, MBIA Insured, 5.25%, 09/01/15 .......... 4,669,550
2,000,000 Lincoln Hospital Revenue, Refunding, Lincoln General Hospital, Series A, CGIC Insured, 6.20%,
12/01/14 .................................................................................... 2,056,860
Municipal Energy Agency of Nebraska, Power Supply System Revenue, Refunding, Series A,
AMBAC Insured, 6.00%,
2,000,000 04/01/15 ................................................................................. 2,040,120
1,350,000 04/01/17 ................................................................................. 1,370,412
1,000,000 Nebraska Educational Finance Authority Revenue, Creighton University Project, AMBAC Insured,
5.95%, 01/01/11 ............................................................................. 1,017,640
Nebraska Investment Finance Authority, SFMR, Refunding,
485,000 Series 1, GNMA Secured, MBIA Insured, 8.125%, 08/15/38 ................................... 507,892
3,470,000 Series B, FGIC Insured, 8.00%, 07/15/17 .................................................. 3,690,900
305,000 Series R1-A, FGIC Insured, 8.00%, 07/15/17 ............................................... 315,837
-----------
25,635,111
-----------
Nevada .5%
4,000,000 Clark County School District, Series A, MBIA Insured, 7.00%, 06/01/10 ........................ 4,551,960
250,000 Clark County, Series A, AMBAC Insured, 6.50%, 06/01/17 ....................................... 269,345
1,250,000 North Las Vegas, FGIC Insured, Pre-Refunded, 7.125%, 04/01/11 ................................ 1,379,663
10,000 Reno Hospital Revenue, Refunding, St. Mary's Regional Medical Center, Series A, MBIA Insured,
7.75%, 07/01/07 ............................................................................. 10,684
1,695,000 Sparks Public Safety, GO, AMBAC Insured, Pre-Refunded, 7.50%, 10/01/09 ....................... 1,870,416
-----------
8,082,068
-----------
New Hampshire .6%
New Hampshire Higher Educational and Health Facilities Authority Revenue,
2,000,000 Concord Hospital, FGIC Insured, Pre-Refunded, 7.00%, 10/01/12 ............................ 2,152,220
4,300,000 Refunding, Concord Hospital, AMBAC Insured, 6.00%, 10/01/26 .............................. 4,246,637
4,000,000 Refunding, University System, MBIA Insured, 6.25%, 07/01/20 .............................. 4,101,360
-----------
10,500,217
-----------
New Jersey 3.0%
Camden County Municipal Utilities Authority, Sewer Revenue, FGIC Insured,
3,950,000 8.25%, 12/01/97 .......................................................................... 4,227,251
2,050,000 Pre-Refunded, 8.25%, 12/01/17 ............................................................ 2,187,412
2,580,000 Economic Development Authority, State Lease Revenue, Refunding, AMBAC Insured, 5.75%,
03/15/20 .................................................................................... 2,540,707
New Jersey (cont.)
Essex County Improvement Authority Lease, Jail and Youth House Projects, AMBAC Insured,
$ 3,000,000 Pre-Refunded, 7.00%, 12/01/24 ............................................................ $ 3,447,330
4,750,000 Refunding, 5.35%, 12/01/24 ............................................................... 4,398,548
2,525,000 Essex County Improvement Authority Revenue, Garden State Cancer Center Project,
AMBAC Insured, 6.00%, 12/01/20 .............................................................. 2,553,507
90,000 Hoboken Union City, Weehawken Sewer Authority Revenue, MBIA Insured, Pre-Refunded, 7.25%,
08/01/19 .................................................................................... 98,454
5,000,000 Hudson County Correctional Facility, COP, BIG Insured, Pre-Refunded, 7.60%, 12/01/21 ......... 5,453,650
Lacey Municipal Utilities Authority Water Revenue, MBIA Insured,
2,500,000 6.10%, 12/01/23 .......................................................................... 2,558,150
3,255,000 6.25%, 12/01/24 .......................................................................... 3,363,977
1,700,000 Mantua Township, New Jersey School District COP, MBIA Insured, Pre-Refunded, 7.25%, 06/30/10 . 1,886,473
2,000,000 Mount Laurel Township Municipal Utilities Authority System Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 07/01/15 ............................................................... 2,039,760
3,000,000 New Jersey EDA Revenue, Clara Maass Health System, FSA Insured, 5.00%, 07/01/25 .............. 2,609,130
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 1,422,090
2,000,000 Community Medical Center, Series D, MBIA Insured, 6.00%, 07/01/19 ........................ 2,017,300
2,860,000 Jersey Shore Memorial Hospital, Series B, AMBAC Insured, Pre-Refunded, 8.00%, 07/01/18 ... 3,103,071
2,600,000 Jersey Shore Memorial Hospital, Series C, MBIA Insured, Pre-Refunded, 7.875%, 07/01/12 ... 2,734,732
3,000,000 Muhlenberg Regional Medical Center, Series B, AMBAC Insured, 8.00%, 07/01/18 ............. 3,244,470
485,000 New Jersey HFA, Home Buyer Revenue, Series C, MBIA Insured, 7.375%, 10/01/17 ................. 502,416
300,000 New Jersey State Turnpike Authority Revenue, Refunding, Series C, AMBAC Insured, 6.50%,
01/01/16 .................................................................................... 328,230
100,000 North Bergen Township Municipal Utilities Authority Sewer Revenue, FGIC Insured, Pre-Refunded,
7.625%, 12/15/19 ............................................................................ 106,468
-----------
50,823,126
-----------
New Mexico .7%
3,600,000 Albuquerque Airport Revenue, Series B, AMBAC Insured, 7.00%, 07/01/16 ........................ 3,620,232
5,000,000 Farmington PCR, Refunding, Public Service Co. of New Mexico, Series A, AMBAC Insured, 6.375%,
12/15/22 .................................................................................... 5,166,400
2,000,000 Gallup PCR, Refunding, Plains Electric Generation, MBIA Insured, 6.65%, 08/15/17 ............. 2,155,800
1,310,000 New Mexico Mortgage Finance Authority, SFMR, Series 1987-C, FGIC Insured, 8.625%, 07/01/17 ... 1,352,968
-----------
12,295,400
-----------
New York 7.2%
900,000 Central Square School District, FGIC Insured, 6.50%, 06/15/10 ................................ 972,459
2,900,000 MAC for the City of New York, Series 61, MBIA Insured, 6.875%, 07/01/07 ...................... 3,023,395
1,585,000 Metropolitan Transportation Authority Service Contract, Refunding, Series K, AMBAC Insured,
Pre-Refunded, 7.50%, 07/01/17 ............................................................... 1,707,410
New York City GO,
1,000,000 Series B, FGIC Insured, Pre-Refunded, 7.25%, 08/01/11 .................................... 1,057,130
105,000 Series C, Subseries C-1, MBIA Insured, 6.625%, 08/01/12 .................................. 113,181
New York City Municipal Water Finance Authority, Water and Sewer System Revenue,
430,000 Series A, FGIC Insured, Pre-Refunded, 6.75%, 06/15/14 .................................... 462,177
2,000,000 Series A, MBIA Insured, Pre-Refunded, 7.25%, 06/15/15 .................................... 2,205,460
5,000,000 Series B, FGIC Insured, Pre-Refunded, 7.625%, 06/15/17 ................................... 5,366,750
5,000,000 Series C, AMBAC Insured, 6.20%, 06/15/21 ................................................. 5,192,800
10,000,000 Series C, AMBAC Insured, 6.50%, 06/15/21 ................................................. 10,203,200
New York State Dormitory Authority Revenues,
4,000,000 Brooklyn Law School, CGIC Insured, 6.40%, 07/01/11 ....................................... 4,246,840
8,655,000 City University System, Series C, FGIC Insured, Pre-Refunded, 7.00%, 07/01/14 ............ 9,529,761
New York(cont.)
New York State Dormitory Authority Revenues, (cont.)
$ 5,560,000 Pooled Capital Program, FGIC Insured, 7.80%, 12/01/05 .................................... $ 5,900,661
1,500,000 Refunding, Mt. Sinai School of Medicine, MBIA Insured, 6.75%, 07/01/15 ................... 1,608,675
1,000,000 New York State Energy Research and Development Authority Facilities Revenue,
Brooklyn Union Gas, Series II, MBIA Insured, 7.00%, 12/01/20 ................................ 1,024,880
New York State Energy Research and Development Authority, PCR,
2,000,000 Central Hudson Gas, Series A, FGIC Insured, 7.375%, 10/01/14 ............................. 2,193,000
3,500,000 Refunding, Niagara Mohawk Power Corp., Series A, FGIC Insured, 6.625%, 10/01/13 .......... 3,718,785
5,000,000 Refunding, Rochester Gas & Electric Project, Series B, MBIA Insured, 6.75%, 01/15/27 ..... 5,294,350
5,000,000 Refunding, Rochester Gas & Electric Project, Series B, MBIA Insured, 6.50%, 05/15/32 ..... 5,148,600
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 3,282,810
7,485,000 Presbyterian Hospital, Series A, MBIA Insured, FHA Guaranteed, 5.375%, 02/15/25 .......... 6,869,134
5,000,000 St. Lukes Hospital, Series B, MBIA Insured, Pre-Refunded, 7.45%, 02/15/29 ................ 5,531,050
2,385,000 St. Lukes-Roosevelt Hospital, Mortgage, Series A, MBIA Insured, FHA Guaranteed, 5.625%,
8/15/18 .................................................................................. 2,279,368
6,635,000 New York State Tollway Authority, General Revenue, Series B, MBIA Insured, 5.00%, 01/01/20 ... 5,929,368
9,000,000 Niagara Frontier Transportation Authority, Airport Revenue, Greater Buffalo International Airport,
Series A, AMBAC Insured, 6.25%, 04/01/24 .................................................... 9,187,740
Port Authority of New York and New Jersey, Consolidated, MBIA Insured,
5,000,000 5.625%, 10/15/17 ......................................................................... 4,876,050
10,000,000 5.875%, 10/15/27 ......................................................................... 9,921,500
` 2,000,000 Suffolk County Water Authority, Waterworks Revenue, Refunding, Series B, AMBAC Insured,
5.625%, 06/01/16 ............................................................................ 1,920,400
3,400,000 Western Nassau County Water Authority, Water System Revenue, AMBAC Insured, 5.65%,
05/01/26 .................................................................................... 3,281,306
-----------
122,048,240
-----------
North Carolina
North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, MBIA Insured,
80,000 6.50%, 01/01/10 .......................................................................... 83,752
20,000 ETM, 6.50%, 01/01/10 ..................................................................... 21,711
500,000 Refunding, 5.75%, 01/01/20 ............................................................... 488,040
-----------
593,503
-----------
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 ................................ 163,884
300,000 North Dakota State Building Authority Revenue, Refunding, Series A, AMBAC Insured, 6.75%,
06/01/11 .................................................................................... 316,446
-----------
480,330
-----------
Ohio 2.1%
2,000,000 Akron Waterworks Mortgage Revenue, AMBAC Insured, Pre-Refunded, 6.55%, 03/01/12 .............. 2,187,440
2,000,000 Clermont County, Refunding, Building and Road Improvement, AMBAC Insured, 5.60%, 09/01/14 .... 1,960,040
Cleveland Waterworks First Mortgage Revenue, Series 1992-F, AMBAC Insured, Pre-Refunded, 6.50%,
1,375,000 01/01/11 ................................................................................. 1,510,341
1,625,000 01/01/11 ................................................................................. 1,731,698
2,750,000 01/01/21 ................................................................................. 3,013,863
1,080,000 Cuyahoga County Hospital Revenue, Metrohealth Systems Project, MBIA Insured, 6.00%, 02/15/19 . 1,087,279
1,750,000 Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ................ 1,819,878
3,000,000 Lucas County Hospital Revenue, St. Vincent Medical Center, MBIA Insured, 6.625%, 08/15/22 .... 3,300,780
Ohio (cont.)
$ 12,720,000 Montgomery County Hospital Facilities Revenue, Kettering Medical Center Facilities, MBIA Insured,
Pre-Refunded, 7.50%, 04/01/14 ............................................................... $ 13,922,040
4,070,000 Ohio HFA, SFMR, Series 1991-D, GNMA Secured, 7.05%, 09/01/16 ................................. 4,203,293
-----------
34,736,652
-----------
Oklahoma 1.6%
730,000 Grady County Home Finance Authority, SFMR, Refunding, Series A, FGIC Insured, 6.70%,
01/01/12 .................................................................................... 760,061
3,300,000 Jenks Public Works Authority Revenue, Refunding, AMBAC Insured, 7.80%, 07/01/11 .............. 3,531,561
1,000,000 Langston University COP, Student Housing Project, MBIA Insured, 5.125%, 02/01/17 ............. 901,010
300,000 McGee Creek Authority Water Revenue, MBIA Insured, 6.00%, 01/01/23 ........................... 305,163
5,000,000 Moore Public Works Authority Revenue, Refunding, AMBAC Insured, 7.60%, 07/01/06 .............. 5,421,950
1,040,000 Muskogee, SFMR, HFA, FGIC Insured, 7.60%, 12/01/10 ........................................... 1,070,878
2,000,000 Oklahoma State Turnpike Authority Revenue, Series A, AMBAC Insured, 6.00%, 01/01/12 .......... 2,062,680
1,255,000 Owasso Public Works Authority, Public Improvement Revenue, CGIC Insured, 7.40%, 11/01/07 ..... 1,324,615
250,000 Pottawatomie County Development Authority Water Revenue, North Deer Creek Reservoir Project,
AMBAC Insured, Pre-Refunded, 7.375%, 07/01/26 ............................................... 278,055
3,275,000 Tulsa Airport Improvements Trust, General Revenue Consolidated, MBIA Insured, Pre-Refunded,
7.50%, 06/01/08 ............................................................................. 3,442,549
Tulsa County HFAR, GNMA Secured,
4,595,000 Series A, 8.30%, 12/01/19 ................................................................ 4,828,794
325,000 Series D, 6.95%, 12/01/22 ................................................................ 334,932
3,270,000 Tulsa Industrial Authority Revenue, Holland Hall School Project, CGIC Insured, 6.75%, 12/01/14 3,496,513
-----------
27,758,761
-----------
Oregon 1.6%
3,000,000 Chemeketa Community College District, FGIC Insured, 5.95%, 06/01/16 .......................... 3,026,130
1,500,000 Deschutes and Jefferson Counties School District No. 2-J, Redmond, MBIA Insured, 5.60%,
06/01/09 .................................................................................... 1,511,565
5,000,000 Josephine County School District No. 7, FGIC Insured, 5.70%, 06/01/13 ........................ 4,983,450
1,000,000 Northern Wasco County Peoples Utility District, Electric Revenue, FGIC Insured, 5.625%, 12/01/22 967,300
700,000 Ontario Catholic Health Corp., Hospital Facilities Authority Revenue, Holy Rosary Medical Facility,
Refunding, Series C, MBIA Insured, 5.50%, 11/15/12 .......................................... 678,783
1,500,000 Oregon Health Sciences University Revenue, Series B, MBIA Insured, 5.25%, 07/01/15 ........... 1,394,760
1,000,000 Oregon State Department of Administrative Services, Series A, MBIA Insured, 5.70%, 05/01/17 .. 984,410
6,025,000 Portland Hospital Facilities Authority Revenue, Legacy Health System, Series A, AMBAC Insured,
6.70%, 05/01/21 ............................................................................. 6,496,577
Washington County, Unified Sewer Agency Revenue,
1,000,000 Senior Lien, Series A, AMBAC Insured, 6.125%, 10/01/12 ................................... 1,040,250
1,845,000 eSenior Lien, FGIC Insured, 5.50%, 10/01/16 ............................................... 1,792,528
1,000,000 Series 1, AMBAC Insured, 6.125%, 10/01/12 ................................................ 1,040,250
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 .............................. 3,023,310
-----------
26,939,313
-----------
Pennsylvania 2.5%
3,900,000 Butler County Hospital Authority Revenue, North Hills Passavant Hospital, CGIC Insured, 7.00%,
06/01/22 .................................................................................... 4,180,683
5,000,000 Cambria County Hospital Development Authority Revenue, Refunding and Improvement,
Conemaugh Valley Hospital, Series B, Connie Lee Insured, 6.375%, 07/01/18 ................... 5,127,700
3,000,000 Dauphin County Hospital Authority Revenue, Refunding, Harrisburg Hospital, MBIA Insured, 8.25%
07/01/14 .................................................................................... 3,138,840
Pennsylvania (cont.)
$ 1,500,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue, Refunding,
AMBAC Insured, 7.375%, 01/01/07 ............................................................. $ 1,609,020
200,000 Exeter Township School District, FGIC Insured, 6.50%, 05/15/06 ............................... 216,540
1,200,000 Harrisburg RDAR, Capital Improvement, Series A, FGIC Insured, 7.875%, 11/02/16 ............... 1,229,244
100,000 Lehigh County General Purpose Authority Revenues, Hospital Healtheast, Inc., Series A, Refunding,
MBIA Insured, 7.00%, 07/01/15 ............................................................... 106,366
8,000,000 Montgomery County IDAR, PCR, Refunding, Series B, MBIA Insured, 6.70%, 12/01/21 .............. 8,513,680
500,000 Pennslyvania Convention Center Authority Revenue, Series A, FGIC Insured, ETM, 6.00%,
09/01/19 .................................................................................... 519,080
100,000 Pennsylvania State Higher Educational Facilities Authority, College and University Revenues,
Hahnemann University Project, MBIA Insured, 7.20%, 07/01/19 ................................. 109,059
5,000,000 Pennsylvania State Higher Educational Facilities Authority, Health Services Revenue, MBIA Insured
5.875%, 11/15/21 ............................................................................ 4,893,350
2,740,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ............................................................... 2,876,781
Pennsylvania State Turnpike Commission Revenue,
500,000 Refunding, Series P, AMBAC Insured, 6.00%, 12/01/17 ...................................... 506,095
2,500,000 Series K, MBIA Insured, Pre-Refunded, 7.50%, 12/01/12 .................................... 2,765,125
4,000,000 Philadelphia Airport Revenue, Series A, AMBAC Insured, 6.10%, 06/15/25 ....................... 4,008,920
1,000,000 Philadelphia Water and Waste Water Revenue, Refunding, CGIC Insured, 5.50%, 06/15/15 ......... 945,100
90,000 Pittsburg Water and Sewer System Authority Revenue, Refunding, ETM, 7.25%, 09/01/14 .......... 99,639
2,000,000 Quaker Valley School District, FGIC Insured, 5.70%, 01/15/19 ................................. 1,948,080
10,000 Scranton-Lackawanna Health and Welfare Authority Revenue, Community Medical Center Project,
BIG Insured, 7.875%, 07/01/10 ............................................................... 10,675
-----------
42,803,977
-----------
Rhode Island 1.3%
2,100,000 Kent County Water Authority, General Revenue, Series A, MBIA Insured, 6.35%, 07/15/14 ........ 2,201,703
620,000 Newport, GO, Refunding, Series B, FGIC Insured, 5.125%, 05/15/10 ............................. 588,628
5,000,000 Providence PBA General Revenue, Series A, CGIC Insured, Pre-Refunded, 7.25%, 12/15/10 ........ 5,586,900
350,000 Rhode Island Convention Center Authority Revenue, Series A, MBIA Insured, Pre-Refunded, 6.65%,
05/15/12 .................................................................................... 382,960
3,335,000 Rhode Island Health and Education Building Authority, Series A, CGIC Insured, Pre-Refunded,
7.50%, 09/15/19 ............................................................................. 3,676,471
Rhode Island Health and Educational Building Corp. Revenue, Higher Educational Facilities,
Connie Lee Insured,
3,000,000 6.30%, 03/15/20 .......................................................................... 3,049,320
2,000,000 Roger Williams Facility, 7.25%, 11/15/24 ................................................. 2,180,280
2,000,000 Rhode Island Port Authority and Economic Development Corp. Revenue, Shepard Building Project,
Series B, AMBAC Insured, 6.75%, 06/01/25 .................................................... 2,142,700
250,000 Rhode Island State, Refunding, Series A, FGIC Insured, 6.25%, 06/15/07 ....................... 267,815
2,000,000 West Warwick GO, MBIA Insured, Pre-Refunded, 7.25%, 09/01/11 ................................. 2,265,320
-----------
22,342,097
-----------
South Carolina .4%
250,000 Charleston Waterworks and Sewer Revenue, Refunding and Improvement, AMBAC Insured, 6.00%,
01/01/16 .................................................................................... 254,413
2,910,000 Cherokee County COP, Peachtree Centre Project, CGIC Insured, 7.05%, 09/01/11 ................. 3,188,924
250,000 Edgefield County School District, Refunding, FSA Insured, 8.50%, 02/01/01 .................... 287,820
200,000 North Charleston Sewer District Revenue, MBIA Insured, Pre-Refunded, 7.75%, 08/01/18 ......... 216,864
South Carolina (cont.)
$ 200,000 Piedmont Municipal Power Agency, South Carolina Electric Revenue, Refunding, FGIC Insured,
6.25%, 01/01/21 ............................................................................. $ 208,958
3,000,000 Richland County Hospital Facilities Revenue, Community Provider, Pooled Loan Program, Series A,
CGIC Insured, 7.125%, 07/01/17 .............................................................. 3,253,890
-----------
7,410,869
-----------
South Dakota .9%
4,800,000 Grant County Pollution Control Revenue, Refunding, MBIA Insured, 5.90%, 06/01/23 ............. 4,661,328
1,355,000 Heartland Consumer Power District, Electric System Revenue, Refunding, MBIA Insured,
Pre-Refunded, 7.625%, 01/01/16 .............................................................. 1,397,954
2,000,000 Lawrence County COP, Courthouse, CGIC Insured, 7.65%, 07/01/10 ............................... 2,197,600
2,345,000 Sioux Falls Medical Clinic Revenue, AMBAC Insured, 8.00%, 09/01/08 ........................... 2,363,455
2,720,000 South Dakota State Lease Revenue, Series A, CGIC Insured, 6.75%, 12/15/16 .................... 2,994,421
2,220,000 South Dakota State University Revenue, Housing and Auxiliary Facilities, Refunding, Series A,
MBIA Insured, 5.50%, 04/01/17 ............................................................... 2,077,276
-----------
15,692,034
-----------
Tennessee .3%
1,460,000 Greater Tennessee Housing Assistance Corp., Mortgage Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 07/01/24 ............................................................... 1,446,188
200,000 Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%, 07/01/15 .... 212,616
3,450,000 Trenton Special School District, AMBAC Insured, 5.75%, 11/01/20 .............................. 3,400,976
-----------
5,059,780
-----------
Texas 9.1%
Austin Combined Utility System Revenue,
1,000,000 BIG Insured, Pre-Refunded, 8.625%, 11/15/17 .............................................. 1,181,940
50,000 Refunding, Series A, FGIC Insured, 6.00%, 05/15/15 ....................................... 50,422
3,000,000 Series A, BIG Insured, Pre-Refunded, 8.00%, 11/15/16 ..................................... 3,396,210
3,930,000 Bexar County HFC Revenue, GNMA Secured, Series A, 8.20%, 04/01/22 ............................ 4,201,091
Brazos River Authority Revenue, Refunding, Houston Light and Power Co. Project,
2,000,000 Series A, AMBAC Insured, 6.70%, 03/01/17 ................................................. 2,160,840
3,360,000 Series D, FGIC Insured, 7.75%, 10/01/15 .................................................. 3,617,477
12,230,000 Coastal Bend Health Facilities Development Corp., Series B, AMBAC Insured, 6.30%, 01/01/17 ... 12,603,504
975,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 .............................................. 1,016,633
850,000 East Texas HFC, SFMR, Series 1990, GNMA Secured, 7.85%, 12/01/10 ............................. 896,062
1,520,000 Faulkey Gully MUD, Refunding, Waterworks and Sewerage System, AMBAC Insured, 6.625%,
03/01/07 .................................................................................... 1,617,052
Fort Bend County Levee Improvement District No. 011, AMBAC Insured, 6.00%,
1,395,000 09/01/21 ................................................................................. 1,402,673
1,495,000 09/01/22 ................................................................................. 1,503,223
1,610,000 09/01/23 ................................................................................. 1,624,442
2,700,000 Grand Prairie Health Facilities, Refunding, Dallas/Fort Worth Medical Center Project,
AMBAC Insured, 6.875%, 11/01/10 ............................................................. 2,977,641
2,350,000 Harris County Hospital District Mortgage Revenue, Refunding, AMBAC Insured, 7.40%, 02/15/10 .. 2,738,455
3,000,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, MBIA Insured,
Pre-Refunded, 7.80%, 12/15/11 ............................................................... 3,285,180
Harris County Toll Road,
35,000 Series A, FGIC Insured, 6.50%, 08/15/11 .................................................. 37,388
1,580,000 Series A, Senior Lien, AMBAC Insured, 6.50%, 08/15/17 .................................... 1,678,434
240,000 Series B, Senior Lien, AMBAC Insured, 6.625%, 08/15/17 ................................... 247,517
Texas (cont.)
Houston Airport System Revenue, Sub Lien, FGIC Insured,
$ 2,500,000 Series A, 6.75%, 07/01/21 ................................................................ $ 2,621,925
1,000,000 Series B, 6.625%, 07/01/22 ............................................................... 1,058,510
Houston Water and Sewer System Revenue, Refunding, Junior Lien, Series C,
1,000,000 AMBAC Insured, 6.375%, 12/01/17 .......................................................... 1,048,520
500,000 MBIA Insured, 5.75%, 12/01/15 ............................................................ 491,950
8,000,000 MBIA Insured, 6.375%, 12/01/22 ........................................................... 8,286,400
1,600,000 Lower Colorado River Authority Priority Revenue, MBIA Insured, Pre-Refunded, 7.625%, 01/01/16 1,701,616
1,250,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, BIG Insured, 8.875%,
12/01/12 .................................................................................... 1,257,438
Matagorda County Navigation District No. 1 Revenue,
200,000 PCR, Central P & L Co. Project, AMBAC Insured, 7.50%, 12/15/14 ........................... 220,410
2,000,000 PCR, Central P & L Co. Project, FGIC Insured, 7.125%, 07/01/19 ........................... 2,145,720
100,000 Refunding, Houston Light & Power Co., Series E, FGIC Insured, 7.20%, 12/01/18 ............ 108,228
12,850,000 Refunding, Houston Light & Power Co., Series E, MBIA Insured, 6.10%, 07/01/28 ............ 12,892,277
2,000,000 North Central Health Facility Development Corp. Revenue, Refunding, Presbyterian Health Care
Project, Series A, BIG Insured, Pre-Refunded, 8.875%, 12/01/15 .............................. 2,154,060
6,000,000 Palo Duro River Authority, Refunding, CGIC Insured, 6.375%, 08/01/08 ......................... 6,151,740
3,250,000 Sabine River Authority, PCR, FGIC Insured, Refunding, Collateralized, Texas Utilities Electric Co.
Project, 6.55%, 10/01/22 .................................................................... 3,422,250
9,900,000 San Antonio Electric & Gas System Revenue, Series A, FGIC Insured, Pre-Refunded, 8.00%,
02/01/16 .................................................................................... 10,598,643
5,200,000 San Antonio Water Revenue, Refunding, MBIA Insured, 6.50%, 05/15/10 .......................... 5,574,660
2,500,000 San Patricio County COP, MBIA Insured, 6.60%, 04/01/07 ....................................... 2,658,625
1,105,000 Smithville HDC Mortgage Revenue, Smithville Retirement, Refunding, Series A, MBIA Insured,
6.40%, 01/01/22 .............................................................................. 1,107,431
1,170,000 Southeast HDC Mortgage Revenue, Stonegate Retirement, MBIA Insured, 6.40%, 01/01/24 .......... 1,189,036
3,250,000 Tarrant County HFC, Health System Revenue, Harris Methodist Health System, MBIA Insured,
6.00%, 09/01/24 ............................................................................. 3,259,620
9,295,000 Tarrant County HFC, SFMR, GNMA Secured, Series A, 8.00%, 07/01/21 ............................ 9,747,852
Texas Health Facilities Development Corp. Hospital Revenue, Refunding,
2,500,000 All Saints Episcopal Hospitals, Series B, MBIA Insured, 6.25%, 08/15/22 .................. 2,575,775
4,885,000 All Saints Episcopal Hospitals, Series B, MBIA Insured, 6.375%, 08/15/23 ................. 5,061,397
2,000,000 Cook-Fort Worth Medical Center Project, FGIC Insured, Pre-Refunded, 8.125%, 06/01/18 ..... 2,166,600
Texas State Turnpike Authority Revenue, Dallas North Tollway,
50,000 FGIC Insured, Pre-Refunded, 7.125%, 01/01/15 ............................................. 52,891
7,250,000 Refunding, AMBAC Insured, 5.00%, 01/01/20 ................................................ 6,453,588
5,990,000 Texas Water Resources Financial Authority Revenue, AMBAC Insured, 7.50%, 08/15/13 ............ 6,393,307
3,750,000 Travis County HFC, SFMR, GNMA Secured, 8.20%, 04/01/22 ....................................... 3,865,688
1,965,000 Webb County, Limited Tax GO, CGIC Insured, Pre-Refunded, 7.25%, 02/15/09 ..................... 2,092,430
-----------
152,594,771
-----------
Utah 1.6%
6,230,000 Intermountain Power Agency, Special Obligation, Refunding, Fifth Crossover Series, FGIC Insured,
7.00%, 07/01/15 ............................................................................. 6,453,283
Intermountain Power Agency, Power Supply Revenue, Refunding, AMBAC Insured,
4,680,000 Series A, 5.50%, 07/01/20 ................................................................ 4,396,205
2,000,000 Series 1987-C, Pre-Refunded, 8.375%, 07/01/12 ............................................ 2,109,960
6,300,000 Series 1987-D, Pre-Refunded, 8.375%, 07/01/12 ............................................ 6,649,020
40,000 Provo Electric System Revenue, Refunding, Series 1984-A, AMBAC Insured, ETM, 10.375%,
09/15/15 .................................................................................... 54,602
Utah (cont.)
$ 5,000 Salt Lake County Water Conservancy District Revenue, Series A, MBIA Insured, ETM,
10.875%, 10/01/02 ........................................................................... $ 5,893
1,080,000 Utah State Board of Regents, Student Loan Revenue, Series H, AMBAC Insured, 6.70%, 11/01/15 .. 1,109,873
660,000 Utah State Municipal Finance Corp., Local Government Revenue, St. George Water, FGIC Insured,
Pre-Refunded, 6.90%, 06/01/08 ............................................................... 724,211
2,935,000 Washington County Water Conservancy District, MBIA Insured, 8.20%, 02/01/18 .................. 3,081,926
Weber County Municipal Building Authority, Lease Revenue, CGIC Insured, Pre-Refunded, 7.20%,
825,000 06/01/05 ................................................................................. 882,371
875,000 06/01/06 ................................................................................. 935,848
950,000 06/01/07 ................................................................................. 1,016,063
-----------
27,419,255
-----------
Vermont .6%
2,205,000 State of Vermont, COP, MBIA Insured, 7.25%, 06/15/11 ......................................... 2,373,021
6,630,000 Vermont Home Mortgage, Series 1989-B, MBIA Insured, 7.60%, 12/01/24 .......................... 6,930,869
1,000,000 Vermont Municipal Bond Bank, Series 2, FSA Insured, 6.25%, 12/01/19 .......................... 1,023,770
-----------
10,327,660
-----------
Virginia .6%
5,000,000 Chesapeake IDA, Public Facilities, Lease Revenue, Chesapeake Jail Project, MBIA Insured, 6.00%,
06/01/12 .................................................................................... 5,144,250
1,000,000 Danville IDA, Danville Regional Medical Center, FGIC Insured, 6.50%, 10/01/24 ................ 1,049,540
3,405,000 Hampton Roads Regional Jail Authority, Series A, MBIA Insured, 5.00%, 07/01/28 ............... 2,949,513
1,000,000 James Madison University Revenue, Refunding, AMBAC Insured, 5.25%, 06/01/13 .................. 945,580
-----------
10,088,883
-----------
Washington 6.8%
5,700,000 Benton County PUD No. 1, Electric Revenue, Refunding, AMBAC Insured, 6.75%, 11/01/11 ......... 6,107,037
1,600,000 Benton County School District No. 400, Richland, AMBAC Insured, Pre-Refunded, 7.875%,
12/01/00 .................................................................................... 1,616,224
2,000,000 Clallam County PUD No. 1, Revenue, Refunding, AMBAC Insured, 6.50%, 01/01/08 ................. 2,137,420
900,000 Douglas County Public Utility, MBIA Insured, 6.00%, 01/01/15 ................................. 913,743
850,000 Everett COP, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 04/01/09 .......................... 937,465
2,000,000 Grant County PUD No. 2, Wanapum Hydro-Electric Revenue, Series B, AMBAC Insured, 6.75%,
01/01/23 .................................................................................... 2,110,600
2,245,000 Grays Harbor County PUD No. 001, Electric Revenue, Refunding, AMBAC Insured, 7.10%,
01/01/06 .................................................................................... 2,336,439
1,500,000 King County Public Hospital District No. 001, Hospital Facilities Revenue, Valley Medical Center,
AMBAC Insured, 7.25%, 09/01/15 .............................................................. 1,635,615
3,375,000 King County School District No. 411, Issaquah, Refunding, AMBAC Insured, Pre-Refunded, 6.50%,
12/01/09 .................................................................................... 3,677,063
3,000,000 King County Sewer, MBIA Insured, 6.125%, 01/01/33 ............................................ 3,021,900
1,015,000 Kitsap County School District No. 100-C, Refunding, MBIA Insured, 6.60%, 12/01/08 ............ 1,089,775
2,105,000 Kittitas County School District No. 404, AMBAC Insured, Pre-Refunded, 6.80%, 12/01/11 ........ 2,305,922
Klickitat County Public Utility District No. 001, Electric Revenue, FGIC Insured,
1,000,000 5.65%, 10/01/15 .......................................................................... 972,660
1,000,000 5.75%, 10/01/27 .......................................................................... 966,280
1,040,000 Mason County School District No. 402, Pioneer, MBIA Insured, 6.60%, 12/01/11 ................. 1,121,286
2,000,000 Port of Longview, Cowlitz County, Airport and Marina Improvements, MBIA Insured, 6.00%,
11/01/15 .................................................................................... 2,042,500
2,890,000 Seatac Storm Water Revenue, MBIA Insured, 6.50%, 12/01/13 .................................... 3,058,198
11,000,000 Seattle Metropolitan Sewer System Revenue, Series W, MBIA Insured, 6.30%, 01/01/33 ........... 11,219,670
Washington (cont.)
$ 4,250,000 Snohomish County PUD No. 1, Electric Revenue, Generation System, FGIC Insured, ETM,
6.65%, 01/01/16 ............................................................................. $ 4,568,070
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 ..................................................... 5,221,000
Tacoma Electric System Revenue,
6,000,000 AMBAC Insured, Pre-Refunded, 8.00%, 01/01/11 ............................................. 6,405,720
500,000 Refunding, AMBAC Insured, 6.25%, 01/01/11 ................................................ 522,305
6,190,000 Refunding, FGIC Insured, 6.25%, 01/01/15 ................................................. 6,410,302
1,305,000 Thurston and Pierce Counties, Community Schools, Series B, AMBAC Insured, 6.65%, 12/01/09 .... 1,385,453
Washington Public Power Supply System, Nuclear Project No. 1 Revenue,
500,000 Refunding, Series A, MBIA Insured, 6.25%, 07/01/17 ....................................... 512,670
4,420,000 Refunding, Series B, FGIC Insured, 7.25%, 07/01/12 ....................................... 4,804,231
2,500,000 Refunding, Series C, FGIC Insured, 7.75%, 07/01/08 ....................................... 2,777,625
1,465,000 Series A, MBIA Insured, 7.50%, 07/01/15 .................................................. 1,575,974
2,200,000 Series A, MBIA Insured, Pre-Refunded, 7.50%, 07/01/15 .................................... 2,413,532
100,000 Washington Public Power Supply System Revenue, Nuclear Project No. 3, Refunding, Series A,
BIG Insured, Pre-Refunded, 7.25%, 07/01/16 .................................................. 109,051
2,905,000 Washington State HFA, Series A, GNMA Secured, 7.70%, 07/01/32 ................................ 3,006,617
Washington State Health Care Facilities Authority Revenue,
1,000,000 Franciscan Health System, BIG Insured, Pre-Refunded, 7.70%, 01/01/13 ..................... 1,054,990
950,000 Harrison Memorial Hospital, AMBAC Insured, 5.40%, 08/15/23 ............................... 863,702
5,000,000 Mason Medical Center, MBIA Insured, 8.00%, 07/01/15 ...................................... 5,241,850
3,250,000 Swedish Hospital Medical Center, AMBAC Insured, 6.30%, 11/15/22 .......................... 3,314,123
Western Washington University Revenue, Housing & Dining System, MBIA Insured,
3,000,000 6.375%, 10/01/22 ......................................................................... 3,103,590
1,050,000 Refunding, 6.70%, 10/01/11 ............................................................... 1,102,689
3,500,000 Refunding, 6.375%, 10/01/21 .............................................................. 3,582,495
6,130,000 Refunding, 6.40%, 10/01/24 ............................................................... 6,386,602
2,000,000 Whatcom County School District No. 501, Bellingham, FGIC Insured, 6.125%, 12/01/13 ........... 2,077,680
350,000 Yakima-Tieton Irrigation District Revenue, Refunding, FSA Insured, 6.20%, 06/01/19 ........... 359,937
-----------
114,070,005
-----------
West Virginia 1.9%
11,560,000 Harrison County, Community Solid Waste Disposal Revenue, Potomac Edison Co., Series C,
AMBAC Insured, 6.75%, 08/01/24 .............................................................. 12,217,186
1,000,000 Monongalia County Building Community Hospital Revenue, Refunding, Monongalia General Hospital,
Series B, MBIA Insured, 6.50%, 07/01/17 ..................................................... 1,035,060
South Charleston Hospital Revenue, Refunding, Herbert J. Thomas Memorial Hospital, BIG Insured,
Pre-Refunded, 8.00%,
3,060,000 10/01/04 ................................................................................. 3,339,959
2,400,000 10/01/10 ................................................................................. 2,619,576
300,000 West Virginia School Building Authority Revenue, Capital Improvement, Series B, MBIA Insured,
6.75%, 07/01/17 ............................................................................. 319,002
2,000,000 West Virginia State HDA, SFMR, MBIA Insured, 7.40%, 11/01/11 ................................. 2,062,720
2,000,000 West Virginia State Hospital Finance Authority Revenue, Monongalia General Hospital Project,
BIG Insured, Pre-Refunded, 8.60%, 07/01/17 .................................................. 2,074,820
2,250,000 West Virginia State University Revenue, Refunding, AMBAC Insured, 6.00%, 04/01/12 ............ 2,312,033
West Virginia State Water Development Authority Revenue,
3,000,000 Loan Program II, Series B, CGIC Insured, Pre-Refunded, 7.50%, 11/01/29 ................... 3,312,000
2,750,000 Refunding, Loan Program, Series A, CGIC Insured, 7.00%, 11/01/25 ......................... 2,955,013
-----------
32,247,369
-----------
Wisconsin 1.1%
$ 500,000 Holmen School District, Series A, AMBAC Insured, 6.25%, 10/01/10 ............................. $ 527,670
Lake County School District GO, Refunding, AMBAC Insured, 6.35%,
850,000 04/01/11 ................................................................................. 875,194
900,000 04/01/12 ................................................................................. 937,638
1,970,000 Sturgeon Bay, Combined Utilities Mortgage Revenue, Refunding, AMBAC Insured, 5.20%, 01/01/10 . 1,873,450
3,000,000 Superior Limited Obligation Revenue, Refunding, Midwest Energy Resources, Series E,
FGIC Insured, 6.90%, 08/01/21 ............................................................... 3,401,550
Wisconsin Health Educational Revenue, Series A, CGIC Insured,
2,000,000 7.50%, 01/15/09 .......................................................................... 2,124,260
1,965,000 Community Provider Program, 7.50%, 01/15/04 .............................................. 2,105,183
Wisconsin Health Facilities Authority Revenue,
2,000,000 Meriter Hospital, Inc., FGIC Insured, Pre-Refunded, 8.375%, 12/01/09 ..................... 2,142,100
4,000,000 Milwaukee Psychiatric Hospital, MBIA Insured, 7.30%, 04/01/12 ............................ 4,127,640
500,000 Wisconsin State Health and Educational Facilities Authority Revenue, Refunding, Series AA,
MBIA Insured, 6.25%, 06/01/20 ............................................................... 509,755
-----------
18,624,440
-----------
Wyoming 1.2%
500,000 Gillette Health Facilities Revenue, Lutheran Hospital and Home Society, Refunding, MBIA Insured,
5.90%, 01/01/16 ............................................................................. 501,580
3,085,000 Lincoln City PCR, Refunding, Pacificorp Projects, AMBAC Insured, 5.625%, 11/01/21 ............ 2,875,004
3,735,000 Natrona County Hospital Revenue, Wyoming Medical Center Projects, Refunding, AMBAC Insured,
6.00%, 09/15/24 ............................................................................. 3,714,831
2,245,000 University Facilities Revenues, MBIA Insured, 7.10%, 06/01/10 ................................ 2,383,045
1,525,000 Worland GO, Refunding, AMBAC Insured, 5.30%, 06/01/12 ........................................ 1,449,863
6,750,000 Wyoming CDA, AMBAC Insured, 6.00%, 06/01/23 .................................................. 6,625,868
2,000,000 Wyoming Municipal Power Agency, Power Supply System Revenue, Refunding, Series A,
MBIA Insured, 6.125%, 01/01/16 .............................................................. 2,042,220
-----------
19,592,411
-----------
Total Long Term Investments (Cost $1,577,499,534)....................................... 1,653,086,743
-----------
aShort Term Investments .6%
100,000 Beltrami County Environmental Control, Refunding, Mead Insured, Daily VRDN and Put, 3.80%,
12/01/21 .................................................................................... 100,000
500,000 Grand Rapids, Michigan Water Supply System Revenue, Refunding, FGICInsured, Daily VRDN
and Put, 3.35%, 01/01/20 .................................................................... 500,000
300,000 New York City GO, Series B, MBIA Insured, Daily VRDN and Put, 3.80%, 08/15/03 ................ 300,000
1,100,000 New York City Municipal Water Finance Authority, Water and Sewer System Revenue Series C,
FGIC Insured, Daily VRDN and Put, 3.80%, 06/15/23 ........................................... 1,100,000
1,300,000 Uinta County Pollution Control Revenue, Refunding, Daily VRDN and Put, 3.80%, 08/15/20 ....... 1,300,000
6,600,000 Washington State Health Care Facilities Authority Revenue, Daily VRDN and Put, 3.35%, 10/01/05 6,600,000
-----------
Total Short Term Investments (Cost $20,300,000)......................................... 9,900,000
-----------
Total Investments (Cost $1,587,399,534) 98.7%...................................... 1,662,986,743
Other Assets and Liabilities, Net 1.3%............................................. 21,804,987
-----------
Net Assets 100.0% ................................................................. $1,684,791,730
===========
At August 31, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,587,399,534 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.............................................................. $ 82,338,183
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (6,750,974)
-----------
Net unrealized appreciation................................................................. $ 75,587,209
===========
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
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 Board
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MUD - Municipal Utility District
PBA - Public Building 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
aVariable rate demand notes (VRDN's) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). eSee Note 1(i) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Massachusetts Insured Tax-Free Income Fund (Note 1)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 96.4%
$ 2,700,000 Ashburnham & Westminister, Regional School District, MBIA Insured, 6.00%, 12/15/13 ............. $ 2,732,238
Attleboro Municipal Purpose GO, AMBAC Insured, 6.00%,
1,045,000 07/01/11 ................................................................................... 1,078,545
1,045,000 07/01/12 ................................................................................... 1,075,357
685,000 07/01/13 ................................................................................... 702,296
755,000 07/01/14 ................................................................................... 768,371
Blackstone-Milville School District, AMBAC Insured, 6.50%,
705,000 05/01/08 ................................................................................... 753,441
750,000 05/01/09 ................................................................................... 797,235
795,000 05/01/10 ................................................................................... 842,525
Boston Water and Sewage Commission, General Revenue,
3,000,000 Series 1988-A, BIG Insured, 7.25%, 11/01/06 ................................................ 3,207,180
1,400,000 Series 1989-A, Pre-Refunded, 7.10%, 11/01/19 ............................................... 1,529,318
1,095,000 Central Berkshire GO, School District, MBIA Insured, 7.25%, 06/01/08 ........................... 1,187,166
2,000,000 Fall River School Project, MBIA Insured, 7.20%, 06/01/10 ....................................... 2,199,000
1,650,000 Framingham Housing Authority Mortgage Revenue, Beaver Terrace Apartments, Series A,
GNMA Secured, 6.65%, 02/20/32 ................................................................. 1,675,575
Greenfield GO, MBIA Insured, 6.50%,
500,000 10/15/08 ................................................................................... 535,570
500,000 10/15/09 ................................................................................... 533,245
1,000,000 Holyoke GO, School Project Loans, MBIA Insured, 8.05%, 06/15/04 ................................ 1,183,310
Hudson GO, MBIA Insured, 6.00%,
250,000 05/15/13 ................................................................................... 257,000
240,000 05/15/14 ................................................................................... 244,922
Lenox GO, Refunding, AMBAC Insured,
1,000,000 6.60%, 10/15/11 ............................................................................ 1,062,590
500,000 6.625%, 10/15/15 ........................................................................... 530,285
450,000 Leominster GO, Series 1990, MBIA Insured, Pre-Refunded, 7.50%, 04/01/09 ........................ 499,851
Ludlow GO, School Project, Limited Tax, MBIA Insured,
210,000 7.30%, 11/01/07 ............................................................................ 244,432
210,000 7.30%, 11/01/08 ............................................................................ 244,589
210,000 7.40%, 11/01/09 ............................................................................ 246,341
4,000,000 Lynn Water and Sewer General Revenue, Series 1990-A, MBIA Insured, Pre-Refunded, 7.25%,
12/01/10 ...................................................................................... 4,466,280
2,000,000 Mansfield GO, AMBAC Insured, 6.70%, 01/15/11 ................................................... 2,136,960
Martha's Vineyard, Regional High School District No. 100, AMBAC Insured,
830,000 6.55%, 12/15/10 ............................................................................ 896,284
725,000 6.60%, 12/15/11 ............................................................................ 782,754
880,000 6.65%, 12/15/12 ............................................................................ 958,936
210,000 6.70%, 12/15/14 ............................................................................ 227,329
500,000 Mashpee Water District GO, MBIA Insured, 6.40%, 10/15/12 ....................................... 529,425
Massachusetts Bay Transportation Authority,
2,500,000 COP, BIG Insured, 7.75%, 01/15/06 .......................................................... 2,965,475
3,000,000 General Transportation System, Series 1988-A, Pre-Refunded, 7.75%, 03/01/13 ................ 3,214,410
2,360,000 Massachusetts Education Loan Authority Revenue, Issue D, Series A, MBIA Insured, 7.25%, 01/01/09 2,456,453
Massachusetts GO,
1,000,000 Commonwealth, Series A, FGIC Insured, Pre-Refunded, 7.25%, 03/01/09 ........................ 1,100,900
800,000 Commonwealth, Series C, AMBAC Insured, 6.75%, 08/01/09 ..................................... 857,904
1,000,000 Commonwealth, Series C, CGIC Insured, Pre-Refunded, 7.00%, 12/01/10 ........................ 1,090,570
2,000,000 Refunding, Series A, AMBAC Insured, 6.50%, 08/01/11 ........................................ 2,112,320
4,000,000 Refunding, Series B, MBIA Insured, 6.50%, 08/01/11 ......................................... 4,224,640
Massachusetts State Health & Educational Facilities Authority Revenue,
$ 1,500,000 BayState Medical Center, Refunding, Series D, FSA Insured, 6.00%, 07/01/15 ................. $ 1,501,875
475,000 BayState Medical Center, Series E, FSA Insured, 6.00%, 07/01/26 ............................ 467,177
1,250,000 Bentley College, Series I, MBIA Insured, 6.125%, 07/01/17 .................................. 1,261,063
2,000,000 Berkshire Health System, Series A, MBIA Insured, Pre-Refunded, 7.50%, 10/01/08 ............. 2,167,520
1,500,000 Berkshire Health System, Series A, MBIA Insured, Pre-Refunded, 6.75%, 10/01/19 ............. 1,576,005
5,500,000 Berkshire Health System, Series D, MBIA Insured, 6.00%, 10/01/19 ........................... 5,517,325
1,900,000 Beverly Hospital, Lot 1, Refunding, Series D, MBIA Insured, 7.30%, 07/01/13 ................ 2,053,881
4,000,000 Beverly Hospital, Lot 2, Series D, MBIA Insured, Pre-Refunded, 7.30%, 07/01/19 ............. 4,372,880
2,250,000 Boston College, Series J, FGIC Insured, 6.625%, 07/01/21 ................................... 2,367,338
500,000 Brigham & Women's Hospital, Series C, MBIA Insured, 7.00%, 06/01/18 ........................ 533,050
1,000,000 Cable Housing & Health Services, Series A, MBIA Insured, 5.25%, 07/01/23 ................... 890,780
2,200,000 Children's Hospital, Refunding, Series E, AMBAC Insured, 6.20%, 10/01/16 ................... 2,216,500
1,000,000 Community College Program, Series A, Connie Lee Insured, 6.50%, 10/01/09 ................... 1,066,440
3,250,000 Community College Program, Series A, Connie Lee Insured, 6.60%, 10/01/22 ................... 3,300,473
4,295,000 Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/18 ........................ 4,038,030
5,600,000 Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/25 ........................ 5,186,888
1,000,000 Dana-Farber Cancer Institute, Series F, Refunding, FGIC Insured, 6.00%, 12/01/15 ........... 1,003,400
3,605,000 Emerson Hospital, Series D, FSA Insured, 5.80%, 08/15/18 ................................... 3,496,129
5,250,000 Fallon Health Care System, Series A, CGIC Insured, 6.875%, 06/01/11 ........................ 5,738,670
7,550,000 Fallon Health Care System, Series A, CGIC Insured, 6.75%, 06/01/20 ......................... 8,220,063
600,000 Fallon Health Care System, Series A, CGIC Insured, 6.00%, 06/01/21 ......................... 633,912
3,490,000 Lahey Clinic Medical Center, Series A, MBIA Insured, Pre-Refunded, 7.625%, 07/01/18 ........ 3,767,106
5,520,000 eLahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 07/01/23 ...................... 5,034,902
11,465,000 Massachusetts General Hospital, AMBAC Insured, 6.25%, 07/01/20 ............................. 11,548,580
2,500,000 Massachusetts General Hospital, Refunding, Series F, AMBAC Insured, 6.00%, 07/01/15 ........ 2,506,525
1,280,000 Mclean Hospital, Series C, FGIC Insured, 6.625%, 07/01/15 .................................. 1,353,754
3,000,000 Metro West Health, Inc., Series C, AMBAC Insured, 6.40%, 11/15/11 .......................... 3,304,140
3,500,000 Metro West Health, Inc., Series C, AMBAC Insured, 6.50%, 11/15/18 .......................... 3,873,380
550,000 Metro West Health, Inc., Refunding, Series C, AMBAC Insured, 6.30%, 11/15/12 ............... 602,839
5,400,000 Milton Hospital, Series B, MBIA Insured, 7.00%, 07/01/16 ................................... 5,821,200
6,000,000 Mt. Auburn Hospital, Series 1988-A, MBIA Insured, Pre-Refunded, 7.875%, 07/01/18 ........... 6,485,880
6,500,000 Mt. Auburn Hospital, Series B-1, MBIA Insured, 6.30%, 08/15/24 ............................. 6,658,795
1,895,000 New England Medical Center Hospitals, Series D, AMBAC Insured, 6.875%, 04/01/22 ............ 2,036,083
1,000,000 New England Medical Center Hospitals, Series F, FGIC Insured, 6.50%, 07/01/12 .............. 1,046,610
4,000,000 New England Medical Center Hospitals, Series G, MBIA Insured, 5.375%, 07/01/24 ............. 3,613,520
5,000,000 Newton-Wellesley Hospital, Series C, BIG Insured, Pre-Refunded, 8.00%, 07/01/18 ............ 5,429,600
4,030,000 Newton-Wellesley Hospital, Series D, MBIA Insured, 7.00%, 07/01/15 ......................... 4,412,890
1,300,000 Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 07/01/18 ......................... 1,304,992
250,000 Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 07/01/25 ......................... 249,973
1,250,000 North Eastern University, Series D, AMBAC Insured, Pre-Refunded, 7.125%, 10/01/10 .......... 1,365,700
3,900,000 North Eastern University, Series E, MBIA Insured, 6.55%, 10/01/22 .......................... 4,101,591
5,750,000 Salem Hospital, Series 1987-A, MBIA Insured, Pre-Refunded, 7.25%, 07/01/09 ................. 5,907,665
4,000,000 St. Elizabeth's Hospital of Boston, Series B, FHA Mortgage Insured, Pre-Refunded, 7.75%,
08/01/27 .................................................................................. 4,213,840
6,200,000 St. Luke's Hospital, New Bedford, Series B, AMBAC Insured, Pre-Refunded, 7.75%, 07/01/13 ... 6,515,022
890,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.55%, 07/01/12 ...................... 943,445
3,000,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.60%, 07/01/20 ...................... 3,168,180
1,025,000 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.65%, 07/01/10 .................. 1,149,794
515,000 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.70%, 07/01/20 .................. 578,592
1,690,000 eStonehill College, Series F, AMBAC Insured, 5.75%, 07/01/26 ................................ 1,633,757
3,000,000 Suffolk University, Series B, Connie Lee Insured, 6.35%, 07/01/22 .......................... 3,034,620
2,000,000 Tufts University, FGIC Insured, 5.95%, 08/15/18 ............................................ 2,002,400
Massachusetts State Health & Educational Facilities Authority Revenue, (cont.)
$ 1,500,000 University Hospital, Series C, MBIA Insured, Pre-Refunded, 7.25%, 07/01/19 ................. $ 1,636,395
1,820,000 Wentworth Institute of Technology, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 04/01/10 .. 2,015,686
3,000,000 Wheaton College, Series B, CGIC Insured, 7.25%, 07/01/19 ................................... 3,275,700
2,750,000 Worcester Polytech Institute, MBIA Insured, 6.625%, 09/01/17 ............................... 2,911,398
4,395,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue, Series D,
MBIA Insured, 6.125%, 07/01/19 ................................................................ 4,425,721
430,000 Massachusetts State HFA, MFHR, Section 8 Assisted, Series 1979-A, ETM, 7.00%, 04/01/21 ......... 484,872
Massachusetts State HFA, Housing Revenue,
1,735,000 Series 1986-A, MBIA Insured, 7.50%, 12/01/06 ............................................... 1,785,263
1,975,000 Series 1988-8, BIG Insured, 7.70%, 06/01/17 ................................................ 2,055,047
1,500,000 SFMR, Series 18, MBIA Insured, 7.35%, 12/01/16 ............................................. 1,559,355
Massachusetts State Industrial Finance Agency Revenue,
750,000 Babson College, Series A, MBIA Insured, 6.375%, 10/01/09 ................................... 794,783
3,105,000 Babson College, Series A, MBIA Insured, 6.50%, 10/01/22 .................................... 3,235,224
7,075,000 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 ............................... 7,479,902
1,000,000 Milton Academy, Series A, MBIA Insured, Pre-Refunded, 7.25%, 09/01/19 ...................... 1,095,970
2,010,000 Refunding, Combined Jewish Philanthropies, AMBAC Insured, Series A, 6.375%, 02/01/15 ....... 2,083,888
1,665,000 Saint Marks School Issue, MBIA Insured, 5.375%, 01/01/21 ................................... 1,540,591
Massachusetts State Port Authority Revenue,
5,200,000 Series A, FGIC Insured, 7.50%, 07/01/20 .................................................... 5,651,204
1,000,000 Series B, FSAInsured, 6.00%, 07/01/23 ...................................................... 999,890
Melrose Municipal Purpose GO, MBIA Insured,
200,000 6.00%, 08/15/11 ............................................................................ 205,720
200,000 6.05%, 08/15/12 ............................................................................ 207,864
200,000 6.10%, 08/15/13 ............................................................................ 207,846
200,000 6.10%, 08/15/14 ............................................................................ 206,306
Millis School Project, GO, Unlimited Tax, AMBAC Insured, 7.40%,
270,000 05/01/06 ................................................................................... 294,654
270,000 05/01/07 ................................................................................... 294,181
270,000 05/01/08 ................................................................................... 293,709
Norfolk GO, AMBAC Insured, 6.00%,
450,000 01/15/10 ................................................................................... 459,738
425,000 01/15/11 ................................................................................... 432,782
375,000 01/15/12 ................................................................................... 386,640
300,000 01/15/13 ................................................................................... 308,301
300,000 North Andover Municipal Purpose, Limited Tax, MBIA Insured, 7.40%, 09/15/09 .................... 332,526
North Attleborough GO, Limited Tax, AMBAC Insured, Pre-Refunded,
125,000 7.15%, 06/01/08 ............................................................................ 137,840
125,000 7.20%, 06/01/09 ............................................................................ 138,053
850,000 North Attleborough, MBIA Insured, 5.70%, 01/15/16 .............................................. 843,047
1,500,000 Palmer GO, Refunding, MBIA Insured, 5.50%, 10/01/10 ............................................ 1,468,320
Peabody GO, Electric Light, AMBAC Insured,
500,000 6.75%, 08/01/05 ............................................................................ 543,640
750,000 6.85%, 08/01/06 ............................................................................ 815,265
500,000 6.90%, 08/01/07 ............................................................................ 542,315
555,000 6.95%, 08/01/08 ............................................................................ 601,898
1,000,000 Puerto Rico Commonwealth, Public Improvement, MBIA Insured, Pre-Refunded, 6.50%, 07/01/09 ...... 1,101,040
3,250,000 Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue, Refunding,
Series X, FSAInsured, 5.50%, 07/01/19 ......................................................... 3,091,693
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
500,000 Series 1988-A, 7.80%, 10/15/21 ............................................................. 520,410
765,000 Series 1988-B, 7.65%, 10/15/22 ............................................................. 803,227
Quabbin Regional School District, GO, AMBAC Insured, 7.00%,
$ 275,000 06/15/04 ................................................................................... $ 299,448
275,000 06/15/05 ................................................................................... 298,452
275,000 06/15/06 ................................................................................... 298,452
275,000 06/15/07 ................................................................................... 298,452
275,000 06/15/08 ................................................................................... 298,452
250,000 06/15/09 ................................................................................... 271,320
Rochester School GO, Lot B, MBIA Insured, 7.30%,
150,000 04/01/04 ................................................................................... 162,266
150,000 04/01/05 ................................................................................... 161,886
150,000 04/01/06 ................................................................................... 161,696
150,000 04/01/07 ................................................................................... 161,696
150,000 04/01/08 ................................................................................... 161,696
120,000 04/01/09 ................................................................................... 129,356
Salem GO,
425,000 AMBAC Insured, 6.70%, 08/15/05 ............................................................. 464,317
500,000 AMBAC Insured, 6.80%, 08/15/07 ............................................................. 547,270
470,000 MBIA Insured, 5.20%, 07/15/11 .............................................................. 445,715
470,000 MBIA Insured, 5.20%, 07/15/12 .............................................................. 442,834
3,000,000 Somerville Housing Authority Revenue, Clarendon Hill, GNMA Secured, 7.95%, 11/20/30 ............ 3,192,270
South Essex Sewer District,
330,000 AMBAC Insured, 6.25%, 11/01/11 ............................................................. 345,332
1,000,000 Series A, MBIA Insured, 5.25%, 06/15/24 .................................................... 910,370
2,800,000 Series B, MBIA Insured, Pre-Refunded, 7.00%, 06/01/24 ...................................... 3,199,476
2,375,000 Southbridge GO, AMBAC Insured, 6.375%, 01/01/12 ................................................ 2,494,249
Tyngsborough GO, School Project Loan, AMBAC Insured, 6.90%,
600,000 05/15/09 ................................................................................... 670,254
600,000 05/15/10 ................................................................................... 670,254
2,000,000 Westfield School District GO, AMBAC Insured, Pre-Refunded, 7.10%, 12/15/08 ..................... 2,223,240
Westford GO,
800,000 FGIC Insured, Pre-Refunded, 7.60%, 10/15/10 ................................................ 901,530
2,000,000 Refunding, AMBAC Insured, 5.45%, 10/15/10 .................................................. 1,957,520
Whately GO, AMBAC Insured,
215,000 6.20%, 01/15/07 ............................................................................ 226,843
215,000 6.30%, 01/15/08 ............................................................................ 227,322
200,000 6.40%, 01/15/10 ............................................................................ 211,520
Worcester GO, Refunding, MBIA Insured,
1,335,000 Series E, 6.00%, 10/01/15 .................................................................. 1,367,481
1,200,000 Series G, 5.30%, 07/01/15 .................................................................. 1,125,180
1,410,000 Worcester Municipal Purpose Loan, Series A, AMBAC Insured, 5.25%, 08/01/16 ..................... 1,303,390
-----------
Total Long Term Investments (Cost $281,193,055) .......................................... $296,323,239
-----------
aShort Term Investment .3%
1,100,000 Massachusetts State Updates, Series B, National Westminster Bank Plc., Daily VRDN and Put, 3.35%,
12/01/97 (Cost $1,100,000)..................................................................... 1,100,000
-----------
Total Investments (Cost $282,293,055) 96.7% ......................................... 297,423,239
Other Assets and Liabilities, Net 3.3% .............................................. 10,083,539
-----------
Net Assets 100.0%.................................................................... $307,506,778
===========
At August 31, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $282,293,055 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 16,496,062
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (1,365,878)
-----------
Net unrealized appreciation .................................................................. $ 15,130,184
===========
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
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). eSee Note 1 (i) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Michigan Insured Tax-Free Income Fund (Note 1)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 97.8%
$ 1,325,000 Allegan Public School District GO, School Building and Site, AMBAC Insured, 5.875%, 05/01/18 . $ 1,324,073
3,165,000 Allegan Public School District, AMBAC Insured, 5.75%, 05/01/22 ............................... 3,069,797
Allendale Public School District, School Building, MBIA Insured,
2,000,000 5.875%, 05/01/14 .......................................................................... 2,013,720
3,750,000 6.00%, 05/01/24 ........................................................................... 3,823,950
2,000,000 Avondale School District, AMBAC Insured, 5.75%, 05/01/22 ..................................... 1,934,760
1,625,000 Bath Community School District Refunding, FGIC Insured, 5.75%, 05/01/25 ...................... 1,565,281
3,100,000 Bay City Electric Utility Revenue, AMBAC Insured, 6.60%, 01/01/12 ............................ 3,290,619
1,135,000 Bay City GO, Refunding, AMBAC Insured, 5.20%, 09/01/12 ....................................... 1,066,889
Belding Area School, Series B, AMBAC Insured, Pre-Refunded, 6.15%,
375,000 05/01/13 .................................................................................. 406,103
675,000 05/01/14 .................................................................................. 730,985
Berkley City School District, FGIC Insured,
2,060,000 5.625%, 01/01/15 .......................................................................... 2,026,298
2,125,000 6.00%, 01/01/19 ........................................................................... 2,136,135
470,000 Big Rapids Public School District, Building & Site, FGIC Insured, 5.625%, 05/01/25 ........... 445,978
Brandon School District, FGIC Insured, 5.875%,
5,540,000 05/01/16 ................................................................................. 5,536,288
7,000,000 05/01/26 ................................................................................. 6,945,890
1,450,000 Breckenridge Community School District, AMBAC Insured, 5.75%, 05/01/23 ....................... 1,396,350
Breitung Township School District,
7,500,000 CGIC Insured, Pre-Refunded, 7.20%, 05/01/19 ............................................... 8,143,350
2,935,000 MBIA Insured, 6.30%, 05/01/15 ............................................................. 2,995,314
5,250,000 Byron Center Public Schools, Refunding, MBIA Insured, 5.875%, 05/01/24 ....................... 5,210,468
Caledonia Community Schools,
3,750,000 AMBAC Insured, 6.625%, 05/01/14 ........................................................... 3,955,275
4,400,000 MBIA Insured, 5.85%, 05/01/22 ............................................................. 4,359,212
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 ..................................... 1,384,157
875,000 Calumet School District GO, Laurium and Keweenah Public Schools, CGIC Insured, 5.875%,
05/01/20 .................................................................................... 863,363
3,875,000 Cedar Springs Public School District, MBIA Insured, 5.875%, 05/01/24 ......................... 3,809,629
5,000,000 Central Michigan University Revenue, MBIA Insured, Pre-Refunded, 7.90%, 10/01/15 ............. 5,302,650
3,140,000 Chelsea School District, FGIC Insured, 5.875%, 05/01/25 ...................................... 3,077,891
Chippewa Valley School District, BIG Insured, Pre-Refunded, 7.40%,
500,000 05/01/07 .................................................................................. 543,580
500,000 05/01/08 .................................................................................. 543,580
500,000 05/01/09 .................................................................................. 543,580
500,000 05/01/10 .................................................................................. 543,580
Coldwater Community Schools, MBIA Insured,
1,100,000 6.20%, 05/01/15 ........................................................................... 1,133,715
1,700,000 6.30%, 05/01/23 ........................................................................... 1,751,867
3,000,000 Comstock Park Public Schools, Refunding, School Building and Site, FGIC Insured, 5.25%,
05/01/15 .................................................................................... 2,796,990
Dearborn EDC Revenue, Oakwood Obligation Group, Series A,
4,400,000 FGIC Insured, 5.875%, 11/15/25 ............................................................ 4,294,576
1,000,000 MBIA Insured, 5.25%, 08/15/21 ............................................................. 903,560
14,000,000 Detroit City School District, Series A, AMBAC Insured, 5.70%, 05/01/25 ....................... 13,594,980
Detroit Sewage Disposal Revenue,
10,300,000 FGIC Insured, Pre-Refunded, 7.125%, 07/01/19 .............................................. 11,167,260
1,000,000 FGIC Insured, Pre-Refunded, 6.625%, 07/01/21 .............................................. 1,099,460
4,000,000 Refunding, BIG Insured, 7.00%, 07/01/09 ................................................... 4,126,280
Detroit Sewage Disposal System Revenue, (cont.)
$ 500,000 Refunding, BIG Insured, Pre-Refunded, 8.00%, 07/01/08 ..................................... $ 526,200
4,000,000 Refunding, Series B, MBIA Insured, 5.25%, 07/01/21 ........................................ 3,658,160
6,000,000 Detroit State Aid GO, AMBAC Insured, Pre-Refunded, 7.20%, 05/01/09 ........................... 6,519,960
Detroit Water Supply System Revenue,
4,960,000 FGIC Insured, Pre-Refunded, 7.125%, 07/01/10 .............................................. 5,473,608
5,000,000 FGIC Insured, Pre-Refunded, 6.25%, 07/01/12 ............................................... 5,321,500
3,500,000 FGIC Insured, Pre-Refunded, 7.25%, 07/01/20 ............................................... 3,877,615
13,050,000 MBIA Insured, Pre-Refunded, 7.875%, 07/01/19 .............................................. 14,142,807
DeWitt Public Schools Building and Site, AMBAC Insured, Pre-Refunded, 6.60%,
350,000 05/01/15 .................................................................................. 381,409
350,000 05/01/16 .................................................................................. 381,409
1,050,000 Dexter Community Schools, Refunding, AMBAC Insured, 5.70%, 05/01/14 .......................... 1,023,687
6,000,000 East Detroit School District, Refunding, FGIC Insured, 6.10%, 05/01/16 ....................... 6,112,320
1,250,000 East Lansing Building Authority, GO, Refunding, AMBAC Insured, 7.00%, 10/01/16 ............... 1,326,713
Eastern Michigan University Revenue, Refunding,
1,000,000 AMBAC Insured, 6.375%, 06/01/14 ........................................................... 1,038,280
2,105,000 Residence Hall, FGIC Insured, 7.875%, 10/01/10 ............................................ 2,130,092
2,000,000 Eaton Rapids Public Schools Building and Site, MBIA Insured, 5.625%, 05/01/25 ................ 1,897,780
Farmington Hills Economic Development Corp. Revenue, Botsford Continuing Care, Series A,
MBIA Insured,
1,000,000 5.70%, 02/15/15 ........................................................................... 975,460
1,835,000 5.75%, 02/15/25 ........................................................................... 1,763,031
10,140,000 Farmington Hills Hospital Finance Authority Revenue, Refunding, Botsford General Hospital, Series A,
MBIA Insured, 7.10%, 02/15/14 ............................................................... 10,847,873
2,000,000 Ferndale School District, Refunding, FGIC Insured, 5.375%, 05/01/21 .......................... 1,869,200
Ferris State College Revenue, AMBAC Insured,
1,000,000 6.15%, 10/01/14 ........................................................................... 1,032,190
1,000,000 6.25%, 10/01/19 ........................................................................... 1,032,050
2,150,000 Fowlerville Community School District, Refunding, FGIC Insured, 5.75%, 05/01/20 .............. 2,133,316
2,345,000 Fremont Public Schools District, Series 95, FGIC Insured, 5.50%, 05/01/21 .................... 2,214,993
4,425,000 Gaylord Community Schools, Refunding, MBIA Insured, 5.625%, 05/01/21 ......................... 4,223,353
Gerrish and Higgins School District, Building and Site, CGIC Insured, Pre-Refunded,
3,000,000 6.40%, 05/01/12 ........................................................................... 3,250,980
2,500,000 6.50%, 05/01/17 ........................................................................... 2,719,500
4,000,000 Gibraltar School District GO, CGIC Insured, Pre-Refunded, 7.00%, 05/01/15 .................... 4,255,560
1,015,000 Gogebic - Iron Wastewater Authority, Waste Water Treatment System Revenue, Refunding,
MBIA Insured, 5.95%, 01/01/15 ............................................................... 1,013,772
5,000,000 Grand Haven Area Public Schools, Refunding, MBIA Insured, 6.05%, 05/01/14 .................... 5,114,350
Grand Ledge Public School District, MBIA Insured,
6,750,000 5.375%, 05/01/24 .......................................................................... 6,303,825
10,000,000 Pre-Refunded, 6.60%, 05/01/24 ............................................................. 11,163,900
610,000 Grand Rapids Community College, MBIA Insured, 5.90%, 05/01/19 ................................ 610,830
7,500,000 Grand Rapids, Downtown, Devauth Tax Increment Revenue, MBIA Insured, 6.875%, 06/01/24 ........ 8,116,875
3,850,000 Grand Rapids Sewer System Revenue Improvement, Refunding, MBIA Insured, 6.00%, 01/01/20 ...... 3,862,205
Grand Rapids Water Supply System Revenue,
5,375,000 FGIC Insured, Pre-Refunded, 7.25%, 01/01/20 ............................................... 5,897,611
4,500,000 MBIA Insured, Pre-Refunded, 7.875%, 01/01/18 .............................................. 4,803,165
1,700,000 Grand Traverse County Building Authority, AMBAC Insured, 5.75%, 09/01/15 ..................... 1,674,891
Grand Traverse County Hospital Finance Authority Revenue, Series A,
2,500,000 Refunding, Munson Healthcare, AMBAC Insured, 6.25%, 07/01/12 .............................. 2,606,350
7,900,000 Refunding, Munson Healthcare, AMBAC Insured, 6.25%, 07/01/22 .............................. 8,115,196
$ 3,000,000 Gratiot County EDC, EDR, Masonic Home Project, AMBAC Insured, Pre-Refunded, 7.375%,
04/01/20 .................................................................................... $ 3,320,100
Greenville Public Schools Building, MBIA Insured, 5.75%,
1,850,000 05/01/19 .................................................................................. 1,813,130
1,050,000 05/01/24 .................................................................................. 1,020,191
5,100,000 Grosse Ile Township School District, Refunding, FGIC Insured, 6.00%, 05/01/22 ................ 5,107,446
2,750,000 Gull Lake Community School District, FGIC Insured, Pre-Refunded, 6.80%, 05/01/21 ............. 3,030,610
4,715,000 Harrison Community Schools GO, AMBAC Insured, 6.25%, 05/01/13 ................................ 4,940,754
Haslett Public School District, CGIC Insured,
4,000,000 Pre-Refunded, 7.50%, 05/01/20 ............................................................. 4,416,880
3,875,000 Refunding, 6.625%, 05/01/19 ............................................................... 4,099,401
Hastings School District, FGIC Insured, 5.625%,
1,000,000 05/01/15 .................................................................................. 966,860
3,425,000 05/01/18 .................................................................................. 3,282,109
2,000,000 Holland School District GO, Refunding, AMBAC Insured, 6.375%, 05/01/10 ....................... 2,095,240
3,775,000 Holly Area School District, FGIC Insured, 5.625%, 05/01/25 ................................... 3,631,928
Holt Public Schools Building and Site, MBIA Insured,
1,000,000 6.25%, 05/01/16 ........................................................................... 1,031,760
3,060,000 6.25%, 05/01/18 ........................................................................... 3,157,186
2,525,000 6.30%, 05/01/20 ........................................................................... 2,605,043
1,425,000 6.50%, 05/01/21 ........................................................................... 1,482,613
Houghton-Portage Township School District, Refunding,
2,000,000 AMBAC Insured, 6.00%, 05/01/14 ............................................................ 2,047,820
2,700,000 CGIC Insured, Pre-Refunded, 7.00%, 05/01/17 ............................................... 2,872,503
3,475,000 Howell Public Schools, MBIA Insured, 5.60%, 05/01/21 ......................................... 3,344,479
750,000 Hudsonville Building Authority, Refunding, AMBAC Insured, 6.60%, 10/01/17 .................... 779,385
Hudsonville Public Schools GO, Refunding, Series B, FGIC Insured,
2,000,000 6.05%, 05/01/19 ........................................................................... 2,039,340
2,000,000 6.10%, 05/01/24 ........................................................................... 2,039,240
11,535,000 Huron Valley School District, Refunding, FGIC Insured, 6.125%, 05/01/20 ...................... 11,731,210
6,800,000 Imlay City Community School District, Refunding, CGIC Insured, 6.70%, 05/01/21 ............... 7,186,988
Inkster Michigan School District, Series 1990, AMBAC Insured, Pre-Refunded, 7.00%,
450,000 05/01/14 .................................................................................. 491,319
450,000 05/01/16 .................................................................................. 491,319
2,250,000 Iron Mountain School District, Building and Site, AMBAC Insured, Pre-Refunded, 6.30%, 05/01/21 2,428,920
400,000 Jackson County GO, Series 1985, FGIC Insured, Pre-Refunded, 8.60%, 04/01/12 .................. 436,044
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding and Improvement,
3,805,000 Borgess Medical Center, Series A, AMBAC Insured, 5.625%, 06/01/14 ......................... 3,666,194
23,065,000 Bronson Methodist, MBIA Insured, 5.875%, 05/15/26 ......................................... 22,602,316
5,000,000 Bronson Methodist, Series A, MBIA Insured, 6.25%, 05/15/12 ................................ 5,199,850
2,460,000 Bronson Methodist, Series A, MBIA Insured, 6.375%, 05/15/17 ............................... 2,553,554
1,000,000 Kelloggsville Public School District GO, FGIC Insured, 5.75%, 05/01/13 ....................... 996,730
Kenowa Hills Public Schools, MBIA Insured, 5.875%,
1,235,000 05/01/21 .................................................................................. 1,238,940
9,000,000 05/01/26 .................................................................................. 8,868,600
7,500,000 Kent Hospital Finance Authority, Health Care Revenue, Butterworth Health System, Series A,
MBIA Insured, 5.625%, 01/15/26 .............................................................. 6,986,400
2,400,000 Laingsburg Comunity School District, Refunding, FGIC Insured, 5.375%, 05/01/21 ............... 2,228,352
2,500,000 Lake City Area School District GO, AMBAC Insured, Pre-Refunded, 6.95%, 05/01/13 .............. 2,635,275
1,000,000 Lakeshore Public Schools Berrien County, MBIA Insured, 5.70%, 05/01/22 ....................... 964,680
Lake Linden-Hubbell Public Schools FSA Insured,
825,000 5.40%, 05/01/18 ........................................................................... 780,640
675,000 5.50%, 05/01/23 ........................................................................... 639,758
Lake Superior State University Revenue,
$ 1,500,000 AMBAC Insured, 6.375%, 11/15/15 ........................................................... $ 1,578,495
2,135,000 MBIA Insured, 6.50%, 11/15/11 ............................................................. 2,248,112
1,500,000 Lakeview Community School District GO, Refunding, MBIA Insured, 6.75%, 05/01/13 .............. 1,614,000
1,470,000 Lansing Building Authority, Refunding, MBIA Insured, 5.60%, 06/01/19 ......................... 1,402,645
5,830,000 Lansing Sewage Disposal System Revenue, Refunding, Series 1988, MBIA Insured, Pre-Refunded,
7.625%, 05/01/06 ............................................................................ 6,041,279
3,500,000 Leslie Public Schools, Ingham & Jackson Counties, Refunding, Building and Site, AMBAC Insured,
6.00%, 05/01/25 ............................................................................. 3,513,300
2,500,000 Lincoln Park School District, FGIC Insured, 5.90%, 05/01/26 .................................. 2,489,350
1,000,000 Marquette Area Public School Building and Site, Series B, FGIC Insured, Pre-Refunded, 6.65%,
05/01/12 .................................................................................... 1,095,830
Marquette City Hospital Finance Authority Revenue, Refunding, Marquette General Hospital,
5,000,000 Series C, AMBAC Insured, Pre-Refunded, 7.50%, 04/01/07 .................................... 5,466,100
4,525,000 Series D, FSA Insured, 5.875%, 04/01/11 ................................................... 4,564,458
5,225,000 Series D, 6.10%, 04/01/19 ................................................................. 5,293,918
1,100,000 Marysville Public School District, MBIA Insured, 5.75%, 05/01/22 ............................. 1,066,912
1,400,000 Mason Public Schools District, FGIC Insured, 5.40%, 05/01/21 ................................. 1,297,548
Mattawan Consolidated School District, Counties of Van Buren and Kalamazoo, School Building
and Site, GO, Unlimited Tax, AMBAC Insured, Pre-Refunded,
775,000 7.50%, 05/01/13 ........................................................................... 830,932
775,000 7.55%, 05/01/16 ........................................................................... 831,544
800,000 7.55%, 05/01/17 ........................................................................... 858,368
800,000 7.55%, 05/01/18 ........................................................................... 858,368
2,675,000 Menominee Area Public School District, Refunding, AMBAC Insured, 6.00%, 05/01/20 ............. 2,732,646
Michigan Higher Education Student Loan Authority Revenue, Series 8-A, MBIA Insured,
2,000,000 7.40%, 10/01/04 ........................................................................... 2,114,040
2,000,000 7.55%, 10/01/08 ........................................................................... 2,087,560
Michigan Municipal Bond Authority Revenue, Local Government Loan Program,
850,000 Series A, Group 15, AMBAC Insured, Pre-Refunded, 7.60%, 05/01/09 .......................... 915,450
3,790,000 Series C, MBIA Insured, 6.00%, 11/01/10 ................................................... 3,881,680
6,490,000 Series G, AMBAC Insured, 6.75%, 11/01/14 .................................................. 6,983,305
1,650,000 Series G, AMBAC Insured, 6.80%, 11/01/14 .................................................. 1,781,703
825,000 Series G, AMBAC Insured, 6.80%, 11/01/23 .................................................. 884,285
1,000,000 Wayne County Project, Series A, FGIC Insured, Pre-Refunded, 7.00%, 12/01/09 .................. 1,097,630
1,900,000 Michigan Public Power Agency Revenue, Refunding, Campbell Project, AMBAC Insured, 6.125%,
01/01/10 .................................................................................... 1,941,971
Michigan State Building Authority Revenue,
10,000,000 Detroit Regional Prisons, Series I, MBIA Insured, Pre-Refunded, 7.25%, 10/01/08 ........... 10,789,300
1,500,000 Refunding, Series I, AMBAC Insured, 6.25%, 10/01/20 ....................................... 1,529,040
4,645,000 Series II, MBIA Insured, 6.25%, 10/01/20 .................................................. 4,761,868
5,000,000 Series II, MBIA Insured, ETM, 7.40%, 04/01/01 ............................................. 5,306,650
1,750,000 Michigan State Comprehensive Transportation Revenue, Refunding, Series 1988-II, FGIC Insured,
7.625%, 05/01/11 ............................................................................ 1,859,970
Michigan State HDA, Limited Obligation Revenue, Mercy Bellbrook Project, MBIA Insured, Pre-Refunded,
3,200,000 8.00%, 04/01/07 ........................................................................... 3,336,544
1,200,000 8.125%, 04/01/18 .......................................................................... 1,252,044
Michigan State HDA, MFHR, FGIC Insured,
4,780,000 Series 1987-A, 8.375%, 07/01/19 ........................................................... 5,018,761
4,415,000 Series 1988-A, 7.70%, 07/01/18 ............................................................ 4,669,392
2,880,000 Series 1989-A, 7.55%, 07/01/09 ............................................................ 3,007,555
2,945,000 Series 1989-A, 7.65%, 07/01/15 ............................................................ 3,057,028
1,655,000 Michigan State HDA, SFMR, Series 1986-A, FGIC Insured, 8.00%, 10/01/06 ....................... 1,694,406
Michigan State Hospital Finance Authority Revenue,
$ 1,750,000 Crittenton Hospital, FGIC Insured, 6.75%, 03/01/20 ........................................ $ 1,828,015
2,000,000 Crittenton Hospital, Series A, FGIC Insured, Pre-Refunded, 7.125%, 12/01/06 ............... 2,049,500
3,500,000 MidMichigan Hospital, MBIA Insured, 6.625%, 06/01/10 ...................................... 3,627,470
8,750,000 Mt. Sinai Hospital of Detroit, FGIC Insured, Pre-Refunded, 7.00%, 01/01/09 ................ 9,012,938
9,020,000 Oakland General Hospital, AMBAC Insured, 7.00%, 07/01/15 .................................. 9,633,089
2,200,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.00%, 07/01/10 ............................. 2,418,284
10,000,000 Oakwood Hospital, Series B, FGIC Insured, Pre-Refunded, 7.20%, 11/01/15 ................... 11,079,000
13,250,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.10%, 07/01/18 ............................. 14,610,643
7,635,000 Pontiac Osteopathic, Series B, AMBAC Insured, Pre-Refunded, 7.75%, 02/01/05 ............... 7,905,890
2,075,000 Refunding, Sisters of Mercy Health Corp., MBIA Insured, 5.25%, 08/15/21 ................... 1,877,377
2,000,000 Refunding, Sisters of Mercy Health Corp., Series H, MBIA Insured, 7.50%, 08/15/07 ......... 2,104,080
3,445,000 Refunding, St. John's Hospital, Series A, AMBAC Insured, 6.00%, 05/15/13 .................. 3,505,288
9,545,000 Refunding, St. John's Hospital, Series A, AMBAC Insured, 6.25%, 05/15/14 .................. 9,840,609
4,900,000 Refunding, Sisters of Mercy Health Corp., Series H, MBIA Insured, 7.50%, 08/15/13 ......... 5,161,072
1,500,000 Sparrow Obligation Group, MBIA Insured, 6.50%, 11/15/11 ................................... 1,580,700
1,000,000 Sparrow Obligation Group, MBIA Insured, 5.80%, 11/15/16 ................................... 983,550
1,000,000 Sparrow Obligation Group, MBIA Insured, 5.90%, 11/15/26 ................................... 980,560
1,200,000 Sparrow Obligation Group, MBIA Insured, 6.00%, 11/15/36 ................................... 1,183,728
Michigan State Strategic Fund, Limited Obligation Revenue,
20,000,000 Refunding, Detroit Edison Co., FGIC Insured, 6.875%, 12/01/21 ............................. 21,394,000
5,000,000 Refunding, Detroit Edison Co., Series AA, FGIC Insured, 6.95%, 05/01/11 ................... 5,636,100
3,000,000 Refunding, Detroit Edison Co., Series BB, AMBAC Insured, 7.00%, 05/01/21 .................. 3,481,860
1,285,000 Refunding, Detroit Edison Co., Series BB, MBIA Insured, 6.05%, 10/01/23 ................... 1,303,722
10,250,000 Refunding, Detroit Edison Co., Series BB, MBIA Insured, 6.20%,08/15/25 .................... 10,461,765
5,540,000 Refunding, Detroit Edison Co., Series CC, FGIC Insured, 6.95%, 09/01/21 ................... 5,933,174
5,825,000 Refunding, Detroit Edison Co., Series CC, MBIA Insured, 6.05%, 10/01/23 ................... 5,909,870
1,800,000 St. John-Bon Secours Care Center, FGIC Insured, 7.90%, 11/15/16 ........................... 1,890,072
Michigan State Trunk Line GO,
3,000,000 Series A, FGIC Insured, 5.80%, 11/15/24 ................................................... 2,930,520
1,400,000 Series B, Refunding, AMBAC Insured, 5.50%, 10/01/21 ....................................... 1,302,910
5,000,000 Michigan State University Revenues, Series A, AMBAC Insured, 5.00%, 02/15/26 ................. 4,355,950
2,500,000 Monroe County EDC, Limited Obligation Revenue, Monroe Community Health Services,
MBIA Insured, Pre-Refunded, 7.00%, 09/01/21 ................................................. 2,790,325
Monroe County PCR, Detroit Edison Co.,
4,000,000 Series 1, MBIA Insured, 6.875%, 09/01/22 .................................................. 4,237,720
4,000,000 Series 1-B, MBIA Insured, 6.55%, 09/01/24 ................................................. 4,153,880
10,000,000 Series C, AMBAC Insured, 7.50%, 12/01/19 .................................................. 10,996,700
1,150,000 Series CC, MBIA Insured, 6.55%, 06/01/24 .................................................. 1,193,183
4,725,000 Morley-Stanwood Community Schools Building and Site, FGIC Insured, 5.625%, 05/01/21 .......... 4,486,340
2,040,000 Mount Clemens Community School District, Refunding, MBIA Insured, 5.50%, 05/01/19 ............ 1,911,949
Muskegon Public Schools, Series 95, FGIC Insured, 5.25%,
1,900,000 05/01/18 .................................................................................. 1,767,475
2,000,000 05/01/21 .................................................................................. 1,827,180
3,200,000 North Branch Area Schools, Lapeer County Building and Site, Refunding, CGIC Insured,
Pre-Refunded, 6.60%, 05/01/21 ............................................................... 3,527,648
Northern Michigan University Revenue, AMBAC Insured,
1,715,000 5.60%, 12/01/13 ........................................................................... 1,681,403
1,000,000 6.55%, 12/01/14 ........................................................................... 1,075,860
4,500,000 Northview Public School District, Refunding, MBIA Insured, 5.80%, 05/01/21 ................... 4,429,980
1,000,000 Norway Electric Utilities System Revenue, Refunding, AMBAC Insured, 5.375%, 02/01/12 ......... 955,070
4,750,000 Novi Community School District, FGIC Insured, 6.125%, 05/01/18 ............................... 4,824,385
3,500,000 Oakland Community College District, Washtenaw County, AMBAC Insured, 6.65%, 05/01/11 ......... 3,718,155
$ 6,670,000 Oakland County EDC, EDR, FHA Mortgage Insured, Series A, FGIC Insured, 8.00%, 08/01/18 ....... $ 6,841,753
3,000,000 Okemos Public School District, Series I, MBIA Insured, Pre-Refunded, 6.90%, 05/01/11 ......... 3,318,510
1,800,000 Olivet Community School District, Refunding, MBIA Insured, 5.50%, 05/01/20 ................... 1,684,728
2,270,000 Otsego Public School District Building and Site, CGIC Insured, 6.625%, 05/01/16 .............. 2,408,425
3,500,000 Paw Paw Public School District Building and Site, FGIC Insured, 5.625%, 05/01/25 ............. 3,386,145
3,755,000 Perry Public School Building and Site, Refunding, FGIC Insured, 5.45%, 05/01/22 .............. 3,518,585
Petoskey Hospital Finance Authority Facilities Revenue, Refunding, Northern Michigan Hospital,
MBIA Insured,
4,500,000 7.00%, 11/15/07 ........................................................................... 4,832,145
1,000,000 6.75%, 11/15/19 ........................................................................... 1,044,240
Plymouth-Canton Community School District,
4,000,000 Refunding, AMBAC Insured, 5.50%, 05/01/13 ................................................. 3,901,760
1,875,000 Refunding, AMBAC Insured, 5.50%, 05/01/17 ................................................. 1,801,088
3,500,000 Series C, FGIC Insured, 6.50%, 05/01/16 ................................................... 3,731,630
3,000,000 Series C, MBIA Insured, 6.50%, 05/01/16 ................................................... 3,198,540
1,305,000 Pontiac General Building Authority, Series 1991, Refunding, AMBAC Insured, 6.875%, 04/01/06 .. 1,396,598
Port Huron School District,
5,500,000 CGIC Insured, Pre-Refunded, 7.25%, 05/01/15 ............................................... 6,074,035
4,500,000 Refunding, AMBAC Insured, 6.00%, 05/01/12 ................................................. 4,607,595
Portage Lake Water and Sewer Authority GO, Refunding, AMBAC Insured,
770,000 6.10%, 10/01/14 ........................................................................... 799,476
670,000 6.20%, 10/01/20 ........................................................................... 695,514
2,750,000 Portage Public Schools GO, MBIA Insured, 5.625%, 05/01/19 .................................... 2,645,940
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1985-A, FSA Insured,
500,000 ETM, 8.75%, 07/01/00 ...................................................................... 572,480
2,500,000 Pre-Refunded, 9.00%, 07/01/09 ............................................................. 3,154,900
Puerto Rico Commonwealth Public Improvement GO, MBIA Insured,
175,000 7.125%, 07/01/02 .......................................................................... 183,164
825,000 Pre-Refunded, 7.125%, 07/01/02 ............................................................ 858,396
10,875,000 Pre-Refunded, 6.60%, 07/01/13 ............................................................. 12,028,620
8,500,000 Series 1987, 6.75%, 07/01/06 .............................................................. 8,806,680
Puerto Rico Electric Power Authority Revenue, CGIC Insured,
3,400,000 Refunding, Series U, 6.00%, 07/01/14 ...................................................... 3,457,664
7,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ................................................... 7,840,700
1,315,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series 1988-C, GNMA Secured, 6.85%, 10/15/23 ......... 1,371,861
8,700,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 07/01/14 .................. 9,394,608
14,090,000 Redford Unified School District No. 1, FGIC Insured, 6.00%, 05/01/22 ......................... 14,253,585
2,985,000 Reeths-Puffer Schools, Refunding, MBIA Insured, Pre-Refunded, 6.625%, 05/01/12 ............... 3,294,306
1,000,000 Reeths-Puffer Schools Building, MBIA Insured, Pre-Refunded, 6.625%, 05/01/12 ................. 1,103,620
1,150,000 River Rouge School District, FSA Insured, 5.625%, 05/01/22 ................................... 1,093,788
Rockford Public Schools GO, Refunding,
3,900,000 AMBAC Insured, 5.875%, 05/01/19 ........................................................... 3,915,132
9,750,000 CGIC Insured, Pre-Refunded, 7.375%, 05/01/19 .............................................. 10,725,585
3,150,000 CGIC Insured, 5.875%, 05/01/19 ............................................................ 3,162,222
1,850,000 MBIA Insured, 5.875%, 05/01/12 ............................................................ 1,880,007
1,925,000 MBIA Insured, 5.875%, 05/01/19 ............................................................ 1,932,469
Romulus Community Schools, Refunding, FGIC Insured,
690,000 5.75%, 05/01/13 ........................................................................... 694,140
1,200,000 5.75%, 05/01/17 ........................................................................... 1,191,288
5,435,000 5.75%, 05/01/22 ........................................................................... 5,355,649
2,220,000 Series II, Pre-Refunded, 6.40%, 05/01/17 .................................................. 2,431,344
5,000,000 Royal Oak Hospital Finance Authority Revenue, Refunding, MBIA Insured, 6.25%, 01/01/19 ....... 5,126,150
25,000 Saginaw City School District, Unlimited Tax, MBIA Insured, Pre-Refunded, 11.00%, 06/01/03 .... 26,759
Saginaw Hospital Finance Authority Revenue, St. Luke's Hospital Project,
$ 5,325,000 Refunding, Series C, MBIA Insured, 6.875%, 07/01/14 ....................................... $ 5,624,744
2,000,000 Refunding, Series C, MBIA Insured, 6.75%, 07/01/17 ........................................ 2,098,700
1,000,000 Refunding, Series D, MBIA Insured, 6.50%, 07/01/11 ........................................ 1,056,140
2,185,000 Series B, AMBAC Insured, Pre-Refunded, 7.625%, 07/01/06 ................................... 2,338,212
3,540,000 Series B, AMBAC Insured, Pre-Refunded, 7.75%, 07/01/13 .................................... 3,795,907
3,875,000 Series B, MBIA Insured, 6.00%, 07/01/21 ................................................... 3,910,030
1,000,000 Saginaw Valley State University Revenue, MBIA Insured, 5.375%, 07/01/16 ...................... 932,390
3,425,000 Sandusky Community School District, CGIC Insured, Pre-Refunded, 6.50%, 05/01/21 .............. 3,718,214
1,350,000 Saranac Coummunity School District Building and Site, MBIA Insured, 5.25%, 05/01/21 .......... 1,246,482
2,000,000 Sault Ste. Marie GO, Series 1990, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10 ............... 2,205,780
Shelby Charter Township Authority, AMBAC Insured, 5.75%,
750,000 11/01/11 .................................................................................. 746,183
750,000 11/01/12 .................................................................................. 753,855
1,925,000 Shelby Public School District, Series 95, MBIA Insured, 5.625, 05/01/21 ...................... 1,863,766
South Haven Public Schools, Refunding, FGIC Insured, 5.50%,
1,640,000 05/01/13 .................................................................................. 1,586,060
1,725,000 05/01/17 .................................................................................. 1,641,113
7,745,000 St. Clair County EDC, PCR, Refunding, Detroit Edison Co., Series DD, AMBAC Insured, 6.05%,
08/01/24 .................................................................................... 7,885,494
Saint Johns Public Schools, FGIC Insured,
4,500,000 5.625%, 05/01/20 .......................................................................... 4,353,975
2,000,000 5.75%, 05/01/25 ........................................................................... 1,950,480
1,000,000 Sturgis Public School District, MBIA Insured, 6.10%, 05/01/18 ................................ 1,034,550
2,400,000 Three Rivers Community Schools, Building and Site, MBIA Insured, 6.00%, 05/01/23 ............. 2,446,128
1,400,000 Traverse City Area Public Schools, Building and Site, Series I, MBIA Insured, 5.70%, 05/01/20 1,371,398
Tri County Area School District, School Building and Site, MBIA Insured, Pre-Refunded, 6.875%,
1,850,000 05/01/11 .................................................................................. 2,037,054
2,325,000 05/01/16 .................................................................................. 2,560,081
2,365,000 University Revenues Medical Service Plan, MBIA Insured, 6.50%, 12/01/21 ...................... 2,458,630
Vicksburg Community School District, Refunding, MBIA Insured, 5.625%,
2,175,000 05/01/12 .................................................................................. 2,162,516
1,000,000 05/01/20 .................................................................................. 967,550
Warren Consolidated School District, Refunding,
6,500,000 CGIC Insured, Pre-Refunded, 6.70%, 05/01/16 ............................................... 7,136,350
2,530,000 MBIA Insured, 5.50%, 05/01/21 ............................................................. 2,399,148
1,225,000 Series II, FGIC Insured, 5.375%, 05/01/14 ................................................. 1,167,842
2,000,000 Wayland Union School District, FGIC Insured, 6.75%, 05/01/24 ................................. 2,178,320
Wayne Charter County Airport Revenue, Detroit Metro Airport, MBIA Insured,
2,900,000 Pre-Refunded, 6.75%, 12/01/19 ............................................................. 3,215,549
6,635,000 Pre-Refunded, 7.00%, 12/01/21 ............................................................. 7,433,191
300,000 Series B, 6.875%, 12/01/11 ................................................................ 319,221
2,000,000 Series B, 6.75%, 12/01/21 ................................................................. 2,105,940
1,000,000 Refunding, Sub Lien Detroit Metro, 5.25%, 12/01/21 ........................................ 904,210
10,585,000 Wayne County Airport Revenue, Series B, AMBAC Insured, 6.00%, 12/01/20 ....................... 10,670,315
Wayne County, Ecorse Creek Drain District, Pollution Abatement No. 1, AMBAC Insured,
500,000 7.40%, 11/01/04 ........................................................................... 529,120
500,000 7.50%, 11/01/05 ........................................................................... 529,385
490,000 7.50%, 11/01/06 ........................................................................... 518,797
450,000 7.50%, 11/01/07 ........................................................................... 476,447
2,275,000 Wayne-Westland Community School, Refunding, FGIC Insured, 6.10%, 05/01/13 .................... 2,351,963
6,630,000 West Ottawa Public School District, Refunding, FGIC Insured, 6.00%, 05/01/20 ................. 6,698,156
5,000,000 Western Michigan University Revenues, FGIC Insured, 6.25%, 11/15/12 .......................... 5,204,050
$ 1,660,000 Western School District, Refunding, MBIA Insured, 5.50%, 05/01/20 ............................ $ 1,573,730
Western Townships Utilities Authority, Sewer Disposal System, Refunding, CGIC Insured,
18,710,000 6.75%, 01/01/15 ........................................................................... 19,633,900
6,115,000 6.50%, 01/01/19 ........................................................................... 6,347,553
1,000,000 White Cloud Public Schools Refunding, Cap Guard, FSA Insured, 5.50%, 05/01/20 ................ 949,250
1,800,000 Williamston County GO, Refunding, AMBAC Insured, 6.90%, 11/01/17 ............................. 1,954,908
4,900,000 Williamston Community School District Building and Site, MBIA Insured, 5.375%, 05/01/15 ...... 4,642,701
6,210,000 Willow Run Community School, CGIC Insured, Pre-Refunded, 6.375%, 05/01/18 .................... 6,688,232
1,800,000 Wyandotte City School District, Refunding, FSA Insured, 5.625%, 05/01/13 ..................... 1,775,934
Wyandotte Electric Revenue, Refunding,
16,060,000 AMBAC Insured, Pre-Refunded, 7.875%, 10/01/17 ............................................. 17,027,936
9,980,000 MBIA Insured, 6.25%, 10/01/17 ............................................................. 10,422,413
Yale Public School District, School Building and Site, AMBAC Insured,
2,000,000 5.375%, 05/01/17 .......................................................................... 1,884,500
1,500,000 5.50%, 05/01/19 ........................................................................... 1,432,620
Zeeland Public Schools GO, Refunding, Series B, MBIA Insured,
2,900,000 6.05%, 05/01/19 ........................................................................... 2,931,378
4,000,000 6.10%, 05/01/24 ........................................................................... 4,057,830
-----------
Total Long Term Investments (Cost $1,039,019,759)....................................... 1,087,481,677
-----------
aShort Term Investments .6%
5,500,000 Grand Rapids Water Supply System Revenue, Refunding, FGIC Insured, Daily VRDN and Put,
3.35%, 01/01/20,............................................................................. 5,500,000
1,000,000 Midland County EDC, Economic Development Limited Obligation Revenue, Dow Chemical Co.
Project, Series A, Daily VRDN and Put, 3.90%, 12/01/23 ...................................... 1,000,000
-----------
Total Short Term Investments (Cost $6,500,000).......................................... 6,500,000
-----------
Total Investments (Cost $1,045,519,759) 98.4%...................................... 1,093,981,677
Other Assets and Liabilities, Net 1.6%............................................. 17,531,347
-----------
Net Assets 100.0% ................................................................. $1,111,513,024
===========
At August 31, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,045,647,364 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 52,424,887
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (4,090,574)
-----------
Net unrealized appreciation ................................................................ $ 48,334,313
===========
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 Assistance
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
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDN's) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Minnesota Insured Tax-Free Income Fund (Note 1)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 100.4%
$ 2,295,000 Albany ISD No. 745, Series A, CGIC Insured, 6.00%, 02/01/16 ................................... $ 2,323,527
2,100,000 Anoka County Resource Recovery Revenue, Northern States Power Co., AMBAC Insured, 7.15%,
12/01/08 ..................................................................................... 2,266,404
4,870,000 Becker GO, Refunding, Tax Increment, Series D, MBIA Insured, 6.25%, 08/01/15 .................. 5,028,859
Becker GO, Waste Water Treatment Facility, Series A, MBIA Insured,
625,000 5.90%, 02/01/12 ........................................................................... 635,063
610,000 5.95%, 02/01/15 ........................................................................... 616,137
290,000 Benson ISD No. 777 GO, CGIC Insured, 6.00%, 02/01/15 .......................................... 292,990
2,685,000 Bloomington Health Care Facilities Revenue, Masonic Home Care Center, AMBAC Insured, 5.875%,
07/01/22 ..................................................................................... 2,640,939
3,500,000 Brainerd Health Care Facilities Revenue, Refunding, Benedictine Health-St. Joseph, Series D,
MBIA Insured, 5.875%, 02/15/13 ............................................................... 3,517,185
2,800,000 Buffalo ISD No. 877, CGIC Insured, 6.15%, 02/01/18 ............................................ 2,872,660
2,105,000 Burnsville ISD, Series A, CGIC Insured, 6.20%, 02/01/17 ....................................... 2,184,337
625,000 Byron ISD No. 531 GO, AMBAC Insured, 6.90%, 06/01/14 .......................................... 667,169
2,975,000 Chanhassen Apartments Project GO, Series B, AMBAC Insured, 6.20%, 01/01/25 .................... 3,028,788
3,500,000 Cold Spring ISD No. 750, Series A, FGIC Insured, 6.15%, 02/01/11 .............................. 3,638,005
Dakota County Housing and Redevelopment Authority, SFMR,
10,000 City of South St. Paul, Burnsville and Inver Grove Heights, FGIC Insured, 9.375%, 05/01/18 10,631
885,000 Refunding, GNMA Secured, 8.10%, 03/01/16 .................................................. 926,338
Dakota, Washington and Stearns County SFMR, Series 1990, GNMA Secured,
960,000 7.80%, 12/01/10 ........................................................................... 1,020,403
3,375,000 7.85%, 12/01/30 ........................................................................... 3,575,543
Delano ISD No. 879, Refunding, Series A, AMBAC Insured,
500,000 5.55%, 02/01/09 ........................................................................... 499,525
700,000 5.60%, 02/01/10 ........................................................................... 696,045
1,040,000 Dilworth ISD No. 147, MBIA Insured, 6.00%, 02/01/15 ........................................... 1,050,920
1,940,000 Dover and Eyota ISD No. 533 GO, AMBAC Insured, 7.25%, 02/01/20 ................................ 2,011,761
Duluth EDA, Health Care Facilities Revenue, The Duluth Clinic, Ltd., AMBAC Insured,
2,880,000 6.20%, 11/01/12 ........................................................................... 2,978,294
5,405,000 6.30%, 11/01/22 ........................................................................... 5,563,961
1,120,000 Pre-Refunded, 6.20%, 11/01/12 ............................................................. 1,207,461
2,125,000 Pre-Refunded, 6.30%, 11/01/22 ............................................................. 2,305,030
3,000,000 Duluth EDA, Hospital Facilities Revenue, St. Lukes Hospital, Series A, Connie Lee Insured, 6.40%,
05/01/12...................................................................................... 3,075,900
3,500,000 Duluth EDA, Tax Increment Revenue, Refunding, MBIA Insured, 7.25%, 08/01/08 ................... 3,724,875
4,420,000 Eagan MFMR, Refunding, Forest Ridge Apartments, BIG Insured, 7.50%, 03/01/27 .................. 4,596,181
Eden Prairie ISD No. 272, Series A,
4,980,000 CGIC Insured, 5.75%, 02/01/15 ............................................................. 4,962,869
1,000,000 FGIC Insured, 5.45%, 02/01/08 ............................................................. 1,002,260
2,000,000 Eden Prairie, Olympic Ridge, Series A, GNMA Secured, 6.25%, 01/20/31 .......................... 2,014,380
500,000 Eden Valley ISD No. 463, CGIC Insured, 6.60%, 02/01/16 ........................................ 539,905
Elk River ISD No. 728 GO, CGIC Insured,
4,000,000 6.40%, 02/01/22 ........................................................................... 4,281,680
650,000 Series A, 7.00%, 02/01/11 ................................................................. 694,395
1,345,000 Eveleth EDA, Housing Development, MBIA Insured, 5.80%, 07/01/25 ............................... 1,308,187
1,500,000 Faribault ISD No. 656, 5.75%, 06/01/15 ........................................................ 1,494,735
Farmington ISD No. 192 GO,
4,000,000 School Building, AMBAC Insured, 5.125%, 02/01/15 .......................................... 3,705,280
4,000,000 Series A, FSA Insured, 5.30%, 06/01/20 .................................................... 3,728,920
2,180,000 Ham Lake, Anoka County Housing, MBIA Insured, 6.10%, 01/01/26 ................................. 2,201,364
Hibbing Health Care Facilities Revenue, The Duluth Clinic, Ltd., FSA Insured,
$ 3,455,000 5.50%, 11/01/16 ........................................................................... $ 3,304,777
9,300,000 5.00%, 11/01/25 ........................................................................... 7,912,998
4,030,000 Kenyon Wanamingo ISD No. 2172, MBIA Insured, 6.00%, 02/01/22 .................................. 4,082,753
Lake of the Woods, ISD No. 390, School Building, AMBAC Insured,
325,000 7.40%, 02/01/18 ........................................................................... 345,098
350,000 7.40%, 02/01/19 ........................................................................... 371,644
375,000 7.40%, 02/01/20 ........................................................................... 398,190
Lakeville ISD No. 194,
5,325,000 Crossover Refunding, Series C, MBIA Insured, 5.125%, 02/01/13 ............................. 5,001,134
1,000,000 FGIC Insured, 5.40%, 02/01/13 ............................................................. 972,390
3,255,000 FGIC Insured, 5.60%, 02/01/18 ............................................................. 3,144,623
500,000 Series A, FGIC Insured, 7.00%, 02/01/14 ................................................... 529,690
2,105,000 Series C, FGIC Insured, 6.70%, 02/01/12 ................................................... 2,215,723
Marshall County Utility Revenue, CGIC Insured,
750,000 5.375%, 01/01/14 .......................................................................... 716,175
825,000 5.375%, 01/01/15 .......................................................................... 782,117
1,565,000 Menahga ISD No. 821, GO, AMBAC Insured, 6.25%, 02/01/18 ....................................... 1,671,827
2,100,000 Minneapolis CDA, Tax Increment Revenue, Series 1990, MBIA Insured, 7.00%, 03/01/01 ............ 2,295,174
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...................................................................................... 1,181,844
Minneapolis Hospital Facilities Revenue,
1,475,000 LifeSpan, Inc., Series 1987-A, Pre-Refunded, 8.125%, 04/01/07 ............................. 1,538,971
4,450,000 LifeSpan, Inc., Series 1987-A, Pre-Refunded, 8.125%, 04/01/17 ............................. 4,642,997
600,000 Refunding, Fairview Hospital and Healthcare, Series A, MBIA Insured, 6.50%, 01/01/11 ...... 639,156
7,815,000 Refunding, Fairview Hospital and Healthcare, Series B, MBIA Insured, 6.70%, 01/01/17 ...... 8,310,315
700,000 Refunding, LifeSpan, Inc., Series 1987-B, Pre-Refunded, 9.125%, 12/01/14 .................. 756,462
915,000 Refunding, LifeSpan, Inc., Series 1988-A, Pre-Refunded, 7.875%, 12/01/14 .................. 975,701
5,000,000 Minneapolis St. Paul School District No. 001, Series A, MBIA Insured, 5.90%, 02/01/17 ......... 5,010,350
Minneapolis St. Paul Housing Finance Board, SFMR, GNMA Secured,
3,460,000 Phase VI, Series A, 8.30%, 08/01/21 ....................................................... 3,488,856
875,000 Series A, 8.375%, 11/01/17 ................................................................ 912,695
505,000 Series C, 8.875%, 11/01/18 ................................................................ 526,053
Minneapolis-St. Paul Housing and Redevelopment Authority, Health Care System Revenue, Series A,
MBIA Insured,
10,390,000 7.40%, 08/15/11 ........................................................................... 11,447,183
3,950,000 6.75%, 08/15/14 ........................................................................... 4,215,559
3,000,000 Minnesota State GO, Refunding, MBIA Insured, 5.40%, 08/01/09 .................................. 2,958,750
2,000,000 Minnesota State HFA, Housing Development, MFMR, Series 1988-A, FGIC Insured, 7.80%, 08/01/18 .. 2,040,280
1,000,000 Minnesota State HFA, MFHR, Series 1977-A, FGIC Insured, 6.375%, 02/01/20 ...................... 1,004,290
Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured,
1,500,000 5.90%, 08/01/15 ........................................................................... 1,486,410
3,200,000 5.95%, 02/01/18 ........................................................................... 3,169,216
3,810,000 6.00%, 02/01/22 ........................................................................... 3,794,951
Minnesota State HFA, SFMR,
2,175,000 Series 1986-B, FGIC Insured, 7.25%, 07/01/06 .............................................. 2,220,153
635,000 Series 1986-B, FGIC Insured, 7.25%, 07/01/16 .............................................. 641,337
375,000 Series 1986-C, FGIC Insured, 7.00%, 07/01/16 .............................................. 378,281
710,000 Series 1987-A, FGIC Insured, 8.50%, 02/01/17 .............................................. 730,618
205,000 Series 1987-D, FGIC Insured, 8.80%, 07/01/16 .............................................. 215,334
2,810,000 Series 1989-A, FGIC Insured, 8.00%, 07/01/29 .............................................. 2,949,404
3,605,000 Series 1989-D, AMBAC Insured, 7.30%, 07/01/09 ............................................. 3,763,079
Minnesota State HFA, SFMR, (cont.)
$ 1,500,000 Series 1992-I, MBIA Insured, 6.25%, 01/01/15 .............................................. $ 1,526,085
1,500,000 Series 1994-F, MBIA Insured, 6.30%, 07/01/25 .............................................. 1,528,395
2,750,000 eSeries G, AMBAC Insured, 6.25%, 07/01/26 ................................................. 2,769,663
3,940,000 Minnesota State Higher Educational Facilities Authority Revenue, Series 3, Connie Lee Insured,
6.50%, 01/01/17 .............................................................................. 4,115,566
Minnetonka MFHR,
350,000 Cedar Hills East Project, FGIC Insured, 7.40%, 12/01/07 ................................... 367,234
1,000,000 Cedar Hills East Project, FGIC Insured, 7.50%, 12/01/27 ................................... 1,013,100
2,720,000 Refunding, Brier Creek Project, Series A, GNMA Secured, 6.45%, 06/20/24 ................... 2,770,837
Monticello ISD No. 882 GO, Series 1991, CGIC Insured, 6.80%,
750,000 02/01/06 .................................................................................. 791,145
1,310,000 02/01/07 .................................................................................. 1,381,867
New Hope MFR, Refunding, North Ridge, Series A, GNMA Secured,
450,000 6.05%, 01/01/17 ........................................................................... 449,429
5,470,000 6.20%, 01/01/31 ........................................................................... 5,385,324
2,000,000 North St. Paul ISD No. 622, Maplewood, Series A, MBIA Insured, Pre-Refunded, 7.10%, 02/01/19 .. 2,282,280
5,475,000 Northeast Metropolitan ISD No. 916, CGIC Insured, 5.80%, 01/01/16 ............................. 5,481,625
Northern Municipal Power Agency, Minnesota, Electric System Revenue,
11,900,000 Refunding, Series A, AMBAC Insured, 6.00%, 01/01/19 ....................................... 11,919,159
4,200,000 Refunding, Series A, AMBAC Insured, 6.00%, 01/01/20 ....................................... 4,206,762
3,500,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/17 ......................... 3,783,290
9,500,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 01/01/18 ......................... 10,300,090
4,000,000 Refunding, Series A, MBIA Insured, 6.00%, 01/01/20 ........................................ 4,006,440
7,500,000 Refunding, Series B, AMBAC Insured, 5.50%, 01/01/18 ....................................... 7,103,175
1,500,000 Series B, AMBAC Insured, Pre-Refunded, 7.40%, 01/01/18 .................................... 1,626,330
8,090,000 Series C, AMBAC Insured, 6.125%, 01/01/20 ................................................. 8,223,404
2,000,000 Northfield College Facility Revenue, St. Olaf College Project, BIG Insured, Pre-Refunded, 8.00%,
10/01/18...................................................................................... 2,148,400
3,350,000 Owatonna Public Utilities Commission, Public Utilities Revenue, Refunding, Series A, AMBAC Insured,
5.45%, 01/01/16 .............................................................................. 3,210,741
2,500,000 Perham ISD No. 549, CGIC Insured, 5.375%, 02/01/14 ............................................ 2,384,375
Plymouth Health Facilities Revenue, Westhealth Project, Series A, CGIC Insured,
1,600,000 6.25%, 06/01/16 ........................................................................... 1,633,712
1,815,000 6.125%, 06/01/24 .......................................................................... 1,827,342
7,205,000 Princeton Hospital Revenue, Fairview Hospital and Healthcare, Series C, MBIA Insured, 6.25%,
01/01/21 ..................................................................................... 7,404,074
Princeton ISD No. 477, Mille Lacs County,
1,000,000 Refunding, FGIC Insured, 6.30%, 02/01/17 .................................................. 1,043,360
2,540,000 Series A, CGIC Insured, 5.375%, 02/01/17 .................................................. 2,417,496
Puerto Rico Commonwealth Public Improvement GO,
3,000,000 MBIA Insured, 6.50%, 07/01/23 ............................................................. 3,196,050
10,000,000 Series 1989-A, FGIC Insured, Pre-Refunded, 7.375%, 07/01/04 ............................... 10,935,600
1,665,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ............... 1,748,200
1,300,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 07/01/14 ................... 1,403,792
2,600,000 Puerto Rico PBA, Public Education and Health Facilities, Series M, AMBAC Insured, 5.75%,
07/01/15 ..................................................................................... 2,573,220
Robbinsdale Hospital Revenue, North Memorial Medical Center Project, AMBAC Insured,
6,450,000 Refunding, Pre-Refunded, 7.375%, 01/01/19 ................................................. 6,989,672
2,000,000 Refunding, Series A, 5.45%, 05/15/13 ...................................................... 1,925,580
7,875,000 eSeries B, 5.50%, 05/15/23 ................................................................ 7,413,131
400,000 Rochester Hospital Facilities Revenue, Rochester Methodist Hospital Project, Refunding, FGIC Insured,
Pre-Refunded, 8.75%, 06/01/05 ................................................................ 414,040
Roseville ISD No. 623, Series A,
$ 1,200,000 CGIC Insured, 5.80%, 02/01/19 ............................................................. $ 1,195,452
2,470,000 CGIC Insured, 5.85%, 02/01/24 ............................................................. 2,459,799
4,260,000 CGIC Insured, 6.00%, 02/01/25 ............................................................. 4,349,843
1,250,000 FGIC Insured, 6.00%, 02/01/23 ............................................................. 1,268,313
1,750,000 Shakopee Public Utilities Commission Revenue, AMBAC Insured, 5.60%, 08/01/18 .................. 1,704,675
2,080,000 South Washington County ISD No. 833, Refunding, Series A, FGIC Insured, 6.125%, 06/01/10 ...... 2,111,720
Southern Minnesota Municipal Power Agency, Power Supply System Revenue,
5,000,000 Refunding, Series B, AMBAC Insured, 6.00%, 01/01/16 ....................................... 5,025,450
2,500,000 Series A, AMBAC Insured, 6.00%, 01/01/13 .................................................. 2,515,300
2,250,000 Series A, AMBAC Insured, 5.75%, 01/01/18 .................................................. 2,214,495
1,000,000 Series A, FGIC Insured, 5.75%, 01/01/18 ................................................... 984,220
5,975,000 Series A, MBIA Insured, 5.00%, 01/01/12 ................................................... 5,533,567
12,500,000 Series A, MBIA Insured, 6.00%, 01/01/13 ................................................... 12,576,526
8,865,000 Series A, MBIA Insured, 5.75%, 01/01/18 ................................................... 8,725,110
1,370,000 Series A, MBIA Insured, Pre-Refunded, 5.75%, 01/01/18 ..................................... 1,382,481
1,000,000 Series C, AMBAC Insured, 5.00% 01/01/17 ................................................... 891,990
St. Cloud Hospital Facilities Revenue, St. Cloud Hospital, AMBAC Insured,
2,000,000 Refunding, Series 1990-C, AMBAC Insured, Pre-Refunded, 7.00%, 07/01/07 .................... 2,230,960
1,350,000 Refunding, Series 1990-C, AMBAC Insured, Pre-Refunded, 6.75%, 07/01/15 .................... 1,491,480
2,165,000 Refunding, Series A, 5.00%, 07/01/15 ...................................................... 1,963,395
8,000,000 Series 1990-B, Pre-Refunded, 7.00%, 07/01/20 .............................................. 8,905,520
St. Francis ISD No. 015, Series A, CGIC Insured,
1,500,000 6.35%, 02/01/13 ........................................................................... 1,598,220
5,465,000 6.375%, 02/01/16 .......................................................................... 5,791,534
St. Louis Park Health Care Facilities Revenue, Healthsystem of Minnesota-Obligated Group, Series A,
Refunding, AMBAC Insured, 5.20%,
1,000,000 07/01/16 .................................................................................. 911,120
9,250,000 07/01/23 .................................................................................. 8,245,913
St. Louis Park Hospital Facilities Revenue, Refunding, Methodist Hospital Project, AMBAC Insured,
1,000,000 Series 1985-A, 7.25%, 07/01/15 ............................................................ 1,097,530
4,500,000 Series 1985-C, Pre-Refunded, 7.25%, 07/01/18 .............................................. 4,985,505
440,000 Series 1990-A, 7.20%, 07/01/03 ............................................................ 482,156
500,000 Series 1990-A, 7.30%, 07/01/05 ............................................................ 554,810
4,115,000 Series 1990-A, 7.25%, 07/01/08 ............................................................ 4,516,336
1,350,000 Series 1990-C, Pre-Refunded, 7.25%, 07/01/08 .............................................. 1,495,652
3,840,000 St. Louis Park MFHR, Rental Community Housing and Service Corp. Project, FHA Mortgage Insured,
FGIC Insured, Pre-Refunded, 7.375%, 12/01/28 ................................................. 4,012,877
1,000,000 St. Paul Housing and Redevelopment Authority Hospital Revenue, St. Paul-Ramsey Medical Center
Project, AMBAC Insured, 5.50%, 05/15/13 ...................................................... 958,810
5,105,000 St. Paul Housing and Redevelopment Authority Parking Revenue, Series A, CGIC Insured, 5.75%,
08/01/13 ..................................................................................... 5,023,422
405,000 St. Paul Housing and Redevelopment Authority Revenue, Tax Increment, AMBAC Insured,
Pre-Refunded, 7.30%, 09/01/03 ................................................................ 413,100
St. Paul ISD No. 625, Series C, MBIA Insured,
1,075,000 6.10%, 02/01/14 ........................................................................... 1,099,962
500,000 6.10%, 02/01/15 ........................................................................... 517,095
3,500,000 5.75%, 02/01/16 ........................................................................... 3,487,610
St. Paul Port Authority, IDR,
190,000 Series 1985-K, FGIC Insured, 9.50%, 12/01/14 .............................................. 194,264
5,000 Series K, 9.50% , 12/01/01 ................................................................ 5,101
5,000 Series K, 9.50%, 12/01/02 ................................................................. 5,105
8,000,000 St. Paul Sewer Revenue, Series A, AMBAC Insured, 8.00%, 12/01/08 .............................. 8,661,520
$ 3,645,000 Stearns County Housing and Redevelopment Authority Lease Revenue, Refunding, Administration
Building Project, AMBAC Insured, 7.00%, 02/01/11 ............................................. $ 3,785,405
2,990,000 Stillwater ISD No. 834, GO, MBIA Insured, 5.75%, 02/01/15 ..................................... 2,966,349
2,915,000 Virginia, Governmental Housing Project, Refunding, MBIA Insured, 5.90%, 02/01/26............... 2,919,460
Waconia ISD No. 110, Carver County, Series A,
1,500,000 FGIC Insured, 6.35%, 02/01/11 ............................................................. 1,580,820
630,000 Refunding, CGIC Insured, 5.25%, 02/01/10 .................................................. 606,495
3,150,000 Wadena ISD No. 819, Refunding, AMBAC Insured, 5.60%, 02/01/20 ................................. 3,038,427
3,000,000 Washington County Housing and Redevelopment Authority, Jail Facility Revenue, MBIA Insured,
Unlimited Tax, Pre-Refunded, 7.00%, 02/01/12 ................................................. 3,307,770
175,000 Washington County SFRMR, Housing and Redevelopment Authority, City of Cottage Grove,
GNMA Secured, Series 1986, FGIC Insured, 7.60%, 12/01/11 ..................................... 175,231
Western Minnesota Municipal Power Agency, Power Supply Revenue, Refunding, Series A,
1,090,000 AMBAC Insured, Pre-Refunded, 7.00%, 01/01/13 .............................................. 1,122,580
7,000,000 MBIA Insured, Pre-Refunded, 6.875%, 01/01/09 .............................................. 7,206,430
5,425,000 MBIA Insured, 5.50%, 01/01/15 ............................................................. 5,260,134
2,000,000 Western Minnesota Municipal Power Agency, Transmission Project Revenue, Refunding,
AMBAC Insured, 6.75%, 01/01/16 ............................................................... 2,124,840
-----------
Total Long Term Investments (Cost $472,048,338).......................................... 487,013,328
-----------
aShort Term Investments
100,000 Beltrami County Environmental Control Revenue, Northwood Panelboard Co. Project, Daily VRDN and
Put, 3.80%, 12/01/21 ......................................................................... 100,000
-----------
Total Short Term Investments (Cost $100,000)............................................. 100,000
-----------
Total Investments (Cost $472,148,338) 100.4%........................................ 487,113,328
Other Assets and Liabilities, Net (.4%)............................................. (1,976,332)
-----------
Net Assets 100.0%................................................................... $485,136,996
===========
At August 31, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $472,149,332 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost............................................................... $ 18,471,072
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (3,507,076)
-----------
Net unrealized appreciation.................................................................. $ 14,963,996
===========
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
FSA - Financial Security Assurance
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.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
SFMR - Single Family Mortgage Revenue
SFRMR - Single Family Residential Mortgage Revenue
SPL - Special
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). eSee note 1(i) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Ohio Insured Tax-Free Income Fund (Note 1)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.3%
Akron Bath Copley Joint Township Hospital District Revenue, AMBAC Insured,
$ 1,000,000 Akron General Medical Center Project, 6.50%, 01/01/11 ....................................... $ 1,043,500
5,000,000 Akron General Medical Center Project, 6.50%, 01/01/19 ....................................... 5,228,200
2,000,000 Children's Hospital Medical Center, Pre-Refunded, 7.45%, 11/15/20 ........................... 2,250,500
500,000 Akron GO, Limited Tax, FGIC Insured, 7.50%, 09/01/05 .......................................... 573,995
1,000,000 Akron Waterworks System First Mortgage Revenue, FGIC Insured, 6.00%, 03/01/14 ................. 1,023,210
1,250,000 Allen County, Refunding, AMBAC Insured, 5.30%, 12/01/15 ....................................... 1,173,850
1,200,000 Allen County Sewer Revenue, MBIA Insured, 5.70%, 12/01/13 ..................................... 1,199,880
Archbold Area Local School District GO,
2,000,000 AMBAC Insured, 6.00%, 12/01/21 .............................................................. 2,039,760
600,000 Refunding, MBIA Insured, 5.90%, 12/01/11 .................................................... 605,304
1,075,000 Aurora City School District GO, Refunding and Improvement, FGIC Insured, 5.80%, 12/01/16 ...... 1,068,550
2,500,000 Avon Local School District, AMBAC Insured, 6.00%, 12/01/20 .................................... 2,530,300
8,375,000 Beavercreek Local School District GO, FGIC Insured, 5.70%, 12/01/20 ........................... 8,180,616
2,000,000 Bellefontaine School District GO, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.125%, 12/01/11 2,246,300
500,000 Belmont County Correctional Facility, MBIA Insured, 5.85%, 12/01/16 ........................... 498,770
500,000 Berne and Union Local School District, Series A, AMBAC Insured, 5.40%, 12/01/11 ............... 491,295
1,450,000 Big Walnut Local School District, Delaware County Construction and Improvement, AMBAC Insured,
6.625%, 12/01/15 ............................................................................. 1,542,989
2,295,000 Brunswick City School District, AMBAC Insured, 6.90%, 12/01/12 ................................ 2,475,984
1,000,000 Butler County GO, AMBAC Insured, 5.75%, 12/01/16 .............................................. 997,520
Butler County Hospital Facilities Revenue, FGIC Insured,
2,150,000 Refunding and Improvement, Middletown Regional Hospital, 6.75%, 11/15/10 .................... 2,332,772
1,400,000 Series 1985-A, Pre-Refunded, 9.30%, 11/01/15 ................................................ 1,484,154
Butler County Waterworks Revenue, AMBAC Insured,
790,000 6.35%, 12/01/08 ............................................................................. 839,209
500,000 6.40%, 12/01/12 ............................................................................. 528,660
1,000,000 5.45%, 12/01/16 ............................................................................. 960,820
400,000 Cardington and Lincoln Local School District, MBIA Insured, 6.60%, 12/01/14 ................... 424,712
1,200,000 Celina Wastewater System Mortgage Revenue, FGIC Insured, 6.55%, 11/01/16 ...................... 1,260,456
2,265,000 Centerville GO, Capital Facilities, MBIA Insured, 5.65%,12/1/18................................ 2,228,171
675,000 Chillicothe GO, Limited Tax, AMBAC Insured, 6.05%, 12/01/12 ................................... 694,015
1,000,000 Chillicothe Sanitary Sewer System First Mortgage Revenue, BIG Insured, Pre-Refunded, 7.65%,
12/01/08 ..................................................................................... 1,096,380
Clermont County Hospital Facilities Revenue, Mercy Health System, Refunding, Provine of Cincinnati,
Pre-Refunded, AMBAC Insured,
515,000 Series A, 7.50%, 09/01/19 ................................................................... 579,190
1,735,000 Series A, 7.50%, 09/01/19 ................................................................... 1,916,099
1,750,000 Series B, 6.00%, 09/01/19 ................................................................... 1,763,265
1,500,000 Clermont County Road Improvement GO, AMBAC Insured, Pre-Refunded, 7.125%, 09/01/11 ............ 1,663,350
4,280,000 Clermont County Sewer System Revenue,AMBAC Insured, Pre-Refunded, 7.10%, 12/01/15 ............. 4,696,487
11,000,000 Clermont County Waterworks Revenue, Refunding, AMBAC Insured, 5.80%, 12/01/18 ................. 10,890,330
Cleveland Airport Systems Revenue, FGIC Insured,
3,000,000 Series A, FGIC Insured, 6.25%, 01/01/20 ..................................................... 3,082,800
985,000 Series B, 6.00%, 01/01/14 ................................................................... 1,001,056
1,450,000 Series B, FGIC Insured, 6.10%, 01/01/24 ..................................................... 1,485,032
2,000,000 Cleveland GO, Series 1994, MBIA Insured, 6.70%, 11/15/18 ...................................... 2,146,400
Cleveland Waterworks First Mortgage Revenue,
2,000,000 Refunding, Series F, AMBAC Insured, 6.25%, 01/01/16 ......................................... 2,066,100
2,100,000 Refunding and Improvement, Series H, MBIA Insured, 5.75%, 01/01/26 .......................... 2,039,016
1,000,000 Series F-92, AMBAC Insured, 6.25%, 01/01/15 ................................................. 1,033,050
1,000,000 Clinton-Massie Local School District, Refunding, Issue I, AMBAC Insured, 7.50%, 12/01/11 ...... 1,126,340
$ 1,360,000 Columbus City School District GO, Renovation and Improvement, FGIC Insured, Pre-Refunded, 6.65%,
12/01/12 ..................................................................................... $ 1,516,713
975,000 Columbus GO, Limited Tax, FGIC Insured, 9.50%, 04/15/03 ....................................... 1,227,467
1,530,000 Coshocton Sewer System GO, AMBAC Insured, 6.50%, 12/01/12 ..................................... 1,626,971
1,650,000 Crestview Local School District GO, Construction and Improvement, AMBAC Insured, 6.65%, 12/01/14 1,759,544
100,000 Cuyahoga County GO, Limited Tax, MBIA Insured, 9.375%, 10/01/04 ............................... 125,724
Cuyahoga County Hospital Revenue,
10,200,000 Metro Health System Project, MBIA Insured, 6.00%, 02/15/19 .................................. 10,268,748
2,685,000 Mt. Sinai Medical Center, AMBAC Insured, Pre-Refunded, 6.625%, 11/15/21 ..................... 2,973,208
1,500,000 Refunding, Fairview General Hospital Project, AMBAC Insured, Pre-Refunded, 5.50%, 08/15/19 .. 1,410,690
5,360,000 Refunding, University Hospital Health System, Series A, BIG Insured, 6.875%, 01/15/19 ....... 5,767,092
Cuyahoga County Utility System Revenue, Refunding, Medical Center Co. Project, Series B,
MBIA Insured,
1,000,000 5.85%, 08/15/10 ............................................................................. 1,013,670
2,945,000 6.10%, 08/15/15 ............................................................................. 2,947,179
1,395,000 Dayton Water System Mortgage Revenue, Refunding, MBIA Insured, 6.75%, 12/01/10 ................ 1,456,157
Defiance GO, MBIA Insured,
1,000,000 6.10%, 12/01/14 ............................................................................. 1,044,800
750,000 6.20%, 12/01/20 ............................................................................. 789,405
Delphos Sewer System Revenue, CGIC Insured, Pre-Refunded,
450,000 7.20%, 09/01/10 ............................................................................. 500,220
1,100,000 7.25%, 09/01/20 ............................................................................. 1,224,751
2,000,000 Dover City School District, AMBAC Insured, 6.25%, 12/01/16 .................................... 2,066,660
1,625,000 Dover Municipal Electric System Revenue, FGIC Insured, 6.00%, 12/01/19 ........................ 1,648,400
1,100,000 Dover Waterworks Systems Revenue, AMBAC Insured, 6.00%, 12/01/13 .............................. 1,129,502
5,735,000 Dublin City School District, AMBAC Insured, 6.20%, 12/01/19 ................................... 5,947,482
1,390,000 Fairborn GO, Limited Tax, Series 1991, MBIA Insured, 7.00%, 10/01/11 .......................... 1,535,297
1,000,000 Fairfield City School District GO, FGIC Insured, 6.00%, 12/01/20 .............................. 1,015,470
2,500,000 Fostoria City School District GO, AMBAC Insured, 6.70%, 12/01/16 .............................. 2,674,125
5,000,000 Franklin County Convention Facility Authority, Tax and Lease Revenue, Anticipation Bonds,
MBIA Insured, Pre-Refunded, 7.00%, 12/01/19 .................................................. 5,545,500
2,000,000 Franklin County Hospital Revenue, Refunding and Improvement,Riverside United Hospital,
MBIA Insured, 7.25%, 05/15/20 ................................................................ 2,138,360
5,150,000 Granville Exempted Village School District, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.15%,
12/01/15 ..................................................................................... 5,880,940
2,100,000 Green County Water System Revenue, Series A, FGIC Insured, 6.125%, 12/01/21 ................... 2,144,688
Green Local School District GO, Summit County, FGIC Insured,
2,800,000 5.875%, 12/01/14 ............................................................................ 2,820,048
5,150,000 5.90%, 12/01/19 ............................................................................. 5,176,935
Hamilton City Electric System Mortgage Revenue, FGIC Insured,
18,450,000 Refunding, Series A, 6.00%, 10/15/23 ........................................................ 18,637,083
2,340,000 Series B, 6.30%, 10/15/22 ................................................................... 2,429,996
9,500,000 Series B, Pre-Refunded, 8.00%, 10/15/22 ..................................................... 10,401,455
2,000,000 Hamilton County Health Care System Revenue, Refunding, Sisters of Charity, Good Samaritan Hospital,
MBIA Insured, Pre-Refunded, 7.625%, 08/01/12 ................................................. 2,162,180
Hamilton County Hospital Facilities Revenue,
990,000 Christ Hospital, Series 1987, FGIC Insured, Pre-Refunded, 8.375%, 01/01/07 .................. 1,063,003
3,650,000 Refunding, Bethesda Hospital, Series A, AMBAC Insured, 6.25%, 01/01/12 ...................... 3,800,818
3,010,000 Hamilton County Sewer System Revenue, Series A, Refunding, FGIC Insured, 6.05%, 12/01/15 ...... 3,081,156
3,040,000 Hamilton Wastewater System Revenue. Series A, FSA Insured, 5.90%, 10/15/21 .................... 3,004,462
4,665,000 Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ................. 4,851,273
500,000 Hillard School District, Refunding, FGIC Insured, 6.55%, 12/01/05 ............................. 554,390
Hudson Local School District,
$ 2,750,000 Refunding, FGIC Insured, 5.60%, 12/15/14 .................................................... $ 2,694,313
3,350,000 Series A, FGIC Insured, Pre-Refunded, 7.10%, 12/15/13 ....................................... 3,730,828
1,000,000 Indian Lake Local School District GO, Construction and Improvement, FGIC Insured, 5.375%, 12/01/23 930,450
1,000,000 Indian Valley Local School District GO, AMBAC Insured, 5.75%, 12/01/19 ........................ 988,530
Jackson Local School District, Stark and Summit Counties School Building, Construction and
Improvement, MBIA Insured,
2,750,000 5.40%, 12/01/13 ............................................................................. 2,680,535
3,560,000 5.50%, 12/01/21 ............................................................................. 3,428,102
500,000 Jackson Waterworks Revenue, AMBAC Insured, 5.60%, 12/01/18 .................................... 485,110
1,195,000 Kent State University Revenues, AMBAC Insured, 6.45%, 05/01/12 ................................ 1,261,227
1,000,000 Kettering City School District, FGIC Insured, 5.25%, 12/01/22 ................................. 912,450
Lake County Hospital Improvement Revenue, Lake Hospital System, Inc., Series B and C,
AMBAC Insured,
1,940,000 7.875%, 01/01/05 ............................................................................ 1,998,957
2,185,000 Pre-Refunded, 8.00%, 01/01/13 ............................................................... 2,250,528
1,000,000 Lake Local School District, Stark County, AMBAC Insured, 6.25%, 12/01/09 ...................... 1,059,590
3,200,000 Lakota Local District GO, AMBAC Insured, 6.125%, 12/01/17 ..................................... 3,277,824
Liberty Benton Local School District, AMBAC Insured,
2,000,000 6.00%, 12/01/15 ............................................................................. 2,041,180
2,045,000 6.10%, 12/01/19 ............................................................................. 2,086,882
Lucas County GO, Limited Tax, FGIC Insured, 8.00%,
120,000 12/01/06 .................................................................................... 142,506
110,000 12/01/08 .................................................................................... 131,735
120,000 12/01/09 .................................................................................... 144,396
220,000 12/01/10 .................................................................................... 265,487
Lucas County Hospital Revenue, MBIA Insured,
5,000,000 Promedica Healthcare Obligation, Refunding, 5.75%, 11/15/14 ................................. 4,949,450
4,000,000 St. Vincent Medical Center, Series B, Refunding, 5.25%, 08/15/20 ............................ 3,611,840
4,140,000 St. Vincent Medical Center, Series C, 5.25%, 08/15/22 ....................................... 3,723,930
3,200,000 The Toledo Hospital, Pre-Refunded, 7.50%, 11/15/14 .......................................... 3,482,944
Mahoning County GO, Bridge Improvement, AMBAC Insured,
1,500,000 Limited Tax, 7.20%, 12/01/09 ................................................................ 1,634,730
1,500,000 Unlimited Tax, 7.15%, 12/01/04 .............................................................. 1,624,965
Mahoning County Hospital Facilities Revenue, MBIA Insured,
5,835,000 Western Reserve Care, 5.50%, 10/15/25 ....................................................... 5,458,059
2,000,000 Youngstown Hospital, Inc. Project, Series B, 7.00%, 10/15/08 ................................ 2,158,600
2,500,000 Mansfield Hospital Improvement Revenue, Mansfield General Hospital Project, AMBAC Insured,
6.70%, 12/01/09 .............................................................................. 2,687,750
1,000,000 Marietta City School District, Series B, AMBAC Insured, 5.75%, 12/01/07 ....................... 1,030,300
500,000 Marietta Sewer System Mortgage Revenue, BIG Insured, 7.50%, 11/01/07 .......................... 526,665
1,000,000 Marysville Exempted Village School District GO, MBIA Insured, 5.75%, 12/01/23 ................. 982,340
Marysville Water Systems, Refunding, AMBAC Insured,
1,000,000 5.40%, 12/01/13 ............................................................................. 945,220
1,500,000 5.50%, 12/01/18 ............................................................................. 1,415,430
1,935,000 Mason Sewer Systems Revenue, FGIC Insured, 6.00%, 12/01/19 .................................... 1,969,095
Massillon City School District GO, AMBAC Insured, Pre-Refunded,
1,500,000 Series 1, 7.10%, 12/01/11 ................................................................... 1,645,965
1,000,000 Unlimited Tax, 7.20%, 12/01/11 .............................................................. 1,116,720
2,755,000 Maumee Hospital Revenue, Refunding, Saint Luke's Hospital Project, AMBAC Insured, 5.80%,
12/01/14 ..................................................................................... 2,761,033
3,000,000 Medina City School District, FGIC Insured, 6.20%, 12/01/18 .................................... 3,101,190
Mentor Exempted Village School District, MBIA Insured,
$ 1,000,000 5.375%, 12/01/11 ............................................................................ $ 972,050
2,000,000 6.625%, 12/01/13 ............................................................................ 2,137,700
2,040,000 Pre-Refunded, 7.40%, 12/01/11 ............................................................... 2,256,791
Miami County Hospital Facilities Revenue, Upper Valley Medical Center, Nursing Care, Inc.,
525,000 Series A, BIG Insured, Pre-Refunded, 8.375%, 05/01/13 ....................................... 550,536
1,340,000 Series B, MBIA Insured, 6.50%, 05/01/21 ..................................................... 1,398,558
1,500,000 Middleburg Heights Hospital Revenue, Refunding, Southwest General Health Center, FSA Insured,
5.75%, 08/15/21 .............................................................................. 1,453,620
Montgomery County Hospital Facilities Revenue, Kettering Medical Center Project,
MBIA Insured,
15,000,000 7.40%, 04/01/09 ............................................................................. 16,331,400
2,000,000 5.50%, 04/01/26 ............................................................................. 1,862,240
5,000,000 Pre-Refunded, 7.50%, 04/01/14 ............................................................... 5,472,500
Montgomery County Revenue, Series A,
1,600,000 Refunding, Miami Valley Hospital, AMBAC Insured, 6.25%, 11/15/12 ............................ 1,661,040
3,250,000 Refunding, Miami Valley Hospital, AMBAC Insured, 6.25%, 11/15/16 ............................ 3,363,230
1,780,000 Sisters of Charity Health Care, AMBAC Insured, 6.25%, 05/15/14 .............................. 1,844,881
1,565,000 Sisters of Charity Health Care, MBIA Insured, 6.625%, 05/15/21 .............................. 1,638,258
Muskingum County GO, AMBAC Insured,
1,000,000 County Office Building Improvement, 7.20%, 12/01/10 ......................................... 1,097,200
1,695,000 Justice Center Improvement, 6.375%, 12/01/17 ................................................ 1,771,461
1,110,000 New Lexington HDC, Mortgage Revenue, Refunding, Lincoln Park, Series A, MBIA Insured,
FHA Insured, 5.85%, 01/01/21 ................................................................. 1,091,507
2,000,000 New Philadelphia City School District, School and Improvement, AMBAC Insured, 6.25%, 12/01/17 . 2,076,280
1,500,000 New Richmond Exempted Village School District GO, AMBAC Insured, 7.125%, 09/01/09 ............. 1,596,105
1,000,000 Newark Water System, AMBAC Insured, 6.00%, 12/01/18 ........................................... 1,022,650
3,800,000 North Olmsted GO, AMBAC Insured, 6.25%, 12/15/12 .............................................. 3,974,230
1,000,000 North Ridgeville GO, AMBAC Insured, 5.125%, 12/01/13 .......................................... 937,310
2,900,000 North Ridgeville GO, City School District, AMBAC Insured, 6.30%, 12/01/17 ..................... 3,026,353
455,000 Northeast Regional Sewer District Wastewater Revenue, AMBAC Insured, Pre-Refunded, 6.50%,
11/15/16 ..................................................................................... 497,652
25,000 Northeast Regional Sewer District Water Resource Revenue, Junior Lien, MBIA Insured, ETM, 9.80%,
10/01/96 ..................................................................................... 25,107
1,090,000 Northridge Local School District, Licking, Knox and Del Countirs Improvement, FSA Insured, 5.75%,
12/01/18 ..................................................................................... 1,088,529
1,000,000 Northeastern Local School District, Clark County Improvement, FGIC Insured, 5.55%, 12/01/18 ... 968,880
2,000,000 Northwest Local School District, Scioto County, AMBAC Insured, 7.05%, 12/01/14 ................ 2,176,000
1,000,000 Norwalk Waterworks System Revenue, Series 1990, AMBAC Insured, Pre-Refunded, 7.20%, 04/01/15 .. 1,104,490
Ohio Capital Corp. for Housing Mortgage Revenue, Refunding, MBIA Insured,
2,000,000 6.35%, 07/01/22 ............................................................................. 2,021,600
4,215,000 6.90%, 07/01/24 ............................................................................. 4,327,878
3,500,000 Series J, 6.50%, 01/01/25 ................................................................... 3,569,720
1,625,000 Westview Apartments, Series A, 6.125%, 01/01/15 ............................................. 1,645,280
2,565,000 Westview Apartments, Series A, 6.25%, 01/01/23 .............................................. 2,586,059
775,000 Ohio HFA, MFHR, Northridge Apartments, FGIC Insured, 10.35%, 12/01/25 ......................... 830,374
Ohio HFA, SFMR, GNMA Secured,
2,800,000 Series 1988-C, 8.00%, 09/01/08 .............................................................. 2,965,368
2,625,000 Series 1988-C, 8.125%, 03/01/20 ............................................................. 2,750,370
4,185,000 Series 1989-A, 7.65%, 03/01/29 .............................................................. 4,410,906
1,090,000 Series 1990-B, 7.40%, 09/01/15 .............................................................. 1,151,596
1,385,000 Series 1990-C, 7.85%, 09/01/21 .............................................................. 1,469,457
2,565,000 Series 1990-D, 7.50%, 09/01/13 .............................................................. 2,743,344
Ohio HFA, SFMR, GNMA Secured, (cont.)
$ 3,995,000 Series 1990-I, 7.60%, 09/01/16 .............................................................. $ 4,245,287
4,865,000 Series 1991-D, 7.05%, 09/01/16 .............................................................. 5,024,329
Ohio Municipal Electric Generation Agency, AMBAC Insured,
13,000,000 Joint Venture, 5.625%, 02/15/16 ............................................................. 12,662,390
7,680,000 Joint Venture 5, Certificates of Beneficial Interest, 5.375%, 02/15/24 ...................... 7,134,797
Ohio State Air Quality Development Authority Revenue,
4,000,000 Columbus Southern Power, Series A, FGIC Insured, 6.375%, 12/01/20 ........................... 4,156,440
5,000,000 Refunding, Cincinnati Gas and Electric, MBIA Insured, 5.45%, 01/01/24 ....................... 4,644,950
1,230,000 Refunding, JMG Funding, L.P., AMBAC Insured, 6.375%, 01/01/29 ............................... 1,269,102
15,245,000 Refunding, JMG Funding, L.P., AMBAC Insured, 6.375%, 04/01/29 ............................... 15,729,639
1,000,000 Refunding, PCR, FGIC Insured, 7.45%, 03/01/16 ............................................... 1,099,780
1,000,000 Refunding, PCR, Ohio Edison, Series B, AMBAC Insured, 5.625%, 11/15/29 ...................... 942,080
7,000,000 Refunding, PCR, Pennsylvania Power Co., AMBAC Insured, 6.45%, 05/01/27 ...................... 7,273,000
13,000,000 Ohio State Building Authority, Adult Correctional Facility, Series A, MBIA Insured, 6.125%, 10/01/13 13,478,790
1,100,000 Ohio State Department of Transportation, COP, Panhandle Rail Line Project, Series A, CGIC Insured,
6.50%, 04/15/12 .............................................................................. 1,165,472
Ohio State Higher Educational Facility Commission Revenue,
2,500,000 Dayton University Project, FGIC Insured, 7.25%, 12/01/12 .................................... 2,721,675
1,300,000 Dayton University Project, FGIC Insured, 5.80%, 12/01/14 .................................... 1,300,858
1,725,000 Dayton University Project, FGIC Insured, 6.75%, 12/01/15 .................................... 1,854,375
1,135,000 Northern University Project, FGIC Insured, Pre-Refunded, 7.30%, 05/15/10 .................... 1,239,125
1,000,000 Wittenberg University Project, FGIC Insured, 7.85%, 06/01/07 ................................ 1,044,230
1,500,000 Xavier University Project, MBIA Insured, Pre-Refunded, 7.625%, 11/01/08 ..................... 1,607,250
2,420,000 Ohio State Water Development Authority, PCR Facilities, Refunding, PA Power Co. Project,
AMBAC Insured, 6.15%, 08/01/23 ............................................................... 2,475,660
Ohio State Water Development Authority Revenue,
140,000 AMBAC Insured, 9.375%, 12/01/18 ............................................................. 145,197
6,250,000 Fresh Water Service, AMBAC Insured, 5.90%, 12/01/21 ......................................... 6,254,250
1,000,000 Refunding and Improvement, AMBAC Insured, 5.50%, 12/01/11 ................................... 983,700
4,450,000 Refunding and Improvement, Pure Water, AMBAC Insured, 5.50%, 12/01/11 ....................... 4,251,842
4,000,000 Refunding, Cincinnati Gas, Series A, MBIA Insured, 5.45%, 01/01/24 .......................... 3,736,320
5,000,000 Refunding, Dayton Power, Series A, AMBAC Insured, 6.40%, 08/15/27 ........................... 5,175,700
2,000,000 Series I, AMBAC Insured, ETM, 7.00%, 12/01/09 ............................................... 2,289,440
Olentangy Local School District GO,
375,000 BIG Insured, 7.75%, 12/01/08 ................................................................ 456,533
375,000 BIG Insured, 7.75%, 12/01/09 ................................................................ 457,144
375,000 BIG Insured, 7.75%, 12/01/10 ................................................................ 459,191
1,000,000 MBIA Insured, 6.35%, 12/01/17 ............................................................... 1,048,260
Olmsted Falls Local School District, FGIC Insured,
1,000,000 7.05%, 12/15/11 ............................................................................. 1,109,370
1,500,000 5.85%, 12/15/17 ............................................................................. 1,507,890
2,500,000 Orrville Electric System Mortgage Revenue, Refunding, Series A and B, AMBAC Insured, 7.50%,
12/01/10 ..................................................................................... 2,678,225
4,100,000 Orrville Sewer System Revenue, Improvement Mortgage, MBIA Insured, 7.875%, 12/01/12 ........... 4,336,447
1,150,000 Orrville Water Systems Improvement Revenue, MBIA Insured, 6.125%, 12/01/18 .................... 1,182,890
1,500,000 Ottawa County GO, AMBAC Insured, Catawba Isle, 7.00%, 09/01/11 ................................ 1,632,270
1,950,000 Ottawa County Sewer System Revenue, Refunding, Danbury Project, AMBAC Insured, 5.50%,
10/01/14 ..................................................................................... 1,893,411
Painesville Township Local School District GO, Lake County, FGIC Insured,
3,240,000 5.625%, 12/01/09 ............................................................................ 3,232,192
4,490,000 5.65%, 12/01/15 ............................................................................. 4,422,291
2,000,000 Perrysburg Exempted Village School District, AMBAC Insured, 6.00%, 12/01/15 ................... 2,052,520
$ 1,000,000 Pickerington Local School District GO, Refunding, AMBAC Insured, 5.55%. 12/01/07 .............. $ 1,020,910
2,000,000 Puerto Rico Commonwealth GO, MBIA Insured, 5.75%, 07/01/24 .................................... 1,977,900
1,000,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series W, FSA Insured,
5.50%, 07/01/17 .............................................................................. 959,250
1,000,000 Puerto Rico Commonwealth Public Improvement, MBIA Insured, Pre-Refunded, 6.50%, 07/01/09 ...... 1,101,040
11,000,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 6.00%, 07/01/21 ................... 11,067,320
Puert Rico Public Buildings Authority Revenue, Guaranteed, Government Facilities, Series A,
AMBAC Insured, 5.50%,
5,000,000 07/01/21 .................................................................................... 4,778,150
4,130,000 07/0125...................................................................................... 3,907,476
2,700,000 Puerto Rico Public Buildings Authority Revenue, Guaranteed, Public Education and Health Facilities,
Refunding, AMBAC Insured, 5.50%, 07/01/21 .................................................... 2,563,272
Revere Local School District, AMBAC Insured,
2,000,000 5.25%, 12/01/16 ............................................................................. 1,863,020
1,600,000 6.00%, 12/01/16 ............................................................................. 1,630,480
1,300,000 Reynoldsburg City School District, FGIC Insured, 6.55%, 12/01/17 .............................. 1,369,082
1,200,000 Rural Lorain County Water Authority, Water Resource Revenue, Refunding, AMBAC Insured,
Pre-Refunded, 7.70%, 10/01/08 ................................................................ 1,306,488
600,000 Saint Mary's Electric System Mortgage Revenue, AMBAC Insured, 6.65%, 12/01/11 ................. 644,274
750,000 Saint Mary's Waterworks Revenue, AMBAC Insured, 6.65%, 12/01/11 ............................... 805,343
2,000,000 Salem GO, AMBAC Insured, 6.50%, 12/01/06 ...................................................... 2,194,200
1,000,000 South Euclid Lyndhurst City School District, FGIC Insured, 5.30%, 12/01/14 .................... 940,860
700,000 South Range Local School District, MBIA Insured, 6.15%, 12/01/18 .............................. 725,865
South-Western City School District of Ohio, Franklin and Pickway Counties, FGIC Insured, ETM,
7.875%,
490,000 12/01/03 .................................................................................... 577,230
550,000 12/01/04 .................................................................................... 654,825
600,000 12/01/06 .................................................................................... 725,040
600,000 12/01/07 .................................................................................... 721,002
SouthWest Regional Water District, Water Revenue, MBIA Insured, 6.00%,
1,000,000 12/01/15 .................................................................................... 1,013,630
700,000 12/01/20 .................................................................................... 706,853
1,125,000 Springboro Water Systems Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/18 ................... 1,061,291
Springfield City School District, Clark County, AMBAC Insured,
1,220,000 6.40%, 12/01/12 ............................................................................. 1,297,641
1,000,000 6.60%, 12/01/12 ............................................................................. 1,070,090
2,775,000 Stark County GO, Refunding, AMBAC Insured, 5.70%, 11/15/17 .................................... 2,731,155
8,500,000 Stark County Sanitary Sewer System Revenue, Series A, MBIA Insured, Pre-Refunded, 7.75%,
11/15/18 ..................................................................................... 9,295,685
2,075,000 Steubenville City School District, Series A, AMBAC Insured, 6.20%, 12/01/17 ................... 2,159,058
1,750,000 Struthers City School District, AMBAC Insured, 6.50%, 12/01/14 ................................ 1,866,883
Summit County GO, Limited Tax, AMBAC Insured,
630,000 Building Improvement, Pre-Refunded, 8.00%, 12/01/07 ......................................... 672,733
340,000 Capital Improvement, Pre-Refunded, 8.00%, 12/01/07 .......................................... 363,062
3,530,000 County Jail Improvement, Pre-Refunded, 7.85%, 12/01/08 ...................................... 3,872,940
760,000 Justice Facilities, Pre-Refunded, 8.00%, 12/01/07 ........................................... 811,551
100,000 Refunding, Series B, Pre-Refunded, 6.95%, 08/01/08 .......................................... 111,099
400,000 Refunding, Series B, 6.95%, 08/01/08 ........................................................ 437,068
500,000 Refunding, Series B, 6.95%, 08/01/08 ........................................................ 560,340
655,000 Sewer System Improvement, Pre-Refunded, 8.00%, 12/01/07 ..................................... 699,429
475,000 Water System Improvement, Pre-Refunded, 8.00%, 12/01/07 ..................................... 507,219
1,750,000 Sylvania City School District, FGIC Insured, 5.75%, 12/01/22 .................................. 1,735,755
Toledo GO, Limited Tax,
$ 3,715,000 AMBAC Insured, 5.95%, 12/01/15 .............................................................. $ 3,766,267
1,000,000 AMBAC Insured, 6.00%, 12/01/16 .............................................................. 1,019,880
500,000 FGIC Insured, 7.375%, 12/01/00 .............................................................. 545,200
400,000 FGIC Insured, 7.375%, 12/01/02 .............................................................. 440,436
650,000 FGIC Insured, 7.375%, 12/01/03 .............................................................. 718,218
650,000 FGIC Insured, 7.375%, 12/01/04 .............................................................. 727,051
650,000 FGIC Insured, 7.375%, 12/01/05 .............................................................. 730,756
625,000 FGIC Insured, 7.375%, 12/01/06 .............................................................. 705,794
4,500,000 MBIA Insured, 6.50%, 12/01/11 ............................................................... 4,794,390
Toledo Sewage System Mortgage Revenue, Series 1988-B, MBIA Insured,
2,320,000 7.75%, 11/15/17 ............................................................................. 2,508,570
3,680,000 Pre-Refunded, 7.75%, 11/15/17 ............................................................... 4,024,485
Trumbull County Hospital Revenue, FGIC Insured,
1,000,000 Refunding & Improvement, Series A, 6.25%, 11/15/12 .......................................... 1,043,960
2,000,000 Refunding, Series B, 6.90%, 11/15/12 ........................................................ 2,156,860
4,000,000 Twinsburg City School District, CGIC Insured, 6.70%, 12/01/11 ................................. 4,275,680
University of Cincinnati, MBIA Insured,
1,600,000 COP, 6.75%, 12/01/09 ........................................................................ 1,719,968
1,630,000 General Receipt, Series W, 5.85%, 06/01/16 .................................................. 1,638,851
6,990,000 University of Puerto Rico Revenue, Series M, MBIA Insured, 5.25%, 06/01/25 .................... 6,445,479
University of Toledo General Receipt,
2,000,000 FGIC Insured, 5.30%, 06/01/18 ............................................................... 1,849,260
5,000,000 Refunding, FGIC Insured, Series A, 5.90%, 06/01/20 .......................................... 4,999,450
5,000,000 Upper Arlington County School District, MBIA Insured, 5.25%, 12/01/22 ......................... 4,574,650
1,000,000 Urbana Wastewater Treatment Plant GO, AMBAC Insured, 7.05%, 12/01/11 .......................... 1,103,440
1,400,000 Valley Local School District, AMBAC Insured, 7.00%, 12/01/13 .................................. 1,520,834
1,250,000 Warren County Sewer System Revenue, FGIC Insured, Series A, Pre-Refunded, 7.20%, 12/01/15 ..... 1,395,900
2,000,000 Warren County Waterworks District Revenue, Refunding, FGIC Insured, 5.45%, 12/01/15 ........... 1,919,280
Warren GO,
2,415,000 MBIA Insured, 6.65%, 11/01/12 ............................................................... 2,620,468
1,015,000 Refunding, AMBAC Insured, 5.50%, 11/15/13 ................................................... 989,584
1,800,000 Wayne Local School District, Warren County, AMBAC Insured, 6.10%, 12/01/24 .................... 1,845,432
5,000,000 Westerville, Minerva Park and Blendon Joint Township Hospital District Revenue, Refunding,
St. Ann's Hospital, Series B, AMBAC Insured, Pre-Refunded, 7.00%, 09/15/12 ................... 5,378,700
2,000,000 Wilmington City School District, FGIC Insured, 6.30%, 12/01/14 ................................ 2,084,580
Wilmington Sewer System Revenue, Refunding, First Mortgage, MBIA Insured,
1,085,000 5.20%, 02/15/13 ............................................................................. 1,025,336
1,170,000 5.30%, 02/15/18 ............................................................................. 1,095,962
Wilmington Water Revenue, First Mortgage System, AMBAC Insured,
1,275,000 5.90%, 06/15/14 ............................................................................. 1,274,860
2,510,000 6.00%, 06/15/21 ............................................................................. 2,520,241
500,000 Woodmore Local School District, Refunding, AMBAC Insured, 5.65%, 12/01/08 ..................... 508,585
8,700,000 Wooster City School District, AMBAC Insured, 6.50%, 12/01/17 .................................. 9,348,411
2,350,000 Worthington City School District, Refunding, FGIC Insured, 6.375%, 12/01/12 ................... 2,465,841
2,250,000 Youngstown State University, General Receipts, AMBAC Insured, 6.00%, 12/15/16 ................. 2,301,708
-----------
Total Long Term Investments (Cost $651,822,898) ......................................... 678,040,503
-----------
Cuyahoga County Industrial Development Revenue,
$ 900,000 Allen Group Inc. Project, Weekly VRDN, 3.4%, 12/01/15 ....................................... $ 900,000
160,000 S & R Playhouse Realty Co., Wells Fargo Bank, Monthly VRDN, 3.70%, 12/01/09 ................. 160,000
Scioto County Hospital Facilities Revenue, VHA Central Inc., Capital Asset, AMBAC Insured,
Weekly VRDN and Put,
200,000 Series C, 3.30%, 12/01/25 ................................................................... 200,000
120,000 Series F, 3.30%, 12/01/25 ................................................................... 120,000
-----------
Total Short Term Investments (Cost $1,380,000)........................................... 1,380,000
-----------
Total Investments (Cost $653,202,898) 98.5% ........................................ 679,420,503
Other Assets and Liabilities, Net 1.5%.............................................. 10,601,189
-----------
Net Assets 100.0% .................................................................. $690,021,692
===========
At August 30, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $653,202,898 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 30,827,446
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (4,609,841)
-----------
Net unrealized appreciation ................................................................. $ 26,217,605
===========
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 Assurance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
August 31, 1996 (unaudited)
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
___________ ___________ ___________ ___________
Assets:
<S> <C> <C> <C> <C>
Investments in securities:
At identified cost.......................................... $37,059,557 $68,712,512 $1,587,399,534 $282,293,055
=========== =========== =========== ===========
At value.................................................... 37,519,613 69,318,900 1,662,986,743 297,423,239
Cash......................................................... 94,657 181,373 8,140,396 9,824,436
Receivables:
Interest.................................................... 407,584 1,264,914 25,978,748 4,363,973
Investment securities sold.................................. -- -- 772,702 --
Capital shares sold......................................... 34,350 47,260 952,332 123,987
Prepaid expenses............................................ 7,589 -- -- --
___________ ___________ ___________ ___________
Total assets............................................ 38,063,793 70,812,447 1,698,830,921 311,735,635
___________ ___________ ___________ ___________
Liabilities:
Payables:
Investment securities purchased:
Regular delivery........................................... -- -- 5,271,594 --
When-issued basis (Note 1)................................. -- -- 4,706,324 3,545,021
Distributions payable to shareholders....................... 53,705 98,285 2,479,655 434,610
Capital shares repurchased.................................. 13,875 960 589,562 30,934
Distribution fees........................................... 2,894 5,119 210,043 42,826
Shareholder servicing costs................................. 1,564 2,937 37,885 10,222
Management fees............................................. 994 9,239 652,629 136,142
Accrued expenses and other liabilities....................... -- 10,350 91,499 29,102
___________ ___________ ___________ ___________
Total liabilities....................................... 73,032 126,890 14,039,191 4,228,857
___________ ___________ ___________ ___________
Net assets, at value.......................................... $37,990,761 $70,685,557 $1,684,791,730 $307,506,778
=========== =========== =========== ===========
Net assets consist of:
Undistributed net investment income.......................... $ 95,567 $ 43,375 $ -- $--
Accumulated distributions in excess of net investment income -- -- (170,294) (111,258)
Net unrealized appreciation on investments................... 460,056 606,388 75,587,209 15,130,184
Undistributed net realized gain (loss)....................... (545,757) (1,534,341) 399,830 (2,604,857)
Class I capital shares....................................... 37,980,895 71,570,135 1,593,128,122 290,256,394
Class II capital shares...................................... -- -- 15,846,863 4,836,315
___________ ___________ ___________ ___________
Net assets, at value.......................................... $37,990,761 $70,685,557 $1,684,791,730 $307,506,778
=========== =========== =========== ===========
Class I shares:
Net assets, at value......................................... $37,990,761 $70,685,557 $1,669,109,233 $302,714,837
=========== =========== =========== ===========
Shares outstanding........................................... 3,770,903 7,233,754 139,120,866 26,607,452
=========== =========== =========== ===========
Net asset value per share*................................... $10.07 $ 9.77 $12.00 $11.38
=========== =========== =========== ===========
Class II shares:
Net assets, at value......................................... -- -- $15,682,497 $4,791,941
=========== =========== =========== ===========
Shares outstanding........................................... -- -- 1,301,725 419,658
=========== =========== =========== ===========
Net asset value per share*................................... -- -- $12.05 $11.42
=========== =========== =========== ===========
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
August 31, 1996 (unaudited)
Franklin Franklin Franklin
Michigan Insured Minnesota Insured Ohio Insured
Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund
___________ ___________ __________
Assets:
<S> <C> <C> <C>
Investments in securities:
At identified cost........................................................ $1,045,519,759 $472,148,338 $653,202,898
=========== =========== ==========
At value.................................................................. 1,093,981,677 487,113,328 679,420,503
Cash....................................................................... 374,795 54,467 235,803
Receivables:
Interest.................................................................. 19,092,609 5,346,647 11,394,967
Investment securities sold................................................ -- 528 --
Capital shares sold....................................................... 587,855 1,248,647 660,908
___________ ___________ __________
Total assets.......................................................... 1,114,036,936 493,763,617 691,712,181
___________ ___________ __________
Liabilities:
Payables:
Investment securities purchased on a when-issued basis.................... -- 7,585,645 --
Distributions payable to shareholders..................................... 1,601,803 682,286 979,245
Capital shares repurchased................................................ 273,350 5,897 255,219
Distribution fees......................................................... 140,049 57,934 98,661
Shareholder servicing costs............................................... 50,828 15,919 21,315
Management fees........................................................... 437,604 202,779 279,692
Accrued expenses and other liabilities..................................... 20,278 76,161 56,357
___________ ___________ __________
Total liabilities..................................................... 2,523,912 8,626,621 1,690,489
___________ ___________ __________
Net assets, at value........................................................ $1,111,513,024 $485,136,996 $690,021,692
=========== =========== ==========
Net assets consist of:
Undistributed net investment income........................................ $ 48,992 $ 176,547 $--
Accumulated distributions in excess of net investment income............... -- -- (74,140)
Net unrealized appreciation on investments................................. 48,461,918 14,964,990 26,217,605
Net realized loss.......................................................... (3,443,816) (247,594) (2,968,060)
Class I capital shares..................................................... 1,053,504,512 467,455,167 656,523,339
Class II capital shares.................................................... 12,941,418 2,787,886 10,322,948
___________ ___________ __________
Net assets, at value........................................................ $1,111,513,024 $485,136,996 $690,021,692
=========== =========== ==========
Class I shares:
Net assets, at value....................................................... $1,098,695,890 $482,384,134 $679,804,528
=========== =========== ==========
Shares outstanding......................................................... 92,938,756 40,691,684 56,726,562
=========== =========== ==========
Net asset value per share*................................................. $11.82 $11.85 $11.98
=========== =========== ==========
Class II shares:
Net assets, at value....................................................... $ 12,817,134 $ 2,752,862 $ 10,217,164
=========== =========== ==========
Shares outstanding......................................................... 1,079,045 231,518 849,366
=========== =========== ==========
Net asset value per share*................................................. $11.88 $11.89 $12.03
=========== =========== ==========
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST Financial Statements (cont.)
Statements of Operations
for the six months ended August 31, 1996 (unaudited)
Franklin Franklin Franklin
Arizona InsuredFlorida Insured Franklin Massachusetts
Tax-Free Tax-Free Insured Tax-Free Insured Tax-Free
Income Fund Income Fund Income Fund Income Fund
__________ _________ __________ __________
Investment income:
<S> <C> <C> <C> <C>
Interest (Note 1).............................................. $ 1,094,260 $ 1,973,480 $53,321,403 $ 9,521,627
__________ _________ __________ __________
Expenses:
Management fees (Note 5)....................................... 119,112 213,902 3,919,179 808,221
Distribution fees - Class I (Note 5)........................... 16,088 30,567 631,429 117,478
Distribution fees - Class II (Note 5).......................... -- -- 37,647 11,646
Shareholder servicing costs (Note 5)........................... 4,534 9,064 208,529 44,474
Registration and filing fees................................... 5,298 4,211 35,380 8,593
Reports to shareholders........................................ 4,811 5,857 164,058 28,355
Custodian fees................................................. 1,497 667 8,030 9,697
Professional fees.............................................. 1,201 1,381 23,208 4,450
Insurance (Note 1)............................................. 586 -- 1,483 1,379
Trustees' fees and expenses.................................... 290 453 12,564 2,268
Other.......................................................... 9,907 13,147 97,497 28,631
Management fees waived by manager (Note 5)..................... (119,112) (163,233) -- --
Other expenses assumed by manager (Note 5)..................... (8,256) -- -- --
__________ _________ __________ __________
Total expenses............................................ 35,956 116,016 5,139,004 1,065,192
__________ _________ __________ __________
Net investment income..................................... 1,058,304 1,857,464 48,182,399 8,456,435
__________ _________ __________ __________
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)....................................... (118,217) (244,066) 625,724 999,553
Net unrealized depreciation.................................... (960,811) (1,466,601) (36,962,607) (7,869,165)
__________ _________ __________ __________
Net realized and unrealized loss on investments................. (1,079,028) (1,710,667) (36,336,883) (6,869,612)
__________ _________ __________ __________
Net increase (decrease) in net assets resulting from operations. $ (20,724) $ 146,797 $11,845,516 $1,586,823
========== ========= ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended August 31, 1996 (unaudited)
Franklin Franklin Franklin
Michigan Insured Minnesota Insured Ohio Insured
Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund
___________ ___________ __________
Investment income:
<S> <C> <C> <C>
Interest (Note 1)........................................................... $34,429,104 $14,972,388 $21,012,464
___________ ___________ __________
Expenses:
Management fees (Note 5).................................................... 2,619,785 1,215,621 1,668,881
Distribution fees - Class I (Note 5)........................................ 427,185 190,021 269,275
Distribution fees - Class II (Note 5)....................................... 30,973 5,609 26,326
Shareholder servicing costs (Note 5)........................................ 194,337 78,100 111,201
Reports to shareholders..................................................... 83,794 51,662 68,911
Insurance (Note 1).......................................................... 24,267 28,380 11,464
Professional fees........................................................... 16,324 7,050 7,971
Custodian fees.............................................................. 15,806 2,280 3,306
Registration and filing fees................................................ 13,907 12,309 3,258
Trustees' fees and expenses................................................. 7,936 3,614 5,125
Other....................................................................... 9,195 38,097 39,763
___________ ___________ __________
Total expenses......................................................... 3,443,509 1,632,743 2,215,481
___________ ___________ __________
Net investment income.................................................. 30,985,595 13,339,645 18,796,983
___________ ___________ __________
Realized and unrealized gain (loss) on investments:
Net realized gain (loss).................................................... (3,433,011) (243,833) 2,637,378
Net unrealized depreciation................................................. (21,387,363) (11,055,237) (16,018,048)
___________ ___________ __________
Net realized and unrealized loss on investments.............................. (24,820,374) (11,299,070) (13,380,670)
___________ ___________ __________
Net increase in net assets resulting from operations......................... $ 6,165,221 $ 2,040,575 $ 5,416,313
=========== =========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended August 31, 1996
(unaudited) and the year ended February 29, 1996
Franklin Arizona Insured Franklin Florida Insured
Tax-Free Income Fund Tax-Free Income Fund
_____________________ _____________________
Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
_________ _________ _________ _________
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income............................................. $ 1,058,304 $ 1,635,250 $ 1,857,464 $ 3,071,572
Net realized gain (loss) from security transactions............... (118,217) 8,518 (244,066) 29,740
Net unrealized appreciation (depreciation) on investments......... (960,811) 1,489,428 (1,466,601) 2,612,156
_________ _________ _________ _________
Net increase (decrease) in net assets resulting from operations (20,724) 3,133,196 146,797 5,713,468
Distributions to shareholders from undistributed net investment income (1,038,683) (1,604,164) (1,846,828) (3,052,806)
Increase in net assets from capital share transactions (Note 2).... 851,372 15,875,305 2,802,235 20,076,187
_________ _________ _________ _________
Net increase (decrease) in net assets........................ (208,035) 17,404,337 1,102,204 22,736,849
Net assets:
Beginning of period............................................... 38,198,796 20,794,459 69,583,353 46,846,504
_________ _________ _________ _________
End of period..................................................... $37,990,761 $38,198,796 $70,685,557 $69,583,353
========= ========= ========= =========
Undistributed net investment income included in net assets:
Beginning of period............................................... $ 75,946 $ 44,860 $ 32,739 $ 13,973
========= ========= ========= =========
End of period..................................................... $ 95,567 $ 75,946 $ 43,375 $ 32,739
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
Franklin Insured Franklin Massachusetts Insured
Tax-Free Income Fund Tax-Free Income Fund
_________________________ ______________________
Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
___________ ___________ __________ __________
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income..................................... $ 48,182,399 $ 98,442,242 $ 8,456,435 $ 16,730,715
Net realized gain (loss) from security transactions....... 625,724 12,703,972 999,553 (82,430)
Net unrealized appreciation (depreciation) on investments. (36,962,607) 29,657,448 (7,869,165) 8,199,260
___________ ___________ __________ __________
Net increase in net assets resulting from operations. 11,845,516 140,803,662 1,586,823 24,847,545
Distributions to shareholders:
From undistributed net investment income:
Class I.................................................. (48,996,847) (98,929,211) (8,521,577) (16,888,337)
Class II................................................. (303,549) (130,554) (90,945) (62,237)
In excess of net investment income:
Class I (Note 1)......................................... (170,506) -- (109,324) --
Class II (Note 1)........................................ -- -- (1,934) --
Increase (decrease) in net assets from capital share
transactions (Note 2)..................................... 9,226,426 (11,787,371) 10,356,196 8,059,652
___________ ___________ __________ __________
Net increase (decrease) in net assets...................... (28,398,960) 29,956,526 3,219,239 15,956,623
Net assets:
Beginning of period....................................... 1,713,190,690 1,683,234,164 304,287,539 288,330,916
___________ ___________ __________ __________
End of period............................................. $1,684,791,730 $1,713,190,690 $307,506,778 $304,287,539
=========== =========== ========== ==========
Undistributed net investment income (accumulated distributions in excess of net
investment income) included in net assets:
Beginning of period...................................... $ 1,118,209 $ 1,735,732 $ 156,087 $ 375,946
=========== =========== ========== ==========
End of period............................................ $ (170,294) $ 1,118,209 $ (111,258) $ 156,087
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
Franklin Michigan Insured Franklin Minnesota Insured Franklin Ohio Insured
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
________________________ _____________________ _____________________
Six months Year ended Six months Year ended Six months Year ended
ended 8/31/96 2/29/96 ended 8/31/96 2/29/96 ended 8/31/96 2/29/96
___________ ___________ __________ __________ __________ __________
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 30,985,595 $ 61,052,303 $ 13,339,645 $ 27,026,738 $ 18,796,983 $ 37,353,056
Net realized gain (loss) from
security transactions............. (3,433,011) 2,392,717 (243,833) 596,366 2,637,378 2,896,481
Net unrealized appreciation
(depreciation) on investments..... (21,387,363) 27,527,016 (11,055,237) 9,650,802 (16,018,048) 15,182,787
___________ ___________ __________ __________ __________ __________
Net increase in net assets
resulting from operations......... 6,165,221 90,972,036 2,040,575 37,273,906 5,416,313 55,432,324
Distributions to shareholders:
From undistributed net investment
income:
Class I......................... (30,589,572) (61,725,372) (13,609,945) (27,066,218) (18,559,175) (37,736,610)
Class II........................ (236,012) (105,454) (43,083) (17,666) (183,836) (95,312)
In excess of net investment income:
Class I (Note 1).................. -- (113,681) -- -- (57,660) (56,788)
Class II (Note 1)................. -- -- -- -- (16,480) --
Increase in net assets from capital
share transactions (Note 2)....... 14,035,916 55,393,011 3,458,268 3,166,929 11,554,081 21,780,231
___________ ___________ __________ __________ __________ __________
Net increase (decrease) in net
assets............................ (10,624,447) 84,420,540 (8,154,185) 13,356,951 (1,846,757) 39,323,845
Net assets:
Beginning of period............... 1,122,137,471 1,037,716,931 493,291,181 479,934,230 691,868,449 652,544,604
___________ ___________ __________ __________ __________ __________
End of period..................... $1,111,513,024 $1,122,137,471 $485,136,996 $493,291,181 $690,021,692 $691,868,449
=========== =========== ========== ========== ========== ==========
Undistributed net investment income
(accumulated distributions in
excess of net investment income)
included in net assets:
Beginning of period.............. $ (111,019) $ 781,185 $ 489,930 $ 547,076 $ (53,972) $ 481,682
=========== =========== ========== ========== ========== ==========
End of period.................... $ 48,992 $ (111,019) $ 176,547 $ 489,930 $ (74,140) $ (53,972)
=========== =========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Free Trust (the Trust) is an open-end management investment company
(mutual fund), registered under the Investment Company Act of 1940, as amended.
The Trust currently consists of twenty-eight separate funds. This report
pertains only to the seven Funds (the Funds) included in the accompanying
financial statements. Each fund seeks to provide investors with as high a level
of income exempt from federal income taxes as is consistent with prudent
investing, while seeking preservation of shareholders' capital. Each fund, other
than the Franklin Insured Tax-Free Income Fund, also seeks to provide a maximum
level of income which is exempt from personal income tax for resident
shareholders of the named state or territory. Each of the Funds issues a
separate series of the Trust's shares and maintains a totally separate
investment portfolio. All funds in this report are diversified except the
Franklin Arizona Insured Tax-Free Income Fund and the Franklin Florida Insured
Tax-Free Income Fund.
All of the funds within this report, except the Franklin Arizona Insured
Tax-Free Income Fund and the Franklin Florida Insured Tax-Free Income Fund,
offer two classes of shares, Class I and Class II. Class I shares are sold with
a higher front-end sales charge than Class II shares. Each class of shares may
be subject to a contingent deferred sales charge and has the same rights, except
with respect to the effect of the respective sales charges, the distribution
fees borne by each class, voting rights on matters affecting a single class and
the exchange privilege of each class.
The offering of Class II shares began May 1, 1995, at which time all previously
outstanding share became Class I shares.
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 Valuation:
Tax-free bonds generally trade in the over-the-counter market rather than on a
national securities exchange. In the absence of a sale or reported bid and asked
prices, information with respect to bond and note transactions, quotations from
bond dealers, market transactions in comparable securities, and various
relationships between securities are used to determine the value of a 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 (the Board). Securities for which market quotations are
not available are valued in accordance with procedures established by the Board.
b. Municipal Bonds or Notes with "Puts":
The Funds have 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 dates 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 on 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 Funds intend 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 shareholders which will be sufficient to relieve the
Funds from income and excise taxes. 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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Original issue discount and
premium are amortized as required by the 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 day
following the 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, and are payable to
shareholders of record at the beginning of business on the ex-dividend date.
Once each month dividends are reinvested in additional shares of the Funds, or
paid in cash as requested by the shareholders.
Realized and unrealized gains or losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale transactions.
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.
h. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
i. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Funds may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding the
securities, they may sell the 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.
2. TRUST SHARES
At August 31, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Fund's shares 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
__________________ ___________________ _____________________
Class I Shares: Shares Amount Shares Amount Shares Amount
________ _________ ________ __________ _________ ___________
Six months ended August 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold ..................................... 629,979 $ 6,335,972 871,206 $ 8,487,925 8,785,792 $105,840,352
Shares issued in reinvestment of distributions .. 44,135 445,321 65,987 644,607 1,718,632 20,674,695
Shares redeemed ................................. (591,350) (5,929,921) (645,482) (6,330,297) (10,389,358) (125,008,886)
________ _________ ________ __________ _________ ___________
Net increase ..................................... 82,764 $ 851,372 291,711 $ 2,802,235 115,066 $ 1,506,161
======== ========= ======== ========== ========= ===========
Year ended February 29, 1996
Shares sold ..................................... 1,838,731 $18,660,198 3,201,678 $31,841,843 18,183,582 $221,183,747
Shares issued in reinvestment of distributions .. 70,984 721,684 103,904 1,024,348 3,371,851 41,020,750
Shares redeemed ................................. (344,498) (3,506,577)(1,278,505) (12,790,004) (23,198,817) (282,118,466)
________ _________ ________ __________ _________ ___________
Net increase (decrease)........................... 1,565,217 $15,875,305 2,027,077 $20,076,187 (1,643,384) $ (19,913,969)
======== ========= ======== ========== ========= ===========
2. TRUST SHARES (cont.)
Franklin Arizona Insured Franklin Florida Insured Franklin Insured
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
__________________ ___________________ _____________________
Class II Shares: Shares Amount Shares Amount Shares Amount
________ _________ ________ __________ _________ ___________
Six months ended August 31, 1996
Shares sold ..................................... -- -- -- -- 651,469 $ 7,866,984
Shares issued in reinvestment of distributions .. -- -- -- -- 15,660 189,190
Shares redeemed ................................. -- -- -- -- (27,763) (335,909)
________ _________ ________ __________ _________ ___________
Net increase ..................................... -- -- -- -- 639,366 $ 7,720,265
======== ========= ======== ========== ========= ===========
Year ended February 29, 1996*
Shares sold ..................................... -- -- -- -- 678,420 $ 8,323,669
Shares issued in reinvestment of distributions .. -- -- -- -- 5,942 73,170
Shares redeemed ................................. -- -- -- -- (22,003) (270,241)
________ _________ ________ __________ _________ ___________
Net increase ..................................... -- -- -- -- 662,359 $ 8,126,598
======== ========= ======== ========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Franklin Massachusetts Franklin Michigan Insured
Insured Tax-Free Income Fund Tax-Free Income Fund
___________________ ___________________
Class I Shares: Shares Amount Shares Amount
________ __________ ________ __________
Six months ended August 31, 1996
<S> <C> <C> <C> <C>
Shares sold ............................................................... 1,727,721 $19,703,438 4,425,658 $ 52,463,627
Shares issued in reinvestment of distributions ............................ 327,100 3,732,132 1,264,894 14,986,371
Shares redeemed ........................................................... (1,328,788) (15,182,951) (5,041,232) (59,695,806)
________ __________ ________ __________
Net increase ............................................................... 726,033 $ 8,252,619 649,320 $ 7,754,192
======== ========== ======== ==========
Year ended February 29, 1996
Shares sold ............................................................... 2,824,888 $32,667,342 9,709,057 $116,368,142
Shares issued in reinvestment of distributions ............................ 616,949 7,118,850 2,481,201 29,703,331
Shares redeemed ........................................................... (2,990,203) (34,460,747) (8,123,578) (97,338,156)
________ __________ ________ __________
Net increase ............................................................... 451,634 $ 5,325,445 4,066,680 $ 48,733,317
======== ========== ======== ==========
Class II Shares:
Six months ended August 31, 1996
Shares sold ............................................................... 180,553 $ 2,068,601 545,951 $ 6,489,061
Shares issued in reinvestment of distributions ............................ 6,224 71,266 14,203 169,126
Shares redeemed ........................................................... (3,157) (36,290) (31,686) (376,463)
________ __________ ________ __________
Net increase ............................................................... 183,620 $ 2,103,577 528,468 $ 6,281,724
======== ========== ======== ==========
Year ended February 29, 1996*
Shares sold ............................................................... 231,785 $ 2,684,668 562,131 $ 6,801,007
Shares issued in reinvestment of distributions ............................ 4,367 50,866 6,207 75,384
Shares redeemed ........................................................... (114) (1,327) (17,761) (216,697)
________ __________ ________ __________
Net increase ............................................................... 236,038 $ 2,734,207 550,577 $ 6,659,694
======== ========== ======== ==========
2. TRUST SHARES (cont.)
Franklin Minnesota Insured Franklin Ohio Insured
Tax-Free Income Fund Tax-Free Income Fund
__________________ __________________
Class I Shares: Shares Amount Shares Amount
________ __________ ________ __________
Six months ended August 31, 1996
Shares sold ................................................................ 1,747,080 $20,787,867 2,995,624 $35,926,339
Shares issued in reinvestment of distributions ............................. 578,048 6,876,691 734,101 8,803,986
Shares redeemed ............................................................ (2,173,255) (25,844,892)(3,123,618) (37,437,092)
________ __________ ________ __________
Net increase ................................................................ 151,873 $ 1,819,666 606,107 $ 7,293,233
======== ========== ======== ==========
Year ended February 29, 1996
Shares sold ................................................................ 3,441,478 $41,593,853 5,527,081 $67,055,359
Shares issued in reinvestment of distributions ............................. 1,131,910 13,654,723 1,462,685 17,716,211
Shares redeemed ............................................................ (4,417,279) (53,230,931)(5,705,470) (69,053,439)
________ __________ ________ __________
Net increase ................................................................ 156,109 $ 2,017,645 1,284,296 $15,718,131
======== ========== ======== ==========
Class II Shares:
Six months ended August 31, 1996
Shares sold ................................................................ 145,437 $ 1,741,139 405,547 $ 4,889,325
Shares issued in reinvestment of distributions ............................. 2,896 34,541 12,127 145,996
Shares redeemed ............................................................ (11,486) (137,078) (64,841) (774,473)
________ __________ ________ __________
Net increase ................................................................ 136,847 $ 1,638,602 352,833 $ 4,260,848
======== ========== ======== ==========
Year ended February 29, 1996*
Shares sold ................................................................ 99,039 $ 1,202,330 491,956 $ 6,005,927
Shares issued in reinvestment of distributions ............................. 952 11,610 5,067 62,185
Shares redeemed ............................................................ (5,320) (64,656) (490) (6,012)
________ __________ ________ __________
Net increase ................................................................ 94,671 $ 1,149,284 496,533 $ 6,062,100
======== ========== ======== ==========
</TABLE>
*For the period May 1, 1995 to February 29, 1996
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 29, 1996, for tax purposes, the Funds had capital loss carryovers as
follows:
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin
Arizona Florida Franklin Massachusetts Michigan Minnesota Franklin
Insured Insured Insured Insured Insured Insured Ohio Insured
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income FundIncome Fund Income Fund Income Fund Income Fund Income FundIncome Fund
________ ________ ________ _________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C>
Capital loss carryovers expiring in: 1997 .. $ -- $-- $ -- $1,463,422 $-- $-- $2,685,511
1998 ....................................... -- -- -- 359,586 -- -- --
2000 ....................................... -- -- -- -- -- -- 2,000
2001 ....................................... -- -- -- 6,640 -- -- 90,225
2002 ....................................... 21,282 16,913 -- -- -- -- --
2003 ....................................... 394,514 1,225,446 226,494 1,670,219 10,805 2,767 2,762,910
2004 ....................................... -- -- -- 82,668 -- -- --
2005 ....................................... -- -- -- -- -- -- --
________ ________ ________ _________ ________ ________ ________
$415,796 $1,242,359 $226,494 $3,582,535 $10,805 $2,767 $5,540,646
======== ======== ======== ========= ======== ======== ========
</TABLE>
For income tax purposes, the aggregate cost of securities is higher (and
unrealized appreciation is lower) than for financial reporting purposes at
August 31, 1996, by $127,605 in the Franklin Michigan Insured Tax-Free Income
Fund and $994 in the Franklin Minnesota Insured Tax-Free Income Fund.
From November 1, 1995 through February 29, 1996, the Franklin Arizona Insured
Tax-Free Income Fund and the Franklin Florida Insured Tax-Free Income Fund
incurred $11,744 and $47,916 of net realized capital losses, respectively. As
permitted by tax regulations, the Funds intend to elect to defer these losses
and treat them as having arisen in the year ended February 28, 1997.
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the six months ended August 31, 1996 were as follows:
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin
Arizona Florida Franklin Massachusetts Michigan Minnesota Franklin
Insured Insured Insured Insured Insured Insured Ohio Insured
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund Income Fund Income Fund
_________ _________ __________ _________ __________ _________ __________
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases ......................... $4,776,690 $14,284,942 $213,475,841 $28,877,622 $180,658,583 $51,579,996 $67,449,708
Sales ............................. $3,676,303 $14,812,396 $243,363,607 $25,897,773 $193,607,375 $52,268,540 $69,094,366
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisers, Inc., (Advisers)
provides investment advice, administrative services, office space and facilities
to each Fund, and receives fees computed monthly based on the net assets of each
Fund on the last day of the month as follows:
Annualized Fee Rate Month End Net Assets
___________________ __________________________________
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% In excess of $250 million
The terms of the management agreement provide that annual aggregate expenses of
each Fund 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 each Fund's shares are registered. For the six months ended August 31,
1996, the Funds' expenses did not exceed these limitations. However, Advisers
agreed in advance to waive management fees and assume payment of other expenses
for the Franklin Arizona Insured Tax-Free Income Fund and the Franklin Florida
Insured Tax-Free Income Fund as noted in the Statement of Operations.
b. Shareholder Services Agreement:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the six months ended August 31, 1996, aggregated $650,239, of which $571,731 was
paid to Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Funds reimburse Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to a maximum of 0.10% per
annum for Class I and 0.65% per annum for Class II, if applicable, of the
average daily net assets of such class of all the Funds, for costs incurred in
the promotion, offering and marketing of the Funds' shares. The Plans do not
permit nor require payments of excess costs after termination. Fees incurred by
the Funds under the Plans aggregated $1,794,244 for the six months ended August
31, 1996.
In its capacity as underwriter for the shares of the Funds, Distributors
receives commissions on sales of the Funds' shares of beneficial interest.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Funds, and as such are not expenses of the Funds. Distributors may
also make payments, out of its own resources, to the dealers for certain sales
of the Funds' shares. Commissions received by Distributors, the amounts paid to
other dealers, and any applicable contingent deferred sales charges for the six
months ended August 31, 1996 amounted to:
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin
Arizona Florida Franklin Massachusetts Michigan Minnesota Franklin
Insured Insured Insured Insured Insured Insured Ohio Insured
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Class I Income Fund Income Fund Income Fund Income Fund Income Fund Income Fund Income Fund
________ ________ ________ _________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C>
Total commissions received ................. $198,042 $213,365 $1,959,078 $521,961 $1,643,494 $592,674 $1,149,274
Paid to other dealers ...................... $186,717 $199,750 $1,920,052 $512,462 $1,559,434 $589,482 $1,104,160
Contingent deferred sales charge ........... $ -- $ -- $ 2,151 $ -- $ -- $ -- $ --
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Distribution Plans and Underwriting Agreement: (cont.)
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin
Arizona Florida Franklin Massachusetts Michigan Minnesota Franklin
Insured Insured Insured Insured Insured Insured Ohio Insured
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Class II Income Fund Income Fund Income Fund Income Fund Income Fund Income Fund Income Fund
________ ________ ________ _________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C>
Total commissions received ................. -- -- $ 69,049 $21,634 $ 66,315 $17,451 $48,628
Paid to other dealers ...................... -- -- $140,313 $41,787 $131,457 $35,139 $98,459
Contingent deferred sales charges .......... -- -- $ 2,151 $ 344 $ 3,449 $ 865 $ 7,152
</TABLE>
d. Other Affiliated Parties and Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, and Investor Services, all wholly-owned subsidiaries of
Franklin Resources, Inc.
6. CREDIT RISK
All of the Funds' investments are in the securities of issuers within their
respective states and U.S. territories and possessions. Such concentration may
subject the Funds more significantly to economic changes occurring within those
states and U.S. territories and possessions.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period, by Fund, are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
_________________________________________________________________________________ __________________________________________
Net Ratio of Net
Net Realized & Distri- Ratio Investment
Asset Unrealized butions Distri- Net of Income
Value at Net Gain Total From Net butions Asset Net Assets Expenses to
Year Beginning Invest- (Loss) From Invest- From Total Value at at End to Average Average Portfolio
Ended of ment on Investment ment Capital Distri- End of Total of Period Net Net Turnover
Feb. 28 Period Income Securities Operations Income Gains butions Period Return++ (in 000's) Assets+ Assets Rate
____________________________________________________________________________________________________________________________________
Franklin Arizona Insured Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19941 $10.00 $.34 $.265 $ .605 $(.325) $ -- $(.325) $10.28 6.04% $ 12,895 0.03%* 4.85%* 62.88%
1995 10.28 .55 (.485) .065 (.545) -- (.545) 9.80 .94 20,794 .10 5.80 44.61
1996 9.80 .55 .565 1.115 (.555) -- (.555) 10.36 11.64 38,199 .16 5.51 4.12
19962 10.36 .28 (.294) (.014) (.276) -- (.276) 10.07 (.11) 37,991 .19* 5.59* 9.84
Franklin Florida Insured Tax-Free Income Fund:
Class I Shares:
19941 10.00 .34 .060 .400 (.330) -- (.330) 10.07 3.97 32,150 --* 4.97* 28.72
1995 10.07 .52 (.531) (.011) (.529) -- (.529) 9.53 .21 46,847 .35 5.61 43.71
1996 9.53 .53 .491 1.021 (.531) -- (.531) 10.02 10.95 69,583 .35 5.37 24.36
19962 10.02 .27 (.256) .014 (.264) -- (.264) 9.77 .17 70,686 .35* 5.42* 21.12
Franklin Insured Tax-Free Income Fund:
Class I Shares:
1992 11.41 .74 .298 1.038 (.768) -- (.768) 11.68 9.29 1,130,592 .53 6.55 6.35
1993 11.68 .74 .751 1.491 (.741) -- (.741) 12.43 12.93 1,539,186 .53 6.22 7.95
1994 12.43 .73 .020 .750 (.730) -- (.730) 12.45 5.93 1,802,548 .52 5.79 6.85
1995 12.45 .71 (.481) .229 (.709) -- (.709) 11.97 2.03 1,683,234 .59 6.00 14.42
1996 11.97 .71 .302 1.012 (.712) -- (.712) 12.27 8.66 1,705,038 .60 5.81 13.52
19962 12.27 .34 (.257) .083 (.353)4 -- (.353) 12.00 .71 1,669,109 .60* 5.71* 12.86
Class II Shares:
19963 11.98 .54 .322 .862 (.532) -- (.532) 12.31 7.32 8,152 1.18* 5.21* 13.52
19962 12.31 .31 (.251) .059 (.319) -- (.319) 12.05 .50 15,682 1.18* 5.17* 12.86
Franklin Massachusetts Insured Tax-Free Income Fund:
Class I Shares:
1992 10.76 .68 .307 .987 (.717) -- (.717) 11.03 9.34 218,336 .67 6.40 7.49
1993 11.03 .69 .685 1.375 (.675) -- (.675) 11.73 12.61 278,510 .64 6.09 9.65
1994 11.73 .67 .092 .762 (.682) -- (.682) 11.81 6.39 307,013 .60 5.69 13.82
1995 11.81 .66 (.468) .192 (.662) -- (.662) 11.34 1.83 288,331 .67 5.89 16.90
1996 11.34 .66 .313 .973 (.663) -- (.663) 11.65 8.80 301,529 .69 5.67 10.29
19962 11.65 .32 (.261) .059 (.329)6 -- (.329) 11.38 .53 302,715 .69* 5.57* 8.73
Class II Shares:
19963 11.36 .50 .323 .823 (.493) -- (.493) 11.69 7.36 2,759 1.26* 5.06* 10.29
19962 11.69 .29 (.264) .026 (.296)7 -- (.296) 11.42 .25 4,792 1.27* 5.02* 8.73
</TABLE>
7. FINANCIAL HIGHLIGHTS (cont.)
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
_________________________________________________________________________________ __________________________________________
Net Ratio of Net
Net Realized & Distri- Ratio Investment
Asset Unrealized butions Distri- Net of Income
Value at Net Gain Total From Net butions Asset Net Assets Expenses to
Year Beginning Invest- (Loss) From Invest- From Total Value at at End to Average Average Portfolio
Ended of ment on Investment ment Capital Distri- End of Total of Period Net Net Turnover
Feb. 28 Period Income Securities Operations Income Gains butions Period Return++ (in 000's) Assets+ Assets Rate
____________________________________________________________________________________________________________________________________
Franklin Michigan Insured Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $11.19 $.71 $.254 $ .964 $(.744) $ -- $(.744) $11.41 8.78% $ 665,914 .59% 6.45% 10.80%
1993 11.41 .71 .766 1.476 (.706) -- (.706) 12.18 13.23 882,361 .58 6.09 2.04
1994 12.18 .70 .066 .766 (.706) -- (.706) 12.24 6.18 1,055,452 .54 5.66 3.21
1995 12.24 .69 (.484) .206 (.686) -- (.686) 11.76 1.87 1,037,717 .61 5.87 9.12
1996 11.76 .68 .337 1.017 (.687)4 -- (.687) 12.09 8.86 1,115,454 .62 5.65 9.38
19962 12.09 .33 (.270) .060 (.330) -- (.330) 11.82 .52 1,098,696 .62* 5.58* 16.47
Class II Shares:
19963 11.77 .51 .369 .879 (.509) -- (.509) 12.14 7.58 6,683 1.20* 5.03* 9.38
19962 12.14 .30 (.263) .037 (.297) -- (.297) 11.88 .32 12,817 1.19* 5.03* 16.47
Franklin Minnesota Insured Tax-Free Income Fund:
Class I Shares:
1992 11.44 .73 .275 1.005 (.765) -- (.765) 11.68 8.95 357,279 .65 6.43 3.14
1993 11.68 .73 .667 1.397 (.727) -- (.727) 12.35 12.23 445,767 .63 6.12 5.58
1994 12.35 .70 (.014) .686 (.706) -- (.706) 12.33 5.42 499,619 .60 5.67 13.42
1995 12.33 .69 (.451) .239 (.685) (.004) (.689) 11.88 2.12 479,934 .66 5.81 17.59
1996 11.88 .67 .265 .935 (.675) -- (.675) 12.14 8.06 492,139 .66 5.58 17.72
19962 12.14 .33 (.285) .045 (.335) -- (.335) 11.85 .40 482,384 .67* 5.49* 10.72
Class II Shares:
19963 11.89 .500 .281 .781 (.501) -- (.501) 12.17 6.67 1,152 1.25* 4.94* 17.72
19962 12.17 .30 (.279) .021 (.301) -- (.301) 11.89 .19 2,753 1.25* 4.97* 10.72
Franklin Ohio Insured Tax-Free Income Fund:
Class I Shares:
1992 11.33 .71 .275 .985 (.765) -- (.765) 11.55 8.86 409,044 .62 6.36 1.16
1993 11.55 .72 .776 1.496 (.706) -- (.706) 12.34 13.26 564,758 .59 6.05 2.87
1994 12.34 .70 .066 .766 (.706) -- (.706) 12.40 6.08 686,398 .56 5.59 7.29
1995 12.40 .69 (.499) .191 (.691) -- (.691) 11.90 1.74 652,545 .63 5.83 11.76
1996 11.90 .68 .327 1.007 (.687)4 -- (.687) 12.22 8.66 685,783 .64 5.58 11.47
19962 12.22 .33 (.240) .090 (.330)4 -- (.330) 11.98 .77 679,805 .64* 5.48* 9.95
Class II Shares:
19963 11.90 .520 .351 .871 (.511) -- (.511) 12.26 7.43 6,085 1.22* 4.99* 11.47
19962 12.26 .30 (.235) .065 (.295)8 -- (.295) 12.03 .55 10,217 1.15* 4.97* 9.95
</TABLE>
*Annualized
1For the period April 30, 1993 (effective date) to February 28, 1994.
2For the six months ended August 31, 1996.
3For the period May 1, 1995 (effective date) to February 29, 1996.
4Includes distributions in excess of net investment income in the amount of
$.001.
5Includes distributions in excess of net investment income in the amount of
$.024.
6Includes distributions in excess of net investment income in the amount of
$.004.
7Includes distributions in excess of net investment income in the amount of
$.005.
8Includes distributions in excess of net investment income in the amount of
$.019.
++Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or the contingent deferred sales charges, and assumes reinvestment of
dividends and capital gains at net asset value. Prior to May 1, 1994, dividends
were reinvested at the maximum offering price, and capital gains at net asset
value, except for the Franklin Arizona Insured Tax-Free Income Fund and the
Franklin Florida Insured Tax-Free Income Fund. Effective May 1, 1994, with the
implementation of the Rule 12b-1 distribution plans for Class I, the sales
charges on reinvested dividends were eliminated.
+During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees and to make payments of other expenses incurred by the Funds
listed below. Had such action not been taken, the ratio of expenses to average
net assets would have been as follows:
Ratio of Expenses to
Average Net Assets
_____________
Franklin Arizona Insured Tax-Free Income Fund
19941............................................ 0.83%*
1995............................................. 0.96
1996............................................. 0.86
19962............................................ 0.86*
Franklin Florida Insured Tax-Free Income Fund
19941............................................ 0.83*
1995............................................. 0.88
1996............................................. 0.82
19962............................................ 0.80*
Franklin Tax-Free Trust #1 Semi-Annual Report 8/31/96.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This line graph shows the price fluctuation of the Bond Buyer Municipal Bond
Index over a three-year period from 1/31/93 through 8/31/96.
<TABLE>
<CAPTION>
Period Ending Price
<S> <C> <C>
Sep-93 6.04% 5.47%
Oct-93 5.96% 5.48%
Nov-93 6.29% 5.65%
Dec-93 6.35% 5.52%
Jan-94 6.23% 5.45%
Feb-94 6.67% 5.77%
Mar-94 7.10% 6.36%
Apr-94 7.22% 6.37%
May-94 7.39% 6.40%
Jun-94 7.63% 6.47%
Jul-94 7.39% 6.33%
Aug-94 7.46% 6.36%
Sep-94 7.82% 6.58%
Oct-94 7.97% 6.85%
Nov-94 7.99% 7.16%
Dec-94 7.89% 6.92%
Jan-95 7.71% 6.66%
Feb-95 7.46% 6.42%
Mar-95 7.44% 6.37%
Apr-95 7.34% 6.35%
May-95 6.67% 6.10%
Jun-95 6.63% 6.28%
Jul-95 6.86% 6.19%
Aug-95 6.65% 6.11%
Sep-95 6.49% 6.07%
Oct-95 6.34% 5.91%
Nov-95 6.14% 5.74%
Dec-95 5.96% 5.56%
Jan-96 6.03% 5.57%
Feb-96 6.48% 5.71%
Mar-96 6.67% 5.96%
Apr-96 6.89% 6.05%
May-96 7.00% 6.09%
Jun-96 6.90% 6.01%
Jul-96 6.96% 5.98%
Aug-96 7.13% 6.02%
</TABLE>
GRAPHIC MATERIAL (2)
This chart shows in pie chart format the income and capital appreciation of the
Lehman Brothers 20-Year Municipal Bond Index for the 10-year period ended
8/31/96.
<TABLE>
<CAPTION>
Income: An Important Component of Total Return
<S> <C>
Income 90.83%
Capital Appreciation 9.17%
</TABLE>
GRAPHIC MATERIAL (3)
This bar chart compares the dollar amount of new long-term municipal bond
issuance from 1987 ($105 billion), 1988 ($118 billion), 1989 ($125 billion),
1990 ($128 billion), 1991 ($174 billion), 1992 ($235 billion), 1993 ($292
billion), 1994 ($164 billion), 1995 ($156 billion), and 1996 (105 billion).
GRAPHIC MATERIAL (4)
This bar chart shows that 37% insured municipal bonds and 63% non-insured
municipal bonds were issued in 1994, 44% insured municipal bonds and 56%
non-insured municipal bonds issued in 1995, and 48% insured municipal bonds and
52% non-insured municipal bonds issued in 1996.
GRAPHIC MATERIAL (5)
This bar chart shows the comparison between the fund's distribution rate of
5.25% and the taxable equivalent distribution rate of 9.21%.
GRAPHIC MATERIAL (6)
This bar chart shows the comparison between the fund's distribution rate of
5.18% and the taxable equivalent distribution rate of 8.58%.
GRAPHIC MATERIAL (7)
This bar chart shows the comparison between the fund's distribution rate of
5.46% and the taxable equivalent distribution rate of 9.04%, for Class I shares.
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between the fund's distribution rate of
5.09% and the taxable equivalent distribution rate of 8.43%, for Class II
shares.
GRAPHIC MATERIAL (9)
This bar chart shows the comparison between the fund's distribution rate of
5.25% and the taxable equivalent distribution rate of 9.88%, for Class I shares.
GRAPHIC MATERIAL (10)
This bar chart shows the comparison between the fund's distribution rate of
4.87% and the taxable equivalent distribution rate of 9.16%, for Class II
shares.
GRAPHIC MATERIAL (11)
This bar chart shows the comparison between the fund's distribution rate of
5.35% and the taxable equivalent distribution rate of 9.27%, for Class I shares.
GRAPHIC MATERIAL (12)
This bar chart shows the comparison between the fund's distribution rate of
5.00% and the taxable equivalent distribution rate of 8.67%, for Class II
shares.
GRAPHIC MATERIAL (13)
This bar chart shows the comparison between the fund's distribution rate of
5.23% and the taxable equivalent distribution rate of 9.46%, for Class I shares.
GRAPHIC MATERIAL (14)
This bar chart shows the comparison between the fund's distribution rate of
4.87% and the taxable equivalent distribution rate of 8.81%, for Class II
shares.
GRAPHIC MATERIAL (15)
This bar chart shows the comparison between the fund's distribution rate of
5.28% and the taxable equivalent distribution rate of 9.45%, for Class I shares.
GRAPHIC MATERIAL (16)
This bar chart shows the comparison between the fund's distribution rate of
4.87% and the taxable equivalent distribution rate of 8.71%, for Class II
shares.
MESSAGE FROM THE CHAIRMAN
Table of Contents Page
Message from the Chairman 1
Special Feature:
Q&A with Tom Kenny 3
Fund Reports
Franklin Alabama Tax-Free
Income Fund 8
Franklin Florida Tax-Free
Income Fund 14
Franklin Georgia Tax-Free
Income Fund 20
Franklin Kentucky Tax-Free
Income Fund 26
Franklin Louisiana Tax-Free
Income Fund 30
Franklin Maryland Tax-Free
Income Fund 36
Franklin Missouri Tax-Free
Income Fund 42
Franklin North Carolina Tax-Free
Income Fund 48
Franklin Texas Tax-Free
Income Fund 54
Franklin Virginia Tax-Free
Income Fund 60
Statement of Investments 66
Financial Statements 113
Notes to Financial Statements 121
October 15, 1996
Dear Shareholder:
It's a pleasure to bring you the Franklin Tax-Free Trust's semi-annual report
for the period ended August 31, 1996.
The reporting period might well be described as six months of frequent
interest-rate fluctuations, as the 30-year U.S. Treasury bond bounced between
6.67% and 7.00%.* Some of this movement can be attributed to investors and
economists who have overreacted to anticipated actions by the Federal Reserve
Board (the Fed). Indeed, newspaper headlines in the last six months declared the
economy was overheating one day and stalling the next -- all of which seems to
suggest a slow growth trend.
*Source: Micropal.
Our Municipal Bond Department has recently been very active in sales of
pre-refunded bonds. Generally, we look to sell these securities to preserve the
share price of the fund. I encourage you to read the following interview with
Tom Kenny, Director of Franklin Templeton's Municipal Bond Department, which
discusses pre-refunded bonds in more detail.
We expect that the funds in the Franklin Tax-Free Trust should perform well if
the economy maintains its relatively slow growth pattern. Although the economy
appears stable at the moment, market uncertainties persist.
This uncertainty prompts us to continue to encourage individual investors to
maintain a long-term perspective. It is prudent to periodically consult with
your investment representative to ensure your investments match these goals.
This long-term orientation will help minimize undue concern caused by short-term
market volatility.
As a Franklin Templeton fund shareholder, you receive the benefits of
professional management and dedicated service. Should you have any questions
concerning the funds in the Franklin Tax-Free Trust, we would certainly welcome
the opportunity to answer them.
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
Glossary of Investment Terms
Call Protection: the length of time during which a bond cannot be redeemed by
its issuer.
Coupon: the interest rate on a bond the issuer promises to pay to the holder
until the bond matures.
Full Coupon Bond: a bond with a coupon rate that is near or above current market
interest rates.
High Grade Bond/High Quality Bond: a bond rated AAA or AA by Standard &
Poor's(R) or Moody's rating services.
Investment Grade Bond: a bond with a rating of AAA to BBB.
Pre-Refunded Bonds: a second bond is issued to pay off a first bond at the first
call date.
Primary Market: the market for new issues of securities; a market is "primary"
if the issuer of the securities receives the proceeds of the sale.
Secondary Market: a market where previously issued securities are bought and
sold; the selling dealers and investors receive the proceeds, not the issuer.
Tax Loss Carryforward: a tax benefit that allows a company or individual to use
past losses to reduce future tax liability.
Underwriter: an investment banker who agrees to purchase a new issue of
securities from an issuer and distribute it to investors, making a profit on the
underwriting spread.
Underwriting Spread: the difference between the amount paid to an issuer of
securities in a primary distribution and the public offering price.
SPECIAL FEATURE: Q&A WITH TOM KENNY
(PICTURE OMITTED)
Tom Kenny, director of Franklin's Municipal Bond Department, discusses several
current topics, including interest rates and his outlook for the municipal bond
market.
Tom Kenny, Senior Vice President,
Director, Franklin Municipal
Bond Department
Tom, purchasing a municipal bond is considered a pretty safe investment. In the
last few years, however, we've experienced incredible volatility in bond
markets. Is this going to subside in the future, or is this the new way for bond
markets?
It's an interesting observation and -- you're right -- the bond markets didn't
seem to be as volatile a few years back. If you look at the recent bond market,
say since 1992-1993, you'll see that we've had three consecutive years of 200
basis point swings in opposite directions (See Fig. 1). Historically, that level
of volatility is unusual.
I think there are several reasons for the increased volatility. First, we need
to look at the Federal Reserve Board. The Federal Reserve Board has been slow to
adjust short-term rates in response to economic conditions, which has increased
uncertainty and speculation within the fixed-income markets. Thus, market
participants have reacted toward short-term economic data rather than focusing
on the big picture. Since the Fed has not made frequent adjustments to
short-term rates, the increased speculation has created a pendulum effect where
the market tends to overreact in the adjustment of long-term rates.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
So the Federal Reserve Board's restraint has helped to cause some unpredictable
market movement?
Just look at the number of times recently where market expectations of both
growth and inflation have changed dramatically. Earlier this year, nine out of
10 economists said we were going to be in a recession by the end of the first
quarter. Weeks later, they changed their outlook and expected growth at a 4%-5%
annual rate with fears of an overheating economy. Just in the last few weeks,
we've heard, "Well, maybe the economy is not growing that fast after all." So
the market's become very short-term focused -- that's one reason we're seeing
increased volatility.
Second, we are part of a much more global market today than ever before. Funds
tend to flow very freely from market to market.
Third, we have seen an increased use of hedge funds, which often take large
risks with speculative strategies. They've become very popular over the last two
to three years. Hedge fund managers tend to be very short-term focused, trying
to take advantage of undervalued situations. So they're in and out of markets
very quickly.
Last, I think the creation and use of derivatives, where speculators can control
huge amounts of bonds with very little capital at risk, has also caused some of
this volatility.
The increased volatility will probably remain as long as these themes exist.
Have these factors affected your investment strategy?
We try to stay abreast of economic conditions and interest rates in general, but
we don't try to second-guess the market in terms of the direction of rates, or
alter our fundamental philosophy and strategy because of short-term economic
changes.
Our approach is straightforward. With few exceptions, we seek credit safety and
income. I don't think shareholders want the volatility that might be generated
by chasing capital appreciation. If you look at the interest rate chart (Fig. 1)
and think of the number of times you had to be right if you were speculating on
the direction and absolute change in interest rates, you may have called one
swing correctly; but if you missed the other leg of it, you may have given away
everything you gained on the way up or down.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
We have a well-seasoned portfolio management team (the five senior portfolio
managers have over 170 years of collective experience) that manages our funds
for tax-free income. We believe that over the long term, income drives total
return. Total return is important. But, how you achieve total return is even
more important. Income has been responsible for more than 90% of the total
return of municipal bonds over the last 10 years (Fig. 2), as measured by the
unmanaged Lehman Brothers 20-year Municipal Bond Index.
So, by consistently investing for income, you should generate good total-return
performance. We think our shareholders, particularly those in tax-free funds,
are better served by using this consistent, long-term-oriented approach. It is
what distinguishes Franklin from most of its peers.
We have seen more insured bonds, particularly in California. Is this a long-term
industry trend?
I believe so, but it's more pronounced in California.
The national percentage of insured issues now coming to market is in the 54%-55%
range. In California, it's a little bit ahead of that.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Why are there more insured issues now?
It's a function of a couple of things, I think. Supply is still relatively low
when compared with 1992-1993, when we had record volume of long-term bonds
coming to the market. Overall supply dropped more than 45% from 1993, into the
$155-$160 billion range last year. This year, it's probably going to be up
somewhat -- maybe in the 10%-15% range.
Since we haven't seen a heavy supply of bonds coming to market, some insurance
companies have become very aggressive in trying to gain market share. They have
the capital, the capacity, the staffing, and the willingness to price their
premiums aggressively. As a result, it's been comparatively cheap for issuers to
obtain insurance.
How much has pre-refunding influenced your investment strategy recently, and can
you briefly describe what pre-refunding is?
A pre-refunded bond is one that will be paid off at its first call date, using
the proceeds of a second bond carrying a lower interest rate. Let's say a
municipality issues a bond paying 8% interest that will mature in 2025. Some
time later, interest rates drop significantly, as they did in the late 1980s and
in the 1992-1993 period, and comparable bonds are now paying, say, 6%.
Naturally, the issuer would prefer to pay this new, lower rate on its debt, just
as you or I would want to refinance our home mortgage.
One way issuers can reduce their borrowing expense is to refund higher-paying
bonds before they mature. To raise money to refund the higher-rate bonds, they
issue a second bond at the market's now, lower interest rate. The proceeds of
the second bond are invested in U.S. Treasuries, set to mature at the original
bond's first call date, which may be only five or six years away. The bond is
then termed "pre-refunded" to the call date.
When the bond becomes pre-refunded, the price can rise dramatically -- providing
an opportunity to sell it at a premium. Generally, a pre-refunded bond will
maximize its value when there is approximately five years remaining to the call
date.
That first bond sells at a premium now because it's backed by U.S. Treasuries
and it's still paying the higher interest rate?
Yes -- in addition, it is now a bond with a much shorter maturity -- i.e., the
call date versus the original maturity date.
What if you don't sell it?
Well, we know that in five years that bond will be called at 100%-102% of par.
It's currently selling at a premium of, say, 115% of par. If we do nothing right
now, the price of that bond will decline, from 115% of par to the call price,
thereby eroding its value over the next five years. No matter what interest
rates do, that bond price is going down.
Generally, when a bond hits the five-year mark, we look for an opportunity to
sell it, capture the premium, then reinvest the proceeds in the current interest
rate environment.
How does this benefit shareholders?
Shareholders can benefit in a couple of ways. We may purchase a new bond that
can't be called for at least 10 years -- so we've extended our call protection.
Also, if we can capture that premium, we can now buy 115% worth of new bonds at
today's current interest rates. We've protected the fund's share value from
eroding and also helped maintain the earning power of the fund over the long
term.
(PICTURE OMITTED)
What sets your municipal bond department apart from others in the industry?
We use a very consistent, team-oriented approach to portfolio management. All of
our managers are using the same consistent strategy in our efforts to meet the
same overall investment objectives. Many times you'll see some other fund
companies where each manager operates on his/her own strategy.
Also, we're one of the few companies that truly manages for income. We believe
Franklin understands fixed-income and what investors look for.
Many of our competitors have come from an equity-oriented background and then
added a fixed-income side in recent years to round out their product line. This
perspective may not sound important, but we think it is. Some of our competitors
compensate their portfolio managers on a total return-oriented basis each
quarter. We don't.
Why not?
We believe if you're a fixed-income portfolio manager who is being compensated
on quarterly total return, you're probably going to be more inclined to make
short-term bets and take risks that you might not take otherwise. So your
interests may not be clearly aligned with the shareholders' interests. It does
really make a big difference.
Another thing that sets us apart is our research staff. Since we purchase over
95% of our portfolio holdings in the primary market, we spend a lot of time
analyzing credits up front, such as performing site visits, addressing legal
issues, and structuring issues to meet both our credit and portfolio
requirements.
Tom, thanks for your time.
My pleasure.
FRANKLIN ALABAMA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Alabama
state personal income taxes through a portfolio consisting primarily of Alabama
municipal bonds.*
State Update
During the six-month period ended August 31, 1996, Alabama's general obligation
bonds maintained a rating of AA from Standard & Poor's(R), a national rating
agency.+ This high rating reflects Standard & Poor's positive assessment of
Alabama's expanding and diversifying economy, low debt burden and conservative
fiscal management.
Alabama's economy has continued to diversify in recent years, experiencing
strong growth in high-tech, health care and business services. Aggressive
economic development policies adopted by Alabama's legislature have encouraged
growth throughout the state. Additionally, new and expanding companies have
announced capital investments of approximately $9 billion over the past three
years.++
GRAPHIC MATERIAL OMITTED - SEE APPENDIX AT END OF DOCUMENT
Alabama historically has maintained very conservative fiscal policies, which
have enabled the state to balance its financial operations. The state's overall
net debt remains low, and the state has maintained adequate financial
operations. Although the average personal-income level in Alabama still lags
behind the national average, it has been growing by a moderate, average annual
rate of 5.6% since 1991.++
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not indicate Standard & Poor's rating of the fund.
++Standard & Poor's Creditweek Municipal, 5/13/96.
Portfolio Notes
During the reporting period, we focused on your fund's core strategy: maximizing
tax-free income distributions while preserving equity. In doing this, we
purchased primarily high-grade bonds (A or better), because the slightly higher
yields available on BBB-rated bonds were not enough to compensate for the extra
credit risk.
To extend the portfolio's income earning potential, we also sold a percentage of
the fund's pre-refunded bonds.** The proceeds were reinvested in bonds which
offered good call protection.
**Pre-refunded bonds have a higher credit security and shorter maturity than
they did when first issued, and thus tend to sell at higher prices. See page 6
for more information on pre-refunded bonds.
Franklin Alabama Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 26.8%
Hospitals 15.0%
General Obligation 14.5%
Industrial 10.3%
Pre-Refunded 9.5%
Housing 6.9%
Health Care 5.8%
Transportation 4.3%
Education 3.4%
Other Revenue 2.7%
Certificates of Participation .8%
For a complete list of portfolio holdings, please see page 66.
Performance Summary
Class I
The Franklin Alabama Tax-Free Income Fund's share price, as measured by net
asset value, decreased 21 cents from $11.73 on February 29, 1996, to $11.52 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.49%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $12.03 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Alabama state personal income tax bracket of 42.6% would need to
earn 9.57% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Alabama Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.5 cents
April 5.5 cents
May 5.5 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents
Total 33.0 cents
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
Franklin Alabama Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.79% 42.01% 98.97%
Average Annual Total Return2 1.31% 6.34% 7.41%
Distribution Rate3 5.49%
Taxable Equivalent Distribution Rate4 9.57%
30-Day Standardized Yield5 5.03%
Taxable Equivalent Yield4 8.77%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.5 cent per share monthly dividend
and the maximum offering price of $12.03 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Alabama state personal income tax rate of 42.6%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Alabama Tax-Free Income Fund's share price, as measured by net
asset value, decreased by 21 cents from $11.77 on February 29, 1996, to $11.56
on August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.05%,
based on an annualization of the current monthly dividend of 4.92 cents
($0.0492) per share and the offering price of $11.68 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment.
For example, an investor in the maximum combined federal and Alabama state
personal income tax bracket of 42.6% would need to earn 8.8% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Alabama Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 4.91 cents++
April 4.93 cents
May 4.93 cents
June 4.93 cents
July 4.92 cents
August 4.92 cents
Total 29.54 cents
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++The March dividend includes both a regular dividend of 4.93 cents per
share, which increased from 4.9 cents, and an adjustment of -.02 cents to
reconcile the 12b-1 differential between Class I and Class II shares.
Franklin Alabama Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 5.33% 8.70%
Average Annual Total Return2 3.25% 4.94%
Distribution Rate3 5.05%
Taxable Equivalent Distribution Rate4 8.80%
30-Day Standardized Yield5 4.60%
Taxable Equivalent Yield4 8.02%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 4.92 cent per share monthly dividend and the
offering price of $11.68 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Alabama state personal income tax rate of 42.6%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN FLORIDA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal tax through a
portfolio consisting primarily of Florida municipal bonds.* In addition, the
fund's shares are free from Florida's annual intangibles tax.
State Update
During the six-month period ended August 31, 1996, Florida's general obligation
bonds maintained a rating of AA from Standard & Poor's(R), a national rating
agency.+ This high rating reflects Standard & Poor's assessment of Florida's
expanding service-based economy, moderate debt level and sound financial
management.
Florida's economy continued to expand with steady growth in both employment and
population. The state's employment is expected to grow moderately through 1996,
slightly outpacing the national average. More than 64% of the state's work force
is tied to the service, construction and trade sectors -- industries leading the
state in terms of growth.++
While Florida's 1996 fiscal-year budget emphasized spending on public
protection, the budget for 1997 will focus spending on education and human
services programs. We believe the state's consistent economic performance and
well-managed fiscal program should continue to provide a favorable environment
for municipal investments.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not indicate Standard & Poor's rating of the fund.
++Standard & Poor's Creditweek Municipal, 7/22/96.
Portfolio Notes
During the reporting period, we focused primarily on purchasing higher-grade
bonds (A or better), since the higher yields on BBB-rated bonds were not enough
to justify their added credit risk. To extend the fund's income-earning ability,
we also sold a percentage of our pre-refunded bonds.** The proceeds were
reinvested in bonds which offered good call protection. This strategy maintained
the fund's weighted-average life-to-first-call of six years.
**Pre-refunded bonds have a higher credit security and shorter maturity than
they did when first issued, and thus tend to sell at higher prices. See page 6
for more information on pre-refunded bonds.
Franklin Florida Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 24.5%
Transportation 13.6%
Pre-Refunded 13.3%
Hospitals 10.8%
Special Assessment 9.0%
Housing 8.1%
Certificates of Participation 5.8%
Other Revenue 4.6%
General Obligation 2.9%
Miscellaneous 2.5%
Health Care 1.7%
Education 1.4%
Sales Tax 1.4%
Industrial .4%
For a complete list of portfolio holdings, please see page 70.
Performance Summary
Class I
The Franklin Florida Tax-Free Income Fund's share price, as measured by net
asset value, decreased 25 cents from $11.69 on February 29, 1996, to $11.44 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.72%,
based on an annualization of the current monthly dividend of 5.7 cents ($0.057)
per share and the maximum offering price of $11.95 on August 31, 1996. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum federal income tax
bracket of 39.6% would need to earn 9.47% from a taxable investment to match the
fund's tax-free distribution rate.
Franklin Florida Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.7 cents
April 5.7 cents
May 5.7 cents
June 5.7 cents
July 5.7 cents
August 5.7 cents
Total 34.2 cents
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
Franklin Florida Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.03% 42.32% 104.05%
Average Annual Total Return2 0.59% 6.39% 7.72%
Distribution Rate3 5.72%
Taxable Equivalent Distribution Rate4 9.47%
30-Day Standardized Yield5 4.94%
Taxable Equivalent Yield4 8.18%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.7 cent per share monthly dividend
and the maximum offering price of $11.95 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal personal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results. Past expense reductions by
the fund's manager increased the fund's total returns.
Class II
The Franklin Florida Tax-Free Income Fund's share price, as measured by net
asset value, decreased 26 cents from $11.76 on February 29, 1996, to $11.50 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.24%,
based on an annualization of the current monthly dividend of 5.07 cents
($0.0507) per share and the offering price of $11.62 on August 31,
1996. This tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum federal
personal income tax bracket of 39.6% would need to earn 8.68% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Florida Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.18 cents++
April 5.13 cents
May 5.13 cents
June 5.13 cents
July 5.07 cents
August 5.07 cents
Total 30.71 cents
GRAPHIC MATERIAL 10 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++The March dividend includes both a regular dividend of 5.13 cents per share,
which increased from 5.1 cents, and an adjustment of +.05 cents to reconcile the
12b-1 differential between Class I and Class II shares.
Franklin Florida Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.37% 8.37%
Average Annual Total Return2 2.32% 4.70%
Distribution Rate3 5.24%
Taxable Equivalent Distribution Rate4 8.68%
30-Day Standardized Yield5 4.25%
Taxable Equivalent Yield4 7.04%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 5.07 cent per share monthly dividend and the
offering price of $11.62 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal personal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN GEORGIA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Georgia
state personal income taxes through a portfolio consisting primarily of Georgia
municipal bonds.*
State Update
During the six-month period ended August 31, 1996, Georgia's general obligation
bonds received a rating of AA+ from Standard & Poor's(R), a national rating
agency.+ This positive rating reflects Standard & Poor's assessment of Georgia's
improved financial position, moderate debt levels, conservative fiscal
management and healthy economy.++
Georgia's recovery from the 1989 recession has been steady and sustainable. Over
the past several years, the state's employment growth has been better than
Southern regional trends. Employment is expected to increase 2.3% in 1996, with
the services, trade and construction sectors contributing to much of the
growth.++ Longer term, job growth is expected to be moderate, yet remain above
the national average.
Historically, Georgia has maintained moderate debt levels, and current
debt-service costs represent approximately 5% of future operating expenditures.
Stronger economic performance and conservative fiscal management have allowed
Georgia to generate a general fund surplus each year since 1993. We believe
Georgia's economy should continue these positive trends through the remainder of
the 1990s.
GRAPHIC MATERIAL 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not represent Standard & Poor's rating of the fund.
++Source: Standard & Poor's Creditweek Municipal, 5/6/96.
Portfolio Notes
The fund remained fully invested during the reporting period, adding
high-quality bonds. There were fewer new issues offered during the six-month
period, which reflects a national trend that seems to be spurred by efforts to
cut taxes. This low supply, combined with a larger number of current issues
being called or maturing, resulted in a supply-demand imbalance that reduced the
difference between yields on lower- and higher-rated issues.
By purchasing the higher-quality issues, we maintained a competitive yield and
improved the portfolio's credit quality. As of August 31, 1996, 80.5% of the
fund was invested in AAA and AA bonds. Additionally, we continued to sell
lower-yielding bonds and, when possible, replaced them with higher-yielding
issues.
Our investment strategy is to focus the fund's purchases on issues selling at a
slight discount. We feel this approach should afford our investors high overall
income and a relatively steady share value.
Franklin Georgia Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 26.1%
Housing 10.8%
Pre-Refunded 10.1%
Hospitals 9.8%
General Obligation 8.2%
Industrial 8.0%
Education 7.0%
Transportation 6.2%
Sales Tax 5.1%
Other Revenue 4.2%
Certificates of Participation 3.7%
Health Care .8%
For a complete list of portfolio holdings, please see page 80.
Performance Summary
Class I
The Franklin Georgia Tax-Free Income Fund's share price, as measured by net
asset value, decreased 21 cents from $11.88 on February 29, 1996, to $11.67 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.22%,
based on an annualization of the current monthly dividend of 5.3 cents ($0.053)
per share and the maximum offering price of $12.19 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Georgia state personal income tax bracket of 43.2% would need to
earn 9.19% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Georgia Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.5 cents
April 5.5 cents
May 5.5 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents++
Total 33.0 cents
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 5.5 cents ($0.055) to 5.3 cents ($0.053) per share on August 22, 1996. The
8/31/96 distribution rate has been calculated using the new dividend.
Franklin Georgia Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.10% 40.71% 99.65%
Average Annual Total Return2 0.64% 6.15% 7.46%
Distribution Rate3 5.22%
Taxable Equivalent Distribution Rate4 9.19%
30-Day Standardized Yield5 4.65%
Taxable Equivalent Yield4 8.19%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.3 cent per share monthly dividend
and the maximum offering price of $12.19 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Georgia state personal income tax rate of 43.2%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and
capital gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Georgia Tax-Free Income Fund's share price, as measured by net
asset value, decreased 20 cents from $11.92 on February 29, 1996, to $11.72 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 4.51%,
based on an annualization of the current monthly dividend of 4.45 cents
($0.0445) per share and the offering price of $11.84 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Georgia state personal income tax bracket of 43.2% would need to
earn 7.94% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Georgia Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.09 cents++
April 4.93 cents
May 4.93 cents
June 4.93 cents
July 4.65 cents
August 4.65 cents+++
Total 29.18 cents
GRAPHIC MATERIAL 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++The March dividend includes both a regular dividend of 4.92 cents per share,
which increased from 4.9 and an adjustment of +.17 cents to reconcile the 12b-1
differential between Class I and Class II shares.
+++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 4.65 cents ($0.0465) to 4.45 cents ($0.0445) per share on August 22, 1996.
The 8/31/96 distribution rate has been calculated using the new dividend.
Franklin Georgia Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.60% 8.09%
Average Annual Total Return2 2.56% 4.44%
Distribution Rate3 4.51%
Taxable Equivalent Distribution Rate4 7.94%
30-Day Standardized Yield5 4.23%
Taxable Equivalent Yield4 7.45%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 4.45 cent per share monthly dividend and the
offering price of $11.84 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Georgia state personal income tax rate of 43.2%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Kentucky
state personal income taxes through a portfolio consisting primarily of Kentucky
municipal bonds.*
Commonwealth Update
During the six-month period ended August 31, 1996, Kentucky's Infrastructure
Authority issues maintained an A- rating and its State Property & Building
Commission issues an A+, from Standard & Poor's(R), a national rating agency.+
The ratings on these appropriation-backed issues (Kentucky no longer issues
general obligation debt) are based on Standard & Poor's assessment of Kentucky's
steadily growing economic base, improving financial position and manageable debt
load.
Since 1993, when Standard & Poor's issued a negative outlook on Kentucky's debt,
the commonwealth has made balancing its budget a top priority. Its financial
performance has continually improved, and the commonwealth now has a healthy
reserve. Although still fairly dependent upon agriculture and heavy
manufacturing, Kentucky's economy is moving more into services and modern
manufacturing. The commonwealth offers several benefits attractive to businesses
including a low cost-structure, pro-business regulatory environment and high
quality of life.++
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not indicate Standard & Poor's rating of the fund.
++Source: Standard & Poor's Creditweek Municipal, 7/15/96.
The supply of Kentucky municipal bonds in the first half of 1996 was $485.7
million -- just under one-third the debt issued for all of 1995. Because the
demand for Kentucky's bonds is expected to outweigh the supply, we believe
Kentucky's municipal bonds will remain attractive investments.
Franklin Kentucky Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 20.4%
Hospitals 13.8%
Other Revenue 13.6%
Housing 13.2%
Transportation 10.4%
Education 9.8%
Industrial 9.3%
Certificates of Participation 7.5%
General Obligation 1.1%
Pre-Refunded .9%
For a complete list of portfolio holdings, please see page 84.
Portfolio Notes
During the six-month reporting period, roughly 38% of Kentucky's bonds that came
to market were insured. Since the slightly higher yields on lower-quality issues
were not enough to justify the added credit risk, we took advantage of the
situation by purchasing many insured bonds. As of August 31, more than 54% of
your fund was invested in issues rated AAA, and 42% of the issues were insured.
We found two of the most attractive opportunities in the primary market (new
issues). These two issues were the Kenton County for Cincinnati-Northern
Kentucky Airport and the Kentucky Single Family Housing bonds.
By employing Franklin's philosophy of investing for current income, we also
increased the average yield of the portfolio slightly from 6.14% on February 29,
1996, to 6.17% on August 31, 1996.
Performance Summary
The Franklin Kentucky Tax-Free Income Fund's share price, as measured by net
asset value, decreased 25 cents from $11.04 on February 29, 1996, to $10.79 on
August 31, 1996. At the end of this reporting period, the fund's distribution
rate was 5.43%, based on an annualization of the current monthly dividend of 5.1
cents ($0.0510) per share and the maximum offering price of $11.27 on August 31,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, an investor in the maximum
combined federal and Kentucky state personal income tax bracket of 43.2% would
need to earn 9.56% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Kentucky Tax-Free Income Fund
Dividend Distributions (3/1/96 - 8/31/96)+
Dividend
Month per Share
March 5.1 cents
April 5.1 cents
May 5.1 cents
June 5.1 cents
July 5.1 cents
August 5.1 cents
Total 30.6 cents
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Kentucky Tax-Free Income Fund
Periods ended August 31, 1996
Since
Inception
1-Year 3-Year (10/12/91)
Cumulative Total Return1 5.73% 13.29% 40.73%
Average Annual Total Return2 1.22% 2.76% 6.29%
Distribution Rate3 5.43%
Taxable Equivalent Distribution Rate4 9.56%
30-Day Standardized Yield5 5.41%
Taxable Equivalent Yield4 9.53%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.1 cent per share monthly dividend
and the maximum offering price of $11.27 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Kentucky state personal income tax bracket of 43.2%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge, with dividends reinvested at the public offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund eliminated
the sales charge on reinvested dividends and implemented a plan of distribution
under Rule 12b-1, which affects subsequent 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 fund's manager 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 this waiver, the fund's distribution rate
would have been lower, and yield for the period would have been 4.94%. The fee
waiver may be discontinued at any time upon notice to the fund's Board of
Trustees.
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Louisiana
state personal income taxes through a portfolio consisting primarily of
Louisiana municipal bonds.*
State Update
During the six-month period ended August 31, 1996, Louisiana's general
obligation debt maintained its A- rating from Standard & Poor's(R), a national
rating agency.+ The rating is based on Standard & Poor's assessment of
Louisiana's moderately high debt and cyclical economy.
Since 1988, Louisiana's economic profile has improved from the sharp downturn
caused by the collapse of the oil and gas industry in the early- to mid-1980s.
However, industrial diversity remains below average, and the state is heavily
reliant on the oil and gas industry for employment. On a per-capita basis,
Louisiana's income level is only 87% of the national average, while its
per-capita debt ($837) is nearly twice the national median of $431.++
Louisiana has experienced better-than-expected economic performance, which has
allowed the state to reduce some of its debt. The current estimates of 1996
revenues appear to be ahead of budget, and the state also received a much-needed
budget relief in the form of continued federal Medicaid funding.
GRAPHIC MATERIAL 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking forward, we expect Louisiana's financial position to continue to improve
as its economy further stabilizes.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not indicate Standard & Poor's rating of the fund.
++Source: Moody's Municipal Credit Report, 5/21/96.
Portfolio Notes
We concentrated purchases during the six-month reporting period in AAA-rated
bonds, since the slightly higher yields available on BBB-rated bonds were not
enough to justify the extra credit risk. On August 31, 56% of the fund was
invested in AAA securities.
We increased our holdings in high essential-use education bonds from 1% to 8.3%
of total long-term investments. During the last six months, we participated in
issues of Louisiana State University and Tulane University. As rates on the
30-year Treasury bond rose from 6.48% to 7.13%, our income-oriented approach to
tax-free investing helped the fund perform well.
Franklin Louisiana Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 21.8%
Pre-Refunded 16.9%
Housing 15.6%
Hospitals 10.7%
Other Revenue 9.9%
Education 8.3%
Industrial 6.5%
Sales Tax Bonds 4.2%
General Obligation 3.6%
Certificates of Participation 1.5%
Transportation 1.0%
For a complete list of portfolio holdings, please see page 87.
Performance Summary
Class I
The Franklin Louisiana Tax-Free Income Fund's share price, as measured by net
asset value, decreased 17 cents from $11.32 on February 29, 1996, to $11.15 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.57%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $11.64 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Louisiana state personal income tax bracket of 43.2% would need to
earn 9.81% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Louisiana Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.4 cents
April 5.4 cents
May 5.4 cents
June 5.4 cents
July 5.4 cents
August 5.4 cents
Total 32.4 cents
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
Franklin Louisiana Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.81% 39.21% 97.60%
Average Annual Total Return2 1.27% 5.92% 7.33%
Distribution Rate3 5.57%
Taxable Equivalent Distribution Rate4 9.81%
30-Day Standardized Yield5 5.06%
Taxable Equivalent Yield4 8.91%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.4 cent per share monthly dividend
and the maximum offering price of $11.64 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Louisiana state personal income tax rate of 43.2%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Louisiana Tax-Free Income Fund's share price, as measured by net
asset value, decreased 17 cents from $11.37 on February 29, 1996, to $11.20 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.22%,
based on an annualization of the current monthly dividend of 4.92 cents ($.0492)
per share and the offering price of $11.31 on August 31, 1996. This double
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
Louisiana state personal income tax bracket of 43.2% would need to earn 9.19%
from a taxable investment to match the fund's tax-free distribution rate.
Franklin Louisiana Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 4.85 cents++
April 4.85 cents
May 4.85 cents
June 4.85 cents
July 4.92 cents
August 4.92 cents
Total 29.24 cents
GRAPHIC MATERIAL 18 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++Increased from 4.8 cents per share.
Franklin Louisiana Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 5.25% 8.83%
Average Annual Total Return2 3.24% 5.01%
Distribution Rate3 5.22%
Taxable Equivalent Distribution Rate4 9.19%
30-Day Standardized Yield5 4.67%
Taxable Equivalent Yield4 8.22%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 4.92 cent per share monthly dividend and the
offering price of $11.31 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Louisiana state personal income tax rate of 43.2%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN MARYLAND TAX-FREE INCOME FUND
Your Fund's 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.*
State Update
During the six-month period ended August 31, 1996, Maryland's general obligation
bonds maintained the highest rating -- AAA -- from Standard & Poor's(R), a
national rating agency.+ This high rating reflects Standard & Poor's favorable
outlook on Maryland's diverse economy, relatively low unemployment, sound fiscal
policy and manageable debt burden.
Maryland's diverse economy is led by three sectors: services (31.7% of total
employment), trade (24.3%) and government (19.4%).++ Although the state's
unemployment rate remains below the national average, job losses in key sectors,
such as financial services and federal government, have affected employment and
economic growth in 1996. Nonetheless, Maryland's conservative financial
management has allowed it to increase its financial reserves. We believe
Maryland's prudent financial and debt management makes its municipal bonds
attractive investments.
GRAPHIC MATERIAL 19 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not indicate Standard & Poor's rating of the fund.
++Standard & Poor's Creditweek Municipal, 6/10/96.
Portfolio Notes
During the six-month reporting period, we focused on purchasing primarily
higher-grade bonds (A or better), since we believed the slightly higher yields
available on BBB-rated bonds were not enough to compensate for the added credit
risk. We also reduced the percentage of pre-refunded bonds** in the portfolio
somewhat dramatically, from 20.5% in February to 11.1% on August 31, 1996. The
proceeds from selling these bonds were reinvested to help improve the fund's
call protection and its income-earning ability. This strategy increased the
weighted-average life-to-first-call of the fund from 6.61 years on February 29,
1996, to 6.83 years on August 31, 1996.
**Pre-refunded bonds have a higher credit security and shorter maturity than
they did when first issued, and thus tend to sell at higher prices. See page 6
for more information on pre-refunded bonds.
Franklin Maryland Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Housing 22.8%
Utilities 20.5%
Other Revenue 13.0%
Pre-Refunded 11.1%
Hospitals 9.2%
Certificates of Participation 7.3%
Education 6.7%
General Obligation 5.1%
Transportation 4.3%
For a complete list of portfolio holdings, please see page 91.
Performance Summary
Class I
The Franklin Maryland Tax-Free Income Fund's share price, as measured by net
asset value, decreased 25 cents from $11.38 on February 29, 1996, to $11.13 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.37%,
based on an annualization of the current monthly dividend of 5.2 cents ($0.052)
per share and the maximum offering price of $11.62 on August 31,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, an investor in the maximum
combined federal and Maryland state personal income tax bracket of 44.4% would
need to earn 9.66% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Maryland Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.2 cents
April 5.2 cents
May 5.2 cents
June 5.2 cents
July 5.2 cents
August 5.2 cents
Total 31.2 cents
GRAPHIC MATERIAL 20 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
Franklin Maryland Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (10/3/88)
Cumulative Total Return1 4.90% 42.14% 77.35%
Average Annual Total Return2 0.42% 6.37% 6.92%
Distribution Rate3 5.37%
Taxable Equivalent Distribution Rate4 9.66%
30-Day Standardized Yield5 5.04%
Taxable Equivalent Yield4 9.07%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.2 cent per share monthly dividend
and the maximum offering price of $11.62 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Maryland state personal income tax rate of 44.4%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Maryland Tax-Free Income Fund's share price, as measured by net
asset value, decreased 24 cents from $11.44 on February 29, 1996, to $11.20 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 4.9%,
based on an annualization of the current monthly dividend of 4.62 cents
($0.0462) per share and the offering price of $11.31 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Maryland state personal income tax bracket of 44.4% would need to
earn 8.82% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Maryland Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.12 cents++
April 4.65 cents
May 4.65 cents
June 4.65 cents
July 4.62 cents
August 4.62 cents
Total 28.31 cents
GRAPHIC MATERIAL 21 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++The March dividend includes both a regular dividend of 4.65 cents per share
and an adjustment of +.47 cents to reconcile the 12b-1 differential between
Class I and Class II shares.
Franklin Maryland Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.66% 9.32%
Average Annual Total Return2 2.66% 5.36%
Distribution Rate3 4.90%
Taxable Equivalent Distribution Rate4 8.82%
30-Day Standardized Yield5 4.64%
Taxable Equivalent Yield4 8.35%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 4.62 cent per share monthly dividend and the
offering price of $11.31 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Maryland state personal income tax rate of 44.4%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN MISSOURI TAX-FREE INCOME FUND
Your Fund's 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.*
State Update
During the six-month period ended August 31, 1996, Missouri's general obligation
debt maintained the highest possible AAA-rating from Standard & Poor's(R), a
national rating agency.+ The rating is based on Standard & Poor's favorable
assessment of Missouri's low debt burden, prudent fiscal management and
diversified economy.
The state's economic expansion has outpaced the national average in terms of
employment growth and increasing personal-income levels. Personal income is
expected to increase 5.1% in 1996 and 4.4% in 1997.++ Behind this growth is an
increase in service-sector jobs, primarily in health care, computer services and
gaming.
The state's strong economic performance and prudent fiscal management have
allowed Missouri's general fund to post its fourth year of surplus.
Additionally, Missouri's reluctance to issue general obligation debt results in
per-capita debt burden of only $247, nearly half the $431 national average.++
GRAPHIC MATERIAL 22 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not indicate Standard & Poor's rating of the fund.
++Source: Standard & Poor's Creditweek Municipal, 3/18/96
Portfolio Notes
During the six-month reporting period, we focused on selling a percentage of the
portfolio's pre-refunded bonds and reinvested the proceeds in bonds with better
call protection. Our exposure to pre-refunded bonds decreased from 22.6% on
February 29, 1996, to 13.9% on August 31, 1996, which maintained the
weighted-average life-to-first-call at 6.54 years. This strategy was designed to
extend the fund's income-earning potential.
Roughly 43% of Missouri's bonds that came to market during the reporting period
were insured. Since the yields on lower-quality issues were not high enough to
justify their added credit risk, we took advantage of this situation and
purchased many insured bonds. As of August 31, 52.5% of the portfolio was
invested in AAA securities, and approximately 40% of the issues were insured.
Issues in which we participated included the Missouri Health and Educational
Facilities for St. Louis University (insured), Missouri Environmental Facility
for the State Revolving Fund, and the St. Louis Municipal Financial Corporation
Lease Revenue Bond for the Justice Center (insured).
The supply of new Missouri bonds during the six-month period was $1.589 billion,
about 77% of the total issued for all of 1995. Because the supply for the
remainder of the year is expected to be low, Missouri bonds should remain
attractive investments.
Franklin Missouri Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Certificates of Participation 24.0%
Hospitals 14.5%
Pre-Refunded 13.9%
Utilities 10.0%
Transportation 9.6%
Housing 8.6%
Other Revenue 7.8%
Health Care 4.8%
Industrial 2.2%
Education 1.9%
Tax Allocation Bonds 1.4%
General Obligation 1.3%
For a complete list of portfolio holdings, please see page 94.
Performance Summary
Class I
The Franklin Missouri Tax-Free Income Fund's share price, as measured by net
asset value, decreased 27 cents from $11.94 on February 29, 1996, to $11.67 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.32%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $12.19 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Missouri state personal income tax bracket of 43.2% would need to
earn 9.37% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Missouri Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.4 cents
April 5.4 cents
May 5.4 cents
June 5.4 cents
July 5.4 cents
August 5.4 cents
Total 32.4 cents
GRAPHIC MATERIAL 23 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
Franklin Missouri Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.52% 42.98% 99.76%
Average Annual Total Return2 1.02% 6.49% 7.46%
Distribution Rate3 5.32%
Taxable Equivalent Distribution Rate4 9.37%
30-Day Standardized Yield5 4.88%
Taxable Equivalent Yield4 8.59%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.4 cent per share monthly dividend
and the maximum offering price of $12.19 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Missouri state personal income tax rate of 43.2%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Missouri Tax-Free Income Fund's share price, as measured by net
asset value, decreased 27 cents from $11.97 on February 29, 1996, to $11.70 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 4.98%,
based on an annualization of the current monthly dividend of 4.91 cents
($0.0491) per share and the offering price of $11.82 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Missouri state personal income tax bracket of 43.2% would need to
earn 8.77% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Missouri Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.03 cents++
April 4.82 cents
May 4.82 cents
June 4.82 cents
July 4.91 cents
August 4.91 cents
Total 29.31 cents
GRAPHIC MATERIAL 24 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++The March dividend includes both a regular dividend of 4.82 cents per share,
which increased from 4.8 cents and an adjustment of +.21 cents to reconcile the
12b-1 differential between Class I and Class II shares.
Franklin Missouri Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 5.00% 8.76%
Average Annual Total Return2 2.95% 4.92%
Distribution Rate3 4.98%
Taxable Equivalent Distribution Rate4 8.77%
30-Day Standardized Yield5 4.48%
Taxable Equivalent Yield4 7.89%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 4.91 cent per share monthly dividend and the
offering price of $11.82 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Missouri state personal income tax rate of 43.2%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
Your Fund's 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.*
State Update
During the six-month period ended August 31, 1996, North Carolina's general
obligation bonds maintained the highest possible rating from Standard &
Poor's(R) -- AAA.+ This high rating reflects Standard & Poor's favorable
assessment of North Carolina's increasingly diversified economy, low debt levels
and sound financial performance.
North Carolina's economy, historically dominated by textiles, furniture and
tobacco, continues to diversify into financial services and trade industries.
Two of the country's leading financial corporations, NationsBank and First
Union, are headquartered in Charlotte, North Carolina. Through the remainder of
the 1990s, the non-manufacturing industries (financial services, trade,
construction) are expected to show the strongest growth.++
GRAPHIC MATERIAL 25 OMITTED - SEE APPENDIX AT END OF DOCUMENT
North Carolina's debt levels remain low on a per-capita basis. The state's
efforts to cut expenditures and limit future spending growth should help balance
its future infrastructure needs with expected revenues.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not indicate Standard & Poor's rating of the fund.
++Standard & Poor's Creditweek Municipal, 4/8/96.
Portfolio Notes
During the six-month reporting period, we focused on your fund's core strategy:
maximizing tax-free income distributions while preserving equity. We purchased
primarily high-grade bonds (A or better), since we felt the slightly higher
yields on BBB-rated bonds were not enough to compensate for the extra credit
risk. On August 31, 1996, 89% of your fund was invested in high-grade bonds.
To extend the fund's income-earning potential, we also sold a number of
pre-refunded bonds.** The proceeds were reinvested in bonds which offered
improved call protection.
**Pre-refunded bonds have a higher credit security and shorter maturity than at
first issue, and thus tend to sell at higher prices. See page 6 for more
information on pre-refunded bonds.
Franklin North Carolina Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 27.2%
Housing 15.4%
Certificates of Participation 13.3%
Hospitals 12.9%
Pre-Refunded 8.2%
Other Revenue 5.5%
Industrial 5.0%
General Obligation 4.8%
Health Care 3.4%
Education 3.2%
Transportation 1.1%
For a complete list of portfolio holdings, please see page 99.
Performance Summary
Class I
The Franklin North Carolina Tax-Free Income Fund's share price, as measured by
net asset value, decreased 22 cents from $11.75 on February 29, 1996, to $11.53
on August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.18%,
based on an annualization of the current monthly dividend of 5.2 cents ($0.052)
per share and the maximum offering price of $12.04 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and North Carolina state personal income tax bracket of 44.3% would need
to earn 9.30% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin North Carolina Tax-Free Income Fund -Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.4 cents
April 5.4 cents
May 5.4 cents
June 5.2 cents
July 5.2 cents
August 5.2 cents
Total 31.8 cents
GRAPHIC MATERIAL 26 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
Franklin North Carolina Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.26% 39.79% 98.71%
Average Annual Total Return2 0.81% 6.00% 7.41%
Distribution Rate3 5.18%
Taxable Equivalent Distribution Rate4 9.30%
30-Day Standardized Yield5 4.95%
Taxable Equivalent Yield4 8.88%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.2 cent per share monthly dividend
and the maximum offering price of $12.04 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal personal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin North Carolina Tax-Free Income Fund's share price, as measured by
net asset value, decreased 22 cents from $11.80 on February 29, 1996, to $11.58
on August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 4.82%,
based on an annualization of the current monthly dividend of 4.7 cents ($0.047)
per share and the offering price of $11.70 on August 31, 1996. This tax-free
rate is generally higher than the after-tax return on a comparable taxable
investment. For example, an investor in the maximum combined federal and North
Carolina state personal income tax bracket of 44.3% would need to earn 8.65%
from a taxable investment to match the fund's tax-free distribution rate.
Franklin North Carolina Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.05 cents++
April 4.83 cents
May 4.83 cents
June 4.64 cents
July 4.70 cents
August 4.70 cents
Total 28.75 cents
GRAPHIC MATERIAL 27 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++The March dividend includes both a regular dividend of 4.83 cents per share,
which increased from 4.8 cents, and an adjustment of +.22 cents to reconcile the
12b-1 differential between Class I and Class II shares.
Franklin North Carolina Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.74% 8.27%
Average Annual Total Return2 2.68% 4.56%
Distribution Rate3 4.82%
Taxable Equivalent Distribution Rate4 8.65%
30-Day Standardized Yield5 4.57%
Taxable Equivalent Yield4 8.20%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 4.7 cent per share monthly dividend and the
offering price of $11.70 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and North Carolina state personal income tax rate of 44.3%,
based on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN TEXAS TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal income tax
through a portfolio consisting primarily of Texas municipal bonds.*
State Update
During the six-month period ended August 31, 1996, Standard & Poor's(R), the
national rating agency, held a positive outlook on Texas' general obligation
debt, which maintained an AA rating.+ This strong rating is based on Standard &
Poor's favorable outlook on the state's increasingly diversified economy, low
debt levels, and positive employment and economic forecasts.
Texas continued to lead the nation in terms of economic expansion, adding more
new jobs in 1995 (279,000) than any other state.++ Strong employment gains are
expected to continue as the Texas economy diversifies from the oil and gas
industry into other sectors including construction, high tech, services and
trade. Over the next two years, many experts believe Texas' economy should
continue to out-perform the rest of the nation.
Governor Bush continues to strive toward reforming the current state
property-tax system. Currently, for a typical homeowner, property taxes equal
about one-third of his/her total housing cost. At this time, the state is
evaluating other ways to generate the annual $15.4 billion that comes from
property taxes.
GRAPHIC MATERIAL 28 OMITTED - SEE APPENDIX AT END OF DOCUMENT
However, none of the proposed methods -- a business gross receipts tax, value
added tax, or increased/ expanded sales tax -- seems to suffice. If state
leaders find a suitable alternative, Texas could become the first state to
operate without a property tax or state income tax.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
+This does not indicate Standard & Poor's rating of the fund.
++Source: Standard & Poor's Credit Week Municipal, 6/17/96.
Portfolio Notes
During the reporting period, the spread between yields on higher-rated and
lower-rated issues decreased. Therefore, we focused our efforts on purchasing
AAA-rated bonds, since we felt the slightly higher yields available on BBB-rated
bonds were not enough to compensate for the added credit risk. As of August 31,
1996, 69.8% of your fund was invested in AAA securities. Purchases also were
concentrated in high essential-use utility and education bonds.
As of August 31, more than 25% of the fund was invested in electric utility
revenue bonds, including the Austin Utilities, Red River Authority, and Sabine
River Electric Revenue issues. Two of the educational issues we purchased were
the Castlebury and Joshua Independent School District permanent school bonds.
We also sold a percentage of the portfolio's pre-refunded bonds** and reinvested
the proceeds in bonds offering improved call protection. In doing this, we
reduced the percentage of pre-refunded bonds from 18.9% on February 29, 1996, to
12% on August 31, 1996, and increased the fund's weighted-average
life-to-first-call from 5.08 to 5.96 years. Additionally, our income-oriented
approach to tax-free investing helped the fund perform well, as rates on the
30-year Treasury bond rose from 6.48% to 7.13% during the reporting period.+
Franklin Texas Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 26.0%
Industrial 12.1%
Pre-Refunded 12.0%
Education 11.1%
Hospitals 10.4%
Transportation 8.5%
Other Revenue 8.2%
Housing 6.8%
Health Care 3.5%
General Obligation 1.4%
For a complete list of portfolio holdings, please see page 104.
**Pre-refunded bonds have a higher credit security and shorter maturity than
they did at first issue, and thus tend to sell at a premium. See page 6 for more
information on pre-refunded bonds.
+Source: Micropal.
Performance Summary
Class I
The Franklin Texas Tax-Free Income Fund's share price, as measured by net asset
value, decreased 16 cents from $11.58 on February 29, 1996, to $11.42 on August
31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.63%,
based on an annualization of the current monthly dividend of 5.6 cents ($0.056)
per share and the maximum offering price of $11.93 on August 31, 1996. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum federal income tax
bracket of 39.6% would need to earn 9.32% from a taxable investment to match the
fund's tax-free distribution rate.
Franklin Texas Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.6 cents
April 5.6 cents
May 5.6 cents
June 5.6 cents
July 5.6 cents
August 5.6 cents
Total 33.6 cents
GRAPHIC MATERIAL 29 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
Franklin Texas Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.50% 41.64% 102.47%
Average Annual Total Return2 1.01% 6.29% 7.62%
Distribution Rate3 5.63%
Taxable Equivalent Distribution Rate4 9.32%
30-Day Standardized Yield5 4.75%
Taxable Equivalent Yield4 7.86%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.6 cent per share monthly dividend
and the maximum offering price of $11.93 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal personal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Texas Tax-Free Income Fund's share price, as measured by net asset
value, decreased 15 cents from $11.68 on February 29, 1996, to $11.53 on August
31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.20%,
based on an annualization of the current monthly dividend of 5.05 cents
($0.0505) per share and the offering price of $11.65 on August 31, 1996. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment.
For example, an investor in the maximum federal personal income tax bracket of
39.6% would need to earn 8.61% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Texas Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.21 cents++
April 5.04 cents
May 5.04 cents
June 5.04 cents
July 5.05 cents
August 5.05 cents
Total 30.43 cents
GRAPHIC MATERIAL 30 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 5.03 cents per share,
which increased from 5.0 cents and an adjustment of +.18 cents to reconcile the
12b-1 differential between Class I and Class II shares.
Franklin Texas Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 5.40% 9.54%
Average Annual Total Return2 3.33% 5.54%
Distribution Rate3 5.20%
Taxable Equivalent Distribution Rate4 8.61%
30-Day Standardized Yield5 4.33%
Taxable Equivalent Yield4 7.17%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 5.05 cent per share monthly dividend and the
offering price of $11.65 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal personal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Your Fund's 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.*
Commonwealth Update
During the six-month reporting period, Virginia's general obligation bonds
continued to receive the highest quality rating from both Moody's (Aaa) and
Standard & Poor's(R) (AAA), two leading national rating agencies.ss. These high
ratings are based on the rating agencies' favorable assessments of Virginia's
low debt levels, sound financial management and increasingly diverse economic
base.
Virginia has one of the lowest unemployment rates in the country and is expected
to experience fairly strong employment growth over the next few years.+ The
commonwealth's stable economy continues to shift its reliance on defense-related
industries to service-related industries. The state has successfully attracted
companies such as Motorola Inc., IBM and Toshiba, who will build major plants in
Virginia over the next several years.++
In continuing its conservative debt-issuance policy, Virginia concentrated on
funding essential purpose projects. The majority of the commonwealth's issuance
has been for the construction of regional jail facilities, and to finance
capital projects at educational and health facilities. The supply of Virginia
municipal issues declined slightly for the reporting period, and the demand for
Virginia bonds continued to be strong.
GRAPHIC MATERIAL 31 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
ss.This does not indicate Standard & Poor's rating of the fund.
+Source: Standard & Poor's Creditweek Municipal, 5/13/96.
++Source: Moody's Municipal Credit Report, 5/15/96.
Portfolio Notes
The fund participated in one of Virginia's largest issues brought to market
during the reporting period, a $138-million issue by the Hampton Roads Regional
Jail Project. As with many of our holdings, we purchased the Hampton Regional
Jail Project bond in the primary market (as a new issue), which gave us the
opportunity to create a more attractive structure for the portfolio.
An overall fund strategy during the last six months was to sell certain
securities with shorter calls and replace them with securities offering better
call protection. Increasing the call protection may help to extend the
income-producing ability of the fund. We maintained your fund's high credit
quality, which was more than 73% invested in AAA- and AA-rated securities on
August 31, 1996.
Franklin Virginia Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 19.1%
Housing 18.0%
Pre-Refunded 16.2%
Hospitals 14.7%
Transportation 11.6%
Industrial 6.4%
Education 4.8%
Other Revenue 3.2%
Certificates of Participation 3.0%
General Obligation 2.0%
Health Care .6%
Miscellaneous .4%
For a complete list of portfolio holdings, please see page 108.
Performance Summary
Class I
The Franklin Virginia Tax-Free Income Fund's share price, as measured by net
asset value, decreased 22 cents from $11.72 on February 29, 1996, to $11.50 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 5.4%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $12.01 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Virginia state personal income tax bracket of 43.1% would need to
earn 9.49% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Virginia Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.4 cents
April 5.4 cents
May 5.4 cents
June 5.4 cents
July 5.4 cents
August 5.4 cents
Total 32.4 cents
GRAPHIC MATERIAL 32 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
Franklin Virginia Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.15% 41.98% 100.73%
Average Annual Total Return2 0.71% 6.34% 7.52%
Distribution Rate3 5.40%
Taxable Equivalent Distribution Rate4 9.49%
30-Day Standardized Yield5 4.84%
Taxable Equivalent Yield4 8.51%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.4 cent per share monthly dividend
and the maximum offering price of $12.01 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Virginia state personal income tax rate of 43.1%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Virginia Tax-Free Income Fund's share price, as measured by net
asset value, decreased 22 cents from $11.77 on February 29, 1996, to $11.55 on
August 31, 1996.
At the end of this reporting period, your fund's distribution rate was 4.99%,
based on an annualization of the current monthly dividend of 4.85 cents
($0.0485) per share and the offering price of $11.67 on August 31, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Virginia state personal income tax bracket of 43.1% would need to
earn 8.77% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Virginia Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 4.92 cents++
April 4.83 cents
May 4.83 cents
June 4.83 cents
July 4.85 cents
August 4.85 cents
Total 29.11 cents
GRAPHIC MATERIAL 33 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the fund during the reporting
period.
++The March dividend includes both a regular dividend of 4.83 cents per share,
which increased from 4.8 cents, and an adjustment of +.09 cents to reconcile the
12b-1 differential between Class I and Class II shares.
Franklin Virginia Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.51% 8.61%
Average Annual Total Return2 2.46% 4.87%
Distribution Rate3 4.99%
Taxable Equivalent Distribution Rate4 8.77%
30-Day Standardized Yield5 4.43%
Taxable Equivalent Yield4 7.79%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Based on an annualization of the 4.85 cent per share monthly dividend and the
offering price of $11.67 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Virginia state personal income tax rate of 43.1%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Alabama Tax-Free Income Fund (Note 1)
Long Term Investments 97.9%
<S> <C> <C>
$ 1,500,000 Alabama Building Renovation Financing Authority Revenue, 7.45%, 09/01/11...................... $ 1,656,615
75,000 Alabama HFA, MF Residential Development, Bragg, Series B, 7.75%, 07/15/31..................... 77,895
Alabama HFA, SFMR, GNMA Secured,
490,000 Series A, 7.50%, 10/01/10.................................................................... 512,726
125,000 Series A, 8.00%, 10/01/20.................................................................... 129,709
3,440,000 Series A-1, 6.50%, 04/01/17.................................................................. 3,500,922
1,225,000 Series A-2, 6.80%, 04/01/25.................................................................. 1,266,662
285,000 Series C, 7.45%, 10/01/21.................................................................... 292,689
1,090,000 Series C-2, 7.75%, 04/01/22 ................................................................. 1,145,143
1,395,000 Alabama Judicial Building Authority Revenue, Judicial Facilities Project, AMBAC Insured,
7.25%, 01/01/14 .............................................................................. 1,498,649
4,500,000 Alabama State Docks Department, Docks Facilities Revenue, MBIA Insured, 6.30%, 10/01/21....... 4,552,830
250,000 Alabama State University Dormitory Revenue, Pre-Refunded, 8.00%, 01/01/14 .................... 275,710
3,200,000 Alabama Water Pollution Control Authority, Revolving Fund Loan, Series B, 7.75%, 08/15/12..... 3,386,880
2,215,000 Alabaster Water and Gas Board Revenue, AMBAC Insured, 6.35%, 09/01/14 ........................ 2,318,330
750,000 Albertville GO, Warrants, MBIA Insured, 7.00%, 04/01/11 ...................................... 808,493
115,000 Alexander City GO, Warrants, Refunding, Series 1988, Pre-Refunded, 7.90%, 05/01/08............ 120,166
2,000,000 Alexander City Utility Revenue, Warrants, FSA Insured, 6.20%, 08/15/10 ....................... 2,089,160
250,000 Anniston Regional Medical Center Board, Hospital Revenue, Refunding, Northeast Alabama
Regional Medical Center Project, Series A, 7.70%, 07/01/08................................... 255,875
1,000,000 Athens Electric Revenue, Warrants, MBIA Insured, 6.00%, 06/01/25 ............................. 1,004,600
1,500,000 Athens Water and Sewer Revenue, Warrants, AMBAC Insured, 6.10%, 08/01/18...................... 1,542,540
1,550,000 Auburn Governmental Utility Services Corp., Waste Water Revenue, Merscot-Auburn L.P.,
FGIC Insured, 7.30%, 01/01/12 ............................................................... 1,652,796
2,000,000 Auburn University General Fee Revenue, Refunding, 7.00%, 06/01/11............................. 2,193,100
1,000,000 Bessemer Medical Clinic Board Revenue, Refunding, Bessemer Carraway Center, Series A,
MBIA Insured, 7.25%, 04/01/15 ............................................................... 1,075,510
500,000 Birmingham Airport Authority Revenue, Series 1990-A, AMBAC Insured, 7.375%, 07/01/10.......... 547,595
1,870,000 Birmingham Baptist Medical Center, Special Care Facilities Financing Authority Revenue,
Series A, MBIA Insured, 7.00%, 01/01/21 ..................................................... 2,000,750
Birmingham GO, Refunding,
145,000 8.00%, 10/01/15 ............................................................................. 152,394
1,000,000 Series B, 6.25%, 04/01/12 ................................................................... 1,037,740
1,000,000 Series B, 6.25%, 04/01/16 ................................................................... 1,031,530
Birmingham-Jefferson Civic Center Authority, Special Tax, Capital Outlay,
285,000 7.40%, 01/01/08 ............................................................................. 305,070
640,000 7.25%, 01/01/12 ............................................................................. 667,571
1,200,000 Birmingham Special Care Facilities Financing Authority Revenue, Health Care Medical Center East,
MBIA Insured, 7.00%, 07/01/12 ............................................................... 1,295,268
2,000,000 Birmingham Special Care Facilities Financing Authority Revenue, Refunding, Medical Center East,
MBIA Insured, 7.25%, 07/01/15 ............................................................... 2,041,780
3,250,000 Camden IDB, PCR, Facilities Revenue, Refunding, MacMillian Bloedel Project, Series A,
7.75%, 05/01/09 ............................................................................. 3,483,318
500,000 Citronelle IDB, PCR, Stauffer Chemical Project, Guaranteed by Imperial Chemical Plc.,
Series 1982, 8.00%, 12/01/12 ................................................................ 557,545
1,750,000 Colbert County Health Care Authority, Helen Keller Hospital, 8.75%, 06/01/09.................. 1,897,333
Columbia IDB, PCR, Refunding, Alabama Power Co. Project,
5,000,000 AMBAC Insured, 6.50%, 09/01/23 .............................................................. 5,182,450
105,000 Farley Keller Hospital, Series G, 7.40%, 11/01/16 ........................................... 107,292
Courtland IDB, Solid Waste Disposal Revenue, Champion International Corp. Project,
505,000 7.75%, 01/01/20 ............................................................................. 537,764
5,000,000 Series A, 6.50%, 09/01/25 ................................................................... 4,879,000
$ 4,000,000 Courtland IDBR, Refunding, Champion International Corp. Project, Series A, 7.20%, 12/01/13.... $ 4,300,760
2,000,000 Cullman Water Revenue, Warrants, Series A, AMBAC Insured, 6.20%, 10/01/12 .................... 2,054,740
2,000,000 Daphne Utilities Board, Water, Gas and Sewer Revenue, Refunding, Series A, FGIC Insured,
Pre-Refunded, 7.35%, 06/01/20 ................................................................ 2,215,380
200,000 Decatur GO, Warrants, Series A, Pre-Refunded, 7.60%, 05/01/09 ................................ 208,600
1,400,000 Demopolis HDC, MFHR, Refunding, Series 1990-A, CGIC Insured, 7.625%, 8/01/19.................. 1,451,380
3,500,000 Fairfield IDB, Environmental Improvement Revenue, Refunding, USX Corp. Project, Series A,
6.70%, 12/01/24 ............................................................................. 3,534,370
3,000,000 Fairfield, Warrants, AMBAC Insured, 6.30%, 06/01/22 .......................................... 3,111,030
2,000,000 Florence GO, Warrants, Series A, MBIA Insured, 5.75%, 09/01/15 ............................... 1,959,280
1,565,000 Gadsden HDC, MFR, Refunding, Series A, 7.00%, 01/01/22 ....................................... 1,609,258
1,000,000 Guam Airport Authority Revenue, Refunding, Series A, 6.50%, 10/01/23 ......................... 1,006,730
1,935,000 Gulf Shores GO, Refunding, Warrants, AMBAC Insured, 6.00%, 09/01/21........................... 1,957,388
485,000 Homewood Special Care Facilities Financing Authority Revenue, Refunding, Lakeshore
Hospital Project, Series B, Pre-Refunded, 8.25%, 02/01/04 ................................... 513,523
2,070,000 Houston County Health Care Authority Revenue, Southeast Alabama Medical Center,
MBIA Insured, 6.125%, 10/01/12 .............................................................. 2,113,180
2,175,000 Huntsville Health Care Authority Facilities Revenue, Series B, MBIA Insured, 6.50%, 06/01/13.. 2,295,104
230,000 Huntsville Solid Waste Disposal Authority and Resource Recovery Revenue, FGIC Insured,
7.00%, 10/01/14 ............................................................................. 244,807
1,000,000 Jasper County Waterworks & Sewer Board, Water and Sewer Revenue, AMBAC Insured,
6.15%, 06/01/14 ............................................................................. 1,032,410
200,000 Jefferson County GO, Warrants, Pre-Refunded, 7.50%, 04/01/07 ................................. 213,614
200,000 Jefferson County Sewer Revenue, Warrants, ETM, 7.50%, 09/01/13 ............................... 215,948
440,000 Lauderdale County and City of Florence Public Hospital Board Revenue, Eliza Coffee
Memorial Hospital, 7.00%, 07/01/19 .......................................................... 445,658
1,255,000 LCM Housing Assistance Corp. Project, MFR, Refunding, Series A, 7.875%, 01/01/22.............. 1,301,284
1,050,000 Limestone County Water Authority Revenue, FGIC Insured, 7.70%, 12/01/19 ...................... 1,120,529
500,000 Madison County PBA Revenue, Warrants, 6.90%, 11/01/11 ........................................ 531,700
Madison GO, Warrants,
2,000,000 MBIA Insured, 6.00%, 04/01/23 ............................................................... 2,034,340
975,000 Series 1990, Pre-Refunded, 7.25%, 01/01/15 .................................................. 1,065,061
1,560,000 Series B, MBIA Insured, 6.25%, 02/01/15 ..................................................... 1,618,235
2,290,000 Madison School, Warrants, MBIA Insured, 6.25%, 02/01/14 ...................................... 2,375,486
Marshall County Health Care Authority Hospital Revenue,
2,530,000 Crossover Refunding, Guntersville-Arab Medical Center, 7.60%, 10/01/07 ...................... 2,718,181
10,810,000 Refunding, Boaz-Albertville Medical Center, 6.50%, 01/01/18 ................................. 10,294,795
2,500,000 Marshall County, Warrants, AMBAC Insured, Pre-Refunded, 7.00%, 02/01/12 ...................... 2,759,625
1,000,000 Mobile Airport Authority Revenue, Mae Project, 7.375%, 11/01/12 .............................. 1,005,920
1,500,000 Mobile Commission of Water and Sewer Revenue, Refunding, 6.50%, 01/01/09 ..................... 1,603,650
Mobile GO, Warrants, Pre-Refunded,
45,000 Capital Improvement, 7.90%, 08/15/11 ........................................................ 47,511
900,000 Convention Center Project, AMBAC Insured, 7.125%, 08/15/10 .................................. 993,726
1,000,000 Convention Center Project, AMBAC Insured, 7.125%, 08/15/20 .................................. 1,104,140
1,340,000 Mobile Housing Assistance Corp., MFHR, Refunding, Series 1990-A, CGIC Insured,
7.625%, 02/01/21............................................................................. 1,391,027
8,000,000 Mobile IDB, Mobile Energy Service Co. Project, Solid Waste Disposal Revenue, Refunding,
6.95%, 01/01/20 ............................................................................. 8,230,240
155,000 Montgomery Downtown RDA Mortgage Revenue, State of Alabama Project, BIG Insured,
Pre-Refunded, 7.75%, 10/01/13 ............................................................... 168,583
6,000,000 Montgomery Medical Clinic Board, Health Care Facility Revenue, Refunding, Jackson Hospital
& Clinic, AMBAC Insured, 6.00%, 03/01/26..................................................... 5,983,440
$ 5,750,000 Morgan County, Decatur Health Care Revenue, Refunding, Decatur General Hospital,
Connie Lee Insured, 6.375%, 03/01/24 ........................................................ $ 5,895,820
1,500,000 Moulton Waterworks Board, Water Revenue, Series A, 6.30%, 01/01/18 ........................... 1,424,250
Muscle Shoals GO, Refunding, Warrants, MBIA Insured,
1,725,000 5.80%, 08/01/16.............................................................................. 1,708,820
4,000,000 5.90%, 08/01/25.............................................................................. 3,955,960
Northeast Alabama Water, Sewer and Fire Protection District Revenue, AMBAC Insured,
2,000,000 6.375%, 05/01/22 ............................................................................ 2,075,080
30,000 Pre-Refunded, 7.90%, 05/01/15 ............................................................... 32,330
200,000 Northport GO, Warrants, FGIC Insured, Pre-Refunded, 7.70%, 12/01/13 .......................... 218,344
5,000,000 Oneonta Utilities Board Revenue, CGIC Insured, 6.90%, 11/01/24 ............................... 5,337,950
3,640,000 Orange Beach Water, Sewer and Fire Protection Authority Revenue, Pre-Refunded, 7.50%, 05/01/22 4,137,224
Pelham GO, Warrants, AMBAC Insured,
1,000,000 6.25%, 11/01/12 ............................................................................. 1,043,320
2,500,000 6.25%, 11/01/22 ............................................................................. 2,608,300
780,000 Piedmont IDB, IDR, Springs Industrial Project, 8.25%, 09/01/10 ............................... 846,807
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
500,000 7.90%, 07/01/07 ............................................................................. 543,015
175,000 7.875%, 07/01/17 ............................................................................ 189,978
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources, Refunding,
350,000 Series L, Pre-Refunded, 8.00%, 07/01/08 ..................................................... 380,394
15,000 Series L, Pre-Refunded, 8.40%, 07/01/15 ..................................................... 15,840
355,000 Series N, 7.00%, 07/01/07 ................................................................... 378,068
Puerto Rico Commonwealth Highway Authority Revenue,
155,000 Series P, Pre-Refunded, 8.125%, 07/01/13 .................................................... 168,797
600,000 Series R, 7.15%, 07/01/00 ................................................................... 647,130
175,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
7.90%, 07/01/07 ............................................................................. 187,581
300,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 ........ 329,691
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project,
7.50%, 12/01/23 ............................................................................. 217,514
40,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
7.875%, 07/01/16 ............................................................................ 42,106
Russell County PBA Revenue,
1,900,000 Phenix City Jail Project, Warrants, 7.125%, 01/01/14 ........................................ 1,909,595
200,000 Russell County Jail Project, Pre-Refunded, 8.50%, 01/01/14 .................................. 220,945
4,925,000 Tuscaloosa, Warrants, AMBAC Insured, 6.75%, 07/01/20 ......................................... 5,242,268
1,500,000 University of Alabama, Student Housing Revenue, Series A, MBIA Insured, Pre-Refunded,
7.10%, 06/01/15 ............................................................................. 1,670,520
5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant, Series C, MBIA Insured,
6.05%, 05/01/23 ............................................................................. 5,038,550
3,500,000 Wilsonville IDB, PCR, Refunding, Southern Electric Generating System, Series C, MBIA Insured,
6.75%, 02/01/15 ............................................................................. 3,711,260
--------------
Total Long Term Investments (Cost $176,551,458)............................................... 184,089,490
--------------
a Short Term Investments1.0%
Montgomery Baptist Medical Center, Special Care Facilities, Financing Authority Revenue,
VHA, Inc., AMBAC Insured, Weekly VRDN and Put,
300,000 Capital Series A, 3.40%, 12/01/30............................................................ 300,000
200,000 Capital Series E, 3.40%, 12/01/30............................................................ 200,000
100,000 Capital Series G, 3.40%, 12/01/30............................................................ 100,000
300,000 North Environmental Improvement Authority, PCR, DATES, Reynold Metals, Refunding,
Daily VRDN and Put, 3.70%, 12/01/20.......................................................... 300,000
Phenix City IDB, Environmental Improvement Revenue, Mead Coated Board Project,
Daily VRDN and Put,
$ 700,000 Refunding, Series B, 3.95%, 10/01/25......................................................... $ 700,000
300,000 Series A, 3.75%, 06/01/28.................................................................... 300,000
--------------
Total Short Term Investments (Cost $1,900,000)................................................ 1,900,000
--------------
Total Investments (Cost $178,451,458)98.9%.................................................... 185,989,490
Other Assets and Liablities, Net 1.1%........................................................ 2,034,340
--------------
Net Assets 100.0%............................................................................ $188,023,830
==============
At August 31, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$178,452,208 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 8,184,706
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (647,424)
--------------
Net unrealized appreciation................................................................... $ 7,537,282
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
DATES - Demand Adjustable Tax-Exempt Securities
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
L.P. - Limited Partnership
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
RDA - Redevelopment Agency
SFMR - Single Family Mortgage Revenue
VHA - Volunteer Hospital of America
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Florida Tax-Free Income Fund (Note 1)
Long Term Investments 97.9%
Bonds 94.4%
Alachua County Health Facilities Authority Revenue,
<S> <C> <C>
$ 6,705,000 Refunding, Santa Fe Health Care Facilities Project, Pre-Refunded, 7.60%, 11/15/13 .......... $ 7,569,006
10,000,000 Shands Teaching Hospital, Series A, MBIA Insured, 5.80%, 12/01/26........................... 9,830,900
5,755,000 Alachua County Public Improvement Revenue, Refunding, FSA Insured, 5.375%, 08/01/17.......... 5,440,604
2,000,000 Atlantic Beach Utilities Systems Revenue, MBIA Insured, 5.50%, 10/01/25...................... 1,905,300
11,205,000 Bay County Hospital System Revenue, Refunding, Bay Medical Center Project, 8.00%, 10/01/12... 12,500,634
Bay County Resource Recovery Revenue,
3,710,000 Refunding, Series A, MBIA Insured, 6.60%, 07/01/11 ......................................... 4,022,716
18,150,000 Refunding, Series B, MBIA Insured, 6.60%, 07/01/12 ......................................... 19,670,244
2,265,000 Series 1984, Pre-Refunded, 8.00%, 07/01/12.................................................. 2,340,266
Bay County Water System Revenue, Refunding, AMBAC Insured,
525,000 6.50%, 09/01/07 ............................................................................ 571,704
675,000 6.60%, 09/01/11 ............................................................................ 733,016
4,000,000 Boynton Beach Public Service Tax Revenue, MBIA Insured, Pre-Refunded, 7.50%, 11/01/10........ 4,450,760
5,000,000 Brevard County Health Facilities Authority Revenue, Refunding, Wuesthoff Memorial Hospital,
Series B, Pre-Refunded, 7.20%, 04/01/13 .................................................... 5,625,700
1,670,000 Brevard County HFA, SFMR, Refunding, Series B, FSA Insured, 7.00%, 03/01/13 ................. 1,749,642
4,415,000 Brevard County School Board COP, Series A, Refunding, AMBAC Insured, 5.40%, 07/01/11......... 4,326,479
2,250,000 Broward County Educational Facilities Authority Revenue, Refunding, Nova Southeastern
University Project, Connie Lee Insured, 6.125%, 04/01/17.................................... 2,275,020
Broward County Health Facility Authority Revenue, Nursing Home, Refunding,
2,080,000 7.40%, 08/15/10............................................................................. 2,185,539
1,475,000 7.50%, 08/15/20 ............................................................................ 1,583,840
Broward County HFA Revenue, GNMA Secured,
4,185,000 Series B, 7.55%, 03/01/15 .................................................................. 4,397,807
1,365,000 Series C, 8.00%, 03/01/21 .................................................................. 1,429,059
430,000 Series D, 6.90%, 06/01/09 .................................................................. 451,113
1,035,000 Series D, 7.375%, 06/01/21 ................................................................. 1,092,587
Broward County Resource Recovery Revenue,
6,095,000 Broward Waste Energy Co., L.P., North Project, 7.95%, 12/01/08 ............................. 6,690,847
11,580,000 SES Waste Energy Co., L.P., South Project, 7.95%, 12/01/08.................................. 12,712,061
200,000 Broward County Tourist Development, Special Tax Revenue, Convention Center Project,
FGIC Insured, Pre-Refunded, 7.75%, 10/01/13................................................. 217,736
585,000 Broward County Water and Sewer Utility Revenue, Series B, AMBAC Insured, Pre-Refunded,
7.50%, 10/01/18............................................................................. 617,976
1,500,000 Cape Canaveral Hospital District Revenue, Certificates, AMBAC Insured, 6.875%, 01/01/21...... 1,616,985
Celebration Community Development District, Special Assessment, MBIA Insured,
5,500,000 6.00%, 05/01/10 ............................................................................ 5,686,890
4,000,000 6.10%, 05/01/16 ............................................................................ 4,096,760
5,000,000 Charlotte County Utilities Revenue, Refunding, Series A, FGIC Insured, 6.20%, 10/01/23....... 5,018,150
Citrus County PCR, Florida Power and Light Co., Crystal River, Refunding,
11,100,000 Series A, 6.625%, 01/01/27 ................................................................. 11,665,767
20,400,000 Series B, 6.35%, 02/01/22................................................................... 21,154,188
Clay County HFA Revenue, SFM, Series A, GNMA Secured,
2,075,000 8.20%, 06/01/21 ............................................................................ 2,166,611
4,675,000 7.80%, 06/01/22 ............................................................................ 4,941,709
1,310,000 7.45%, 09/01/23............................................................................. 1,364,483
2,915,000 Clearwater MFR, Rental Housing, Drew Gardens Projects, Refunding, Series A, FHA Insured,
6.50%, 10/01/25 ............................................................................ 2,960,445
1,000,000 Clewiston Water and Sewer Revenue, Refunding, AMBAC Insured, Pre-Refunded, 7.65%, 10/01/10... 1,107,750
305,000 Collier County Water and Sewer District Revenue, Sewer Assessment, East and
South Naples Project, MBIA Insured, 7.15%, 10/01/11 ........................................ 315,419
Bonds (cont.)
$ 3,505,000 Coral Springs ID, Special Water and Sewer Project, 6.75%, 11/01/02 .......................... $ 3,592,905
Dade County GO, Unlimited Tax, Series DD, MBIA Insured,
1,000,000 7.70%, 10/01/13 ............................................................................ 1,022,230
380,000 7.75%, 10/01/18............................................................................. 388,432
Dade County Health Facilities Authority Revenue,
75,000 Mt. Sinai Medical Center Project, CGIC Insured, Pre-Refunded, 8.40%, 12/01/17 .............. 80,399
7,475,000 Refunding, Catholic Health and Rehabilitation, Inc. Project, 7.625%, 08/15/20 .............. 7,965,136
1,930,000 Dade County HFA, MFMR, GNMA Secured, Hialeah Center, Series 5, Pre-Refunded,
7.875%, 12/01/32............................................................................ 2,166,695
Dade County HFA, SFMR,
40,000 Refunding, Series A, 8.125%, 07/01/07....................................................... 40,590
1,350,000 Refunding, Series D, FSA Insured, 6.95%, 12/15/12 .......................................... 1,415,651
300,000 Refunding, Series E, FNMA Insured, 7.00%, 03/01/24 ......................................... 310,557
2,670,000 Series A, GNMA Secured, 7.50%, 09/01/13 .................................................... 2,730,449
1,555,000 Series A, GNMA Secured, 7.10%, 03/01/17 .................................................... 1,612,100
260,000 Series B, GNMA Secured, 7.25%, 09/01/23 .................................................... 271,162
125,000 Dade County IDA, IDR, Epworth Village West, FHA Insured, Pre-Refunded, 8.25%, 02/01/28 ...... 134,243
5,695,000 Dade County IDA, Solid Waste Disposal Revenue, Florida Power and Light Co. Project,
7.15%, 02/01/23............................................................................. 6,060,391
140,000 Dade County Public Facilities Revenue, Jackson Memorial Hospital, Series A, MBIA Insured,
7.30%, 06/01/12 ............................................................................ 143,574
14,610,000e Dade County School Board COP, Series B, AMBAC Insured, 5.75%, 08/01/19....................... 14,335,624
5,960,000 Dade County School District GO, Pre-Refunded, 7.375%, 07/01/08 .............................. 6,527,273
4,100,000 Dade County Seaport Revenue, Refunding, Series 95, MBIA Insured, 5.75%, 10/01/15............. 4,076,302
5,000,000 Dade County, Special Obligation, Courthouse Center Project, 6.10%, 04/01/20.................. 5,057,950
Dade County Water and Sewer System Revenue, FGIC Insured,
8,245,000 5.75%, 10/01/22 ............................................................................ 8,134,929
15,000,000 5.50%, 10/01/25 ............................................................................ 14,209,650
Dovera Community Development District Revenue, Special Assessment,
1,405,000 7.625%, 05/01/03 ........................................................................... 1,467,551
2,235,000 7.875%, 05/01/12 ........................................................................... 2,338,302
670,000 Dunes Community Development District Revenue, Water and Sewer Project, Pre-Refunded,
8.25%, 10/01/18............................................................................. 734,588
Duval County HFA, SFMR, GNMA Secured,
65,000 Series 1988, 8.625%, 12/01/19 .............................................................. 68,112
90,000 Series A, 8.50%, 09/01/19 .................................................................. 93,952
2,625,000 Series A, 7.85%, 12/01/22................................................................... 2,761,316
600,000 Series B, 7.70%, 11/01/11 .................................................................. 622,542
1,420,000 Series C, FGIC Insured, 7.70%, 09/01/24 .................................................... 1,506,308
Escambia County HFA, SFMR,
15,000 Refunding, 8.75%, 10/01/15 ................................................................. 15,387
4,235,000 Series A, GNMA Secured, 7.40%, 10/01/23 .................................................... 4,383,394
4,350,000 Escambia County HFA Revenue, Refunding, Baptist Hospital and Manor, 6.75%, 10/01/14 ......... 4,423,341
1,190,000 Escambia County PCR, Refunding, Gulf Power Co. Project, 8.25%, 06/01/17 ..................... 1,239,623
4,000,000 Escambia County Revenue, Series B, Sub-Series 1, MBIA Insured, 7.20%, 01/01/15............... 4,257,960
3,255,000 Escambia County School Board COP, FSA Insured, Pre-Refunded, 6.375%, 02/01/12................ 3,442,083
90,000 Escambia County Tourist Development Revenue, Pre-Refunded, 8.40%, 12/01/12................... 96,422
2,500,000 Escambia County Utilities Authority, Sanitary System Revenue, FSA Insured, 6.00%, 01/01/23... 2,525,800
2,000,000 Escambia County Utilities Authority System Revenue, Refunding, FGIC Insured, 7.75%, 01/01/15. 2,159,680
3,700,000 First Governmental Financing Commission Revenue, Gainsville, Hollywood, and St. Petersburg,
AMBAC Insured, 5.75%, 07/01/16.............................................................. 3,682,314
Florida HFA,
$ 3,700,000 General Mortgage, Refunding, Series A, 6.40%, 06/01/24 ..................................... $ 3,816,809
785,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.80%, 09/01/10 ........................... 829,674
335,000 Homeownership Revenue, Series G-1, GNMA Secured, 8.30%, 06/01/20 ........................... 350,785
5,425,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.90%, 03/01/22 ........................... 5,723,158
4,000,000 MF Housing, Citrus Meadows Apartments Project, Series Q, GNMA Secured, 7.65%, 06/20/31...... 4,140,840
3,445,000 MF Housing, Driftwood Terrace Project, Series I, 7.65%, 12/20/31 ........................... 3,575,738
4,000,000 MF Mortgage, Lake Carlton Arms, Guaranteed, Refunding, Series F, Mandatory Put 12/01/99,
7.375%, 12/01/07............................................................................ 4,058,960
2,900,000 MFHR, Refunding, Series A, 6.95%, 10/01/21 ................................................. 3,034,212
400,000 SFMR, Series A, 8.60%, 07/01/16 ............................................................ 407,192
Florida State Board of Education, Capital Outlay, Public Education,
8,775,000 Refunding, Series A, 7.25%, 06/01/23 ....................................................... 9,607,748
4,500,000 Series A, 5.875%, 06/01/16.................................................................. 4,528,530
8,990,000 Series B, 5.875%, 06/01/24.................................................................. 8,922,126
7,000,000 Series B, 5.875%, 06/01/25.................................................................. 6,946,380
650,000 Series B-1, Pre-Refunded, 7.875%, 06/01/19.................................................. 702,598
2,550,000 Florida State Community Services Corp., Walton County Water and Sewer Revenue,
South Walton County Regional Utilities, 7.00%, 03/01/18..................................... 2,770,218
6,000,000 Florida State Correctional Privatization Commission COP, Correctional Facility Bay Project,
MBIA Insured, 6.00%, 08/01/15............................................................... 6,093,540
2,960,000 Florida State Department of Corrections COP, Okeechobee Correctional Facility,
AMBAC Insured, 6.25%, 03/01/15 ............................................................. 3,077,690
3,000,000 Florida State Department of General Services, Board of Finance Division, Department of
Natural Resources Revenues, AMBAC Insured, 6.75%, 07/01/13.................................. 3,242,640
100,000 Florida State Department of General Services, Board of Finance Division, GO,
Seminole County Road, Refunding, Pre-Refunded, 7.75%, 11/01/18 ............................. 102,628
145,000 Florida State Department of General Services, Facilities Management Division, Revenue,
Florida Facilities Pool, Pre-Refunded, 8.125%, 09/01/17 .................................... 158,507
3,715,000 Florida State GO, Pre-Refunded, 7.375%, 07/01/19 ............................................ 4,068,594
Florida State Mid Bay Bridge Authority Revenue,
13,505,000 Crossover Refunding, Series A, 6.00%, 10/01/13 ............................................. 13,125,239
7,000,000 Crossover Refunding, Series A, 6.10%, 10/01/22 ............................................. 6,760,670
11,100,000 Refunding, Series D, 6.125%, 10/01/22 ...................................................... 10,755,567
2,600,000 Series A, 8.00%, 10/01/06................................................................... 2,876,094
14,250,000 Series A, 7.50%, 10/01/17 .................................................................. 15,455,978
6,000,000 Series A, ETM, 6.875%, 10/01/22 ............................................................ 6,773,400
Florida State Turnpike Authority Revenue, Department of Transportation, Series A,
8,780,000 AMBAC Insured, Pre-Refunded, 7.125%, 07/01/18 .............................................. 9,820,606
17,350,000 FGIC Insured, 5.50%, 07/01/21 .............................................................. 16,624,076
7,000,000 FGIC Insured, 5.625%, 07/01/25 ............................................................. 6,781,180
2,375,000 Pre-Refunded, 7.75%, 07/01/09 .............................................................. 2,624,446
14,950,000 Pre-Refunded, 7.50%, 07/01/19 .............................................................. 16,421,977
Fort Myers Revenue,
6,625,000 ID No. 15, Series A, 8.125%, 05/01/01 ...................................................... 6,748,291
3,640,000 ID No. 17, Series B, 8.125%, 05/01/01....................................................... 3,707,740
Gainesville Utility System Revenue,
1,520,000 Series A, Pre-Refunded, 6.50%, 10/01/22 .................................................... 1,667,303
3,500,000 Series B, 6.00%, 10/01/17................................................................... 3,540,530
1,600,000 Sub-Series A, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/13 ................................. 1,726,160
8,675,000 Gateway Services District Revenue, Transportation Roadway Service Charges, 8.75%, 05/01/14... 9,156,116
2,000,000 Gulf Breeze Local Government Loan Program Revenue, FGIC Insured, 7.75%, 12/01/15 ............ 2,221,880
Bonds (cont.)
$ 3,685,000 Halifax Hospital and Medical Center Revenue, Refunding, Series A, MBIA Insured,
Pre-Refunded, 6.75%, 10/01/11 .............................................................. $ 4,085,744
Hillsborough County Aviation Authority Revenue,
14,945,000 Refunding, Special Purpose, Delta Airlines, Inc., 7.75%, 01/01/24 .......................... 15,689,261
8,500,000 Refunding, Tampa International Airport, Series A, FGIC Insured, 6.90%, 10/01/11 ............ 9,125,430
5,730,000 Tampa International Airport, Series B, FGIC Insured, 5.875%, 10/01/23 ...................... 5,718,082
Hillsborough County Capital Improvement Revenue, County Center Project, Second Series,
Pre-Refunded,
8,300,000 6.625%, 07/01/12 ........................................................................... 9,133,237
1,250,000 6.75%, 07/01/22 ............................................................................ 1,383,313
5,300,000 Hillsborough County IDA, IDR, Colonial Penn Insurance Project, 7.35%, 08/01/13 .............. 5,775,622
3,000,000 Hillsborough County Port District Revenue, Tampa Port Authority, Pre-Refunded, 8.25%, 06/01/09 3,451,440
Hillsborough County School Board COP, MBIA Insured,
9,500,000 6.00%, 07/01/12 ............................................................................ 9,783,195
5,500,000 6.00%, 07/01/14 ............................................................................ 5,647,235
Hillsborough County Utilities Revenue, Refunding,
10,400,000 Series A, 6.625%, 08/01/11 ................................................................. 10,917,920
5,515,000 Series A, 7.00%, 08/01/14 .................................................................. 5,876,949
3,000,000 Series A, 6.50%, 08/01/16 .................................................................. 3,109,260
1,135,000 Series A, Pre-Refunded, 7.00%, 08/01/14 .................................................... 1,262,483
1,000,000 Series B, 6.50%, 08/01/16 .................................................................. 1,036,420
5,000,000 Jacksonville Capital Improvement Revenue Certificates, Gator Bowl Project, 5.875%, 10/01/25.. 4,996,250
Jacksonville Electric Authority Revenue,
4,750,000 Refunding, St. John's River Park System, Issue 2, Series 11, 5.25%, 10/01/20................ 4,407,240
5,000,000 Refunding, St. John's River Park System, Series 1, 6.00%, 10/01/16.......................... 5,000,200
1,750,000 Series 3-A, Pre-Refunded, 7.70%, 10/01/28 .................................................. 1,781,360
45,000 Jacksonville Excise Tax and Revenue, Series A, Pre-Refunded, 8.375%, 10/01/11 ............... 46,049
Jacksonville Health Facilities Authority, Hospital Revenue, Refunding,
2,500,000 Baptist Medical Center Project, Series A, MBIA Insured, 7.30%, 06/01/19..................... 2,685,525
8,480,000 Riverside Hospital Project, 7.625%, 10/01/13 ............................................... 8,845,149
1,750,000 Jacksonville Hospital Revenue, University Medical Center, Inc. Project, Connie Lee Insured,
6.60%, 02/01/21............................................................................. 1,836,398
930,000 Jacksonville PCR, Anheuser-Busch Cos., Inc. Project, 7.375%, 12/01/15 ....................... 965,814
550,000 Jacksonville Port Authority Facilities Revenue, BIG Insured, Pre-Refunded, 7.875%, 11/01/18 . 564,515
1,000,000 Jupiter Sales Tax Revenue, Pre-Refunded, Series 1990, 7.40%, 09/01/20........................ 1,114,940
5,000,000 Kissimmee Water and Sewer Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/15 ................ 5,082,750
6,200,000 Lakeland Electric and Water Revenue, 5.50%, 10/01/26......................................... 5,852,490
4,500,000 Lakeland Utility Tax Revenue, Refunding & Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 4,588,290
1,000,000 Lee County Capital Bonds, Refunding, Series A, MBIA Insured, 7.30%, 10/01/07 ................ 1,090,860
Lee County IDA, Sewer IDR, Bonita Springs Project, Asset Guaranty, Insured,
5,000,000 7.20%, 11/01/11 ............................................................................ 5,405,250
2,000,000 7.25%, 11/01/20 ............................................................................ 2,155,340
2,000,000 Lee County Local Option Gas Tax Revenue, FGIC Insured, 5.75%, 10/01/20....................... 1,974,240
Lee County Solid Waste System Revenue, Series A, MBIA Insured,
1,945,000 7.00%, 10/01/04 ............................................................................ 2,146,638
1,175,000 7.00%, 10/01/05 ............................................................................ 1,294,028
1,305,000 7.00%, 10/01/06 ............................................................................ 1,437,197
4,600,000 7.00%, 10/01/11 ............................................................................ 5,055,124
Lee County Transportation Facilities Revenue, MBIA Insured,
4,500,000 5.75%, 10/01/22............................................................................. 4,439,925
5,900,000 5.75%, 10/01/27............................................................................. 5,832,268
Leesburg Hospital Revenue, Capital Improvement, Leesburg Regional Medical Center Project,
Series 1991-A, Pre-Refunded,
$ 1,250,000 7.375%, 07/01/11 ........................................................................... $ 1,425,850
2,115,000 7.50%, 07/01/21 ............................................................................ 2,425,799
7,000,000 Leesburg Hospital Revenue, Refunding, Leesburg Regional Medical Center Project, Series A,
6.125%, 07/01/18............................................................................ 6,830,670
500,000 Leesburg Utilities Revenue, Refunding, FGIC Insured, 7.60%, 10/01/09 ........................ 539,435
1,010,000 Leon HFA, SFMR, Series A, GNMA Secured, 7.30%, 04/01/21...................................... 1,047,138
Manatee County HFA, SFMR, Series A, GNMA Secured,
1,260,000 8.10%, 11/01/20 ............................................................................ 1,308,019
4,320,000 6.85%, 11/01/23 ............................................................................ 4,432,925
Manatee County IDR, Manatee Hospital and Health System, Inc.,
1,500,000 ETM, 8.25%, 03/01/01 ....................................................................... 1,594,185
6,700,000 Pre-Refunded, 9.25%, 03/01/21 .............................................................. 7,978,427
5,575,000 Manatee County School Board COP, MBIA Insured, 6.125%, 07/01/21.............................. 5,670,611
4,000,000 Martin County Consolidated Utilities System Revenue, Refunding & Improvement, FGIC Insured,
6.00%, 10/01/24 ............................................................................ 4,063,200
14,500,000 Martin County PCR, Refunding, Florida Power and Light Co. Project, MBIA Insured,
7.30%, 07/01/20............................................................................. 15,806,450
3,335,000 Mary Esther Water and Sewer Revenue, 6.875%, 01/01/18 ....................................... 3,490,578
2,000,000 Miami Beach Special Obligation, Subordinated, FGIC Insured, 7.375%, 12/01/08................. 2,205,940
Miami Health Facilities Authority Revenue, Mercy Hospital Project, Refunding,
250,000 8.125%, 08/01/11 ........................................................................... 266,113
7,500,000 Series A, Pre-Refunded, 7.35%, 08/01/15 .................................................... 8,224,650
6,500,000 Miramar Waste Water Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25............ 7,056,595
5,000,000 Nassau County PCR, Refunding, ITT Rayonier, Inc. Project, 6.25%, 06/01/10 ................... 5,005,450
North Miami Health Facilities Authority Revenue, Catholic Health Services Obligation Group,
2,000,000 6.00%, 08/15/16............................................................................. 1,958,960
1,750,000 6.00%, 08/15/24............................................................................. 1,696,940
1,500,000 North Port Utilities Revenue, FGIC Insured, 6.25%, 10/01/22 ................................. 1,553,685
630,000 North Springs ID Revenue, Special Assessment, 6.75%, 05/01/03 ............................... 639,658
Northern Palm Beach County Water Control District, Unit Development No. 31, Project 2,
725,000 6.75%, 11/01/07............................................................................. 734,280
1,470,000 6.625%, 11/01/13 ........................................................................... 1,464,605
1,000,000 Ocala Gas Tax Revenue, MBIA Insured, Pre-Refunded, 7.40%, 12/01/09 .......................... 1,060,650
Orange County Capital Improvement Revenue, MBIA Insured,
170,000 Series A, 7.70%, 10/01/18................................................................... 183,916
30,000 Series A, Pre-Refunded, 7.70%, 10/01/18 .................................................... 32,631
180,000 Series B, Pre-Refunded, 7.70%, 10/01/18 .................................................... 195,784
Orange County Health Facilities Authority Revenue,
1,000,000 Adventist/Sunbelt, Series A, AMBAC Insured, 6.875%, 11/15/15 ............................... 1,088,220
3,000,000 Adventist/Sunbelt, Series A, CGIC Insured, 7.00%, 11/15/14 ................................. 3,193,950
1,000,000 Crossover Refunding, Orlando Regional Health Care, Series A, MBIA Insured, 6.00%, 11/01/24.. 1,016,650
9,775,000 Refunding, Pooled Hospital Loan, Series A, FGIC Insured, 7.875%, 12/01/25 .................. 10,218,590
10,680,000 Refunding, Pooled Hospital Loan, Series B, BIG Insured, 7.875%, 12/01/25 ................... 11,164,658
Orange County HFA Revenue, GNMA Secured,
4,730,000 Refunding, Series A, FGIC Insured, 7.60%, 01/01/24 ......................................... 4,941,005
2,055,000 Series A, 7.75%, 11/01/12 .................................................................. 2,175,197
410,000 Series A, 7.375%, 09/01/24.................................................................. 429,516
810,000 Series D, 7.80%, 10/01/22 .................................................................. 864,189
5,050,000 Orange County Public Service, Tax Revenue, FGIC Insured, 6.00%, 10/01/24 .................... 5,135,497
Orange County Tourist Development Tax Revenue,
$ 3,000,000 AMBAC Insured, Pre-Refunded, 7.25%, 10/01/10................................................ $ 3,339,510
24,675,000 Series B, MBIA Insured, 6.00%, 10/01/24 .................................................... 25,064,865
265,000 Orlando and Orange County Expressway Authority Revenue, Senior Lien, AMBAC Insured,
ETM, 7.625%, 07/01/18 ...................................................................... 285,408
Orlando Community RDA, Tax Increment Revenue, Series A,
2,155,000 6.50%, 10/01/11 ............................................................................ 2,265,573
2,585,000 6.75%, 10/01/16 ............................................................................ 2,736,403
3,500,000 Osceola County Gas Tax Revenue, Refunding & Improvement, FGIC Insured, 6.00%, 04/01/13....... 3,582,145
Osceola County IDA Revenue, Community Provider Pooled Loan Program, CGIC Insured,
4,634,000 Series A, 7.75%, 07/01/10 .................................................................. 4,895,960
795,000 Series C, 7.60%, 07/01/10 .................................................................. 835,935
200,000 Osceola County Transportation Revenue, Series A, FGIC Insured, Pre-Refunded, 7.70%, 04/01/13. 214,534
Pace Property Finance Authority, Utilities System Revenue, Refunding & Improvement,
1,000,000 6.125%, 09/01/07 ........................................................................... 1,014,720
2,545,000 6.25%, 09/01/13 ............................................................................ 2,539,681
1,170,000 6.125%, 09/01/17 ........................................................................... 1,133,110
Palm Beach County Criminal Justice Facilities Revenue, FGIC Insured,
5,000,000 6.00%, 06/01/15 ............................................................................ 5,095,400
6,950,000 Pre-Refunded, 7.25%, 06/01/11............................................................... 7,687,534
Palm Beach County HFA, SFM Purchase Revenue, GNMA Secured,
7,485,000 Series A, 7.70%, 03/01/22 .................................................................. 7,766,211
5,270,000 Series B, 7.60%, 03/01/23 .................................................................. 5,519,218
Palm Beach County IDR, Lourdes-Noreen McKeen Residence, Geriatric Care, Inc.,
1,755,000 6.55%, 12/01/16............................................................................. 1,772,427
4,000,000 6.625%, 12/01/26............................................................................ 4,031,120
Palm Beach County Solid Waste Authority Revenue,
65,000 GO, 8.75%, 07/01/10 ........................................................................ 69,581
535,000 Refunding, BIG Insured, 7.40%, 12/01/05 .................................................... 578,517
1,965,000 Refunding, BIG Insured, Pre-Refunded, 7.40%, 12/01/05 ...................................... 2,134,973
Palm Beach County Solid Waste, IDR, Okeelanta Power and Light Co. Project, Series A,
3,600,000 6.50%, 02/15/09 ............................................................................ 3,205,044
11,700,000 6.70%, 02/15/15 ............................................................................ 10,296,351
26,000,000 6.85%, 02/15/21 ............................................................................ 22,810,060
1,020,000 Pensacola-Westwood Homes Development Corp. Revenue, Refunding, Mortgage Loan,
FHA Insured, 6.40%, 07/15/23................................................................ 1,023,815
Pinellas County HFA, SFMR, GNMA Secured,
1,475,000 Multi-County Program, Series B, 6.875%, 08/01/10 ........................................... 1,531,581
5,810,000 Multi-County Program, Series B, 7.375%, 02/01/24 ........................................... 6,106,484
1,900,000 Series A, 7.30%, 08/01/22 .................................................................. 1,958,406
1,600,000 Series A, 7.75%, 08/01/23 .................................................................. 1,677,712
12,200,000 Pinellas County PCR, Refunding, Florida Power and Light Co., 7.20%, 12/01/14 ................ 13,231,388
Plantation Health Facilities Authority Revenue, Covenant Retirement Community, Inc.,
1,500,000 7.625%, 12/01/12 ........................................................................... 1,610,115
3,000,000 7.75%, 12/01/22 ............................................................................ 3,223,230
2,035,000 Polk County HFA, Refunding, Series A, GNMA Secured, 7.15%, 09/01/23 ......................... 2,125,944
Port Everglades Authority, Port Improvement Revenue,
18,050,000 Refunding, Series A, 7.50%, 09/01/12 ....................................................... 18,966,579
575,000 Series 1986, ETM, 7.50%, 11/01/06........................................................... 647,749
65,000 Royal Palm Beach, Utility System Revenue, Series A, AMBAC Insured, Pre-Refunded,
8.875%, 10/15/13............................................................................ 69,672
Santa Rosa County Health Facilities Authority Revenue, Refunding,
$ 40,000 Gulf Breeze Hospital, Inc., 8.60%, 10/01/02................................................. $ 42,462
520,000 Gulf Breeze Hospital, Inc., Pre-Refunded, 8.70%, 10/01/14 .................................. 573,622
14,350,000 Gulf Breeze Hospital, Inc., Series A, 6.20%, 10/01/14....................................... 14,014,210
4,290,000 Santa Rosa County IDR, Holley Navarre Water System Project, 6.75%, 05/01/24................. 4,387,126
6,250,000 Sarasota County Solid Waste System Revenue, AMBAC Insured, 5.50%, 10/01/16................... 6,072,250
Sarasota County Utility System Revenue,
2,000,000 Capital Appreciation, AMBAC Insured, Pre-Refunded, 7.50%, 06/01/10 ......................... 2,091,840
9,000,000 Refunding, Series A, FGIC Insured, 5.25%, 10/01/25 ......................................... 8,296,200
150,000 Sarasota Water and Sewer Utility Revenue, Refunding, MBIA Insured, Pre-Refunded,
7.625%, 10/01/08............................................................................ 153,429
5,000,000 Seminole County Sales Tax Revenue, MBIA Insured, 5.80%, 10/01/26............................. 4,950,550
Seminole County School Board COP, MBIA Insured,
1,150,000 Series A, 6.125%, 07/01/14 ................................................................. 1,187,134
5,000,000 Series B, Pre-Refunded, 6.50%, 07/01/21 .................................................... 5,524,400
7,500,000 Seminole County Solid Waste Disposal System Revenue, MBIA Insured, Pre-Refunded,
7.25%, 10/01/20............................................................................. 8,348,775
1,000,000 South Florida Water Management District, Special Obligation, Land Acquisition Bonds,
AMBAC Insured, 6.00%, 10/01/15.............................................................. 1,015,210
3,000,000 South Indian River Water Control District, Refunding, Series C, Pre-Refunded, 7.50%, 10/01/06 3,248,160
100,000 St. Augustine Water and Sewer Utility Revenue, Refunding, 8.125%, 10/01/12 .................. 102,170
2,995,000 St. Johns County Water and Sewer Revenue, Series B-1, FGIC Insured, 7.00%, 06/01/11.......... 3,099,885
7,500,000 St. Lucie County Solid Waste Disposal Revenue, Florida Power and Light Co. Project,
7.15%, 02/01/23............................................................................. 7,974,525
6,275,000 St. Lucie, West Services District, Capital Improvement Revenue, Lake Charles Project,
7.50%, 02/01/00............................................................................. 6,319,051
St. Petersburg Health Facilities Authority Revenue,
10,500,000 Allegany Health System, Series A, MBIA Insured, 7.00%, 12/01/15............................. 11,531,625
8,630,000 Allegany Health System, St. Mary, Series B, Pre-Refunded, 7.75%, 12/01/15 .................. 9,623,399
2,500,000 Bon Secours-Maria Manor Project, Series B, Pre-Refunded, 7.875%, 08/15/18 .................. 2,717,325
2,940,000 Refunding, Allegany Health System, St. Anthony, Series C, 7.75%, 01/01/14 .................. 3,110,608
340,000 Refunding, Allegany Health System, St. Anthony, Series C, Pre-Refunded, 7.75%, 01/01/14..... 362,365
Sunrise Lakes Recreation District, Phase 4, Series A,
3,080,000 6.75%, 08/01/15 ............................................................................ 3,139,228
6,120,000 6.75%, 08/01/24............................................................................. 6,190,013
Sunrise Special Tax District No. 1, Refunding,
3,485,000 6.375%, 11/01/08 ........................................................................... 3,625,446
12,390,000 6.375%, 11/01/21 ........................................................................... 12,619,711
3,400,000 Tallahassee Consolidated Utility System Revenue, Series 1994, 6.20%, 10/01/19................ 3,501,932
Tampa Allegany Health System Revenue, St. Joseph,
8,000,000 FGIC Insured, Pre-Refunded, 7.375%, 12/01/23 ............................................... 8,831,360
1,180,000 MBIA Insured, 6.75%, 12/01/17 .............................................................. 1,272,937
7,000,000 MBIA Insured, 6.50%, 12/01/23 .............................................................. 7,601,020
Tampa Capital Improvement Program Revenue,
6,300,000 Series A, 8.25%, 10/01/18 .................................................................. 6,678,819
31,670,000 Series B, 8.375%, 10/01/18.................................................................. 33,421,668
2,000,000 Tampa Guaranteed Entitlement Revenue, Refunding, AMBAC Insured, 7.15%, 10/01/18 ............. 2,208,300
Tampa Sports Authority Revenue, Guaranteed Package, Tampa Bay Arena Project, MBIA Insured,
1,000,000 6.00%, 10/01/15............................................................................. 1,038,110
1,715,000 6.05%, 10/01/20............................................................................. 1,779,244
2,695,000 6.10%, 10/01/26............................................................................. 2,809,268
Tampa Sports Authority Revenue, Interlock Agreement, Tampa Bay, MBIA Insured,
$ 4,250,000 6.05%, 10/01/15............................................................................. $ 4,353,105
5,160,000 6.10%, 10/01/20............................................................................. 5,284,872
6,800,000 6.125%, 10/01/26............................................................................ 6,961,636
Tampa Water and Sewer Revenue, Sub-Lien, Series A, AMBAC Insured,
340,000 7.75%, 10/01/14 ............................................................................ 366,826
3,000,000 7.25%, 10/01/16............................................................................. 3,182,850
1,655,000 Temple Terrace Water and Sewer Revenue, FGIC Insured, 6.30%, 10/01/17 ....................... 1,714,712
6,000,000 Titusville Water and Sewer Revenue, MBIA Insured, 6.20%, 10/01/14 ........................... 6,255,180
University Community Hospital, Inc., Florida Hospital Revenue, Refunding, FSA Insured, Pre-Refunded,
5,000,000 7.375%, 09/01/07 ........................................................................... 5,579,900
5,000,000 7.50%, 09/01/11 ............................................................................ 5,602,400
1,425,000 Venice Capital Improvement Revenue, MBIA Insured, Pre-Refunded, 7.80%, 11/01/13 ............. 1,462,677
Viera East Community Development District, Special Assessment,
2,265,000 7.50%, 05/01/03 ............................................................................ 2,349,666
4,020,000 8.50%, 05/01/04 ............................................................................ 4,448,251
5,225,000 7.50%, 05/01/12............................................................................. 5,411,428
10,640,000 8.625%, 05/01/14 ........................................................................... 11,844,342
7,355,000 eRefunding, 6.30%, 05/01/26................................................................ 7,325,801
11,295,000 Refunding, Series A, 6.00%, 05/01/14 ....................................................... 11,136,757
11,340,000 eRefunding, Water Management, Series A, 6.50%, 05/01/22.................................... 10,955,007
7,490,000 Series B, 6.75%, 05/01/14................................................................... 7,382,893
465,000 eSeries B, Water Management, 6.50%, 05/01/05............................................... 455,100
4,580,000 eSeries B, Water Management, 6.50%, 05/01/22............................................... 4,318,665
Viera East Community Development District, Water and Sewer Revenue
3,615,000 7.875%, 05/01/03............................................................................ 3,724,390
2,850,000 e6.75%, 05/01/09........................................................................... 2,812,751
500,000 Volusia County Educational Facility Authority Revenue, Embry-Riddle Aeronautical University,
Connie Lee Insured, 6.625%, 10/15/22 ....................................................... 528,335
9,770,000 Volusia County Health Facilities Authority Revenue, Hospital Facilities, Memorial Health
Systems Project, AMBAC Insured, 5.50%, 11/15/26............................................. 9,155,956
Westgate/Belvedere Homes Community RDA Revenue, Series 1992,
410,000 6.50%, 11/01/09 ............................................................................ 429,167
1,410,000 6.60%, 11/01/17 ............................................................................ 1,449,211
--------------
Total Bonds (Cost $1,243,061,000)............................................................ 1,300,242,707
--------------
Zero Coupon Bonds 3.5%
3,670,000 Broward County Water and Sewer Utility Revenue, Refunding, Series A, AMBAC Insured,
(original accretion rate 7.50%), 10/01/08 .................................................. 1,875,222
17,020,000 Dade County Guaranteed Entitlement Revenue, Capital Appreciation, AMBAC Insured,
Pre-Refunded, (original accretion rate 7.70%), 08/01/18..................................... 4,162,581
1,625,000 Hillsborough County Utilities Revenue, Refunding, Series A, (original accretion rate
6.97%), 08/01/98............................................................................ 1,480,975
5,770,000 Lakeland Electric and Water Revenue, Capital Appreciation, (original accretion rate
7.00%), 10/01/14............................................................................ 1,996,304
Port Everglades Authority, Port Improvement Revenue, Refunding, Series A,
10,575,000 (original accretion rate 7.40%), 09/01/02 .................................................. 7,623,305
9,075,000 (original accretion rate 7.40%), 09/01/03 .................................................. 6,152,123
3,550,000 (original accretion rate 7.40%), 09/01/04 .................................................. 2,258,793
50,000,000 (original accretion rate 7.45%), 09/01/10 .................................................. 20,628,500
Sarasota Special Obligated Revenue, Refunding, AMBAC Insured,
$ 1,365,000 (original accretion rate 6.69%), 11/01/09 .................................................. $ 655,841
1,780,000 (original accretion rate 6.74%), 11/01/12 .................................................. 701,212
2,180,000 (original accretion rate 6.74%), 11/01/15 .................................................. 703,791
--------------
Total Zero Coupon Bonds (Cost $43,615,313)................................................... 48,238,647
--------------
Total Long Term Investments (Cost $1,286,676,313)............................................ 1,348,481,354
--------------
a Short Term Investments3.0%
300,000 Dade County Health Facilities Authority Revenue, Miami Children's Hospital Project,
Daily VRDN and Put, 3.90%, 09/01/20......................................................... 300,000
1,000,000 Dade County IDA, PCR, Refunding, Florida Power & Light Co. Project, Daily VRDN and Put,
3.75%, 04/01/20............................................................................. 1,000,000
2,700,000 Dade County Water and Sewer Systems Revenue, FGIC Insured, Weekly VRDN and Put,
3.35%, 10/05/22............................................................................. 2,700,000
Hillsborough County IDA, PCR, Refunding, Tampa Electric Co., Daily VRDN and Put,
4,070,000 3.75%, 05/15/18............................................................................. 4,070,000
6,300,000 3.85%, 09/01/25............................................................................. 6,300,000
7,100,000 Jacksonville PCR, Refunding, Florida Power and Light Co. Project, Daily VRDN and Put,
3.75%, 05/01/29............................................................................. 7,100,000
7,710,000 Manatee County PCR, Refunding, Florida Power and Light Co. Project, Daily VRDN and Put,
3.75%, 09/01/24............................................................................. 7,710,000
1,000,000 Martin County PCR, Refunding, Florida Power and Light Co. Project, Daily VRDN and Put,
3.75%, 09/01/24............................................................................. 1,000,000
800,000 Pinellas County Health Facilities Authority Revenue, DATES, Refunding, Pooled Hospital Loan
Program, Daily VRDN and Put, 3.75%, 12/01/15................................................ 800,000
Saint Lucie County PCR, Refunding, Florida Power and Light Co. Project, Daily VRDN and Put,
5,500,000 3.75%, 01/01/26............................................................................. 5,500,000
4,000,000 3.75%, 03/01/27............................................................................. 4,000,000
400,000 University Athletic Association, Inc., Rangely University Stadium Project, Daily VRDN and Put,
3.80%, 02/01/20............................................................................. 400,000
--------------
Total Short Term Investments (Cost $40,880,000).............................................. 40,880,000
--------------
Total Investments (Cost $1,327,556,313)100.9 %............................................... 1,389,361,354
Liabilities in Excess of Other Assets(.9)%................................................... (12,512,966)
--------------
Net Assets100.0%............................................................................. $1,376,848,388
==============
At August 31, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$1,327,556,313 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost............................................................... $ 70,996,192
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................... (9,191,151)
--------------
Net unrealized appreciation.................................................................. $ 61,805,041
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
DATES - Demand Adjustable Tax-Exempt Securities
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
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
L.P. - Limited Partnership
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
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). eSee Note 1(h) regarding securities
purchased on a when-issued basis.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Georgia Tax-Free Income Fund (Note 1)
Long Term Investments98.3%
<S> <C> <C>
$ 500,000 Albany-Dougherty County Hospital Authority Revenue, Anticipation Certificates, Series B,
AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10 ................................................ $ 560,240
50,000 Albany-Dougherty Inner City Authority, Improvement Revenue, Municipal Auditorium Project,
Series 1988-B, 7.875%, 01/01/09 ............................................................. 52,921
50,000 Athens Housing Authority, MFHR, Oakwood Forest Apartments Project, 8.125%, 12/01/05 .......... 50,526
1,400,000 Atlanta Board of Education, COP, FGIC Insured, Pre-Refunded, 7.125%, 06/01/12 ................ 1,542,618
Atlanta COP, Pretrial Detention Center, MBIA Insured,
1,000,000 6.25%, 12/01/11 ............................................................................. 1,046,350
3,800,000 6.25%, 12/01/17 ............................................................................. 3,905,298
420,000 Atlanta Downtown Development Authority, IDR, Underground Atlanta Project, Pre-Refunded,
7.75%, 10/01/16 ............................................................................. 429,639
2,000,000 Atlanta Downtown Development Authority Revenue, Refunding, Underground Atlanta Project,
6.25%, 10/01/16 ............................................................................. 2,039,180
6,000,000 Atlanta GO, Series A, 6.125%, 12/01/23........................................................ 6,111,180
1,480,000 Atlanta HDC, Mortgage Revenue, Refunding, Oakland City/West, Series A, FHA Insured,
6.375%, 03/01/23............................................................................. 1,491,056
3,500,000 Atlanta Special Purpose Facilities Revenue, Delta Air Lines, Inc. Project, Series 1989-B,
7.90%, 12/01/18 ............................................................................. 3,706,885
75,000 Atlanta Urban Residential Finance Authority, SFMR, GNMA Secured, 8.25%, 10/01/21 ............. 75,638
1,000,000 Barnesville Water and Sewer Revenue, Refunding, 6.85%, 09/01/17 .............................. 1,043,010
100,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded,
8.00%, 09/01/15 ............................................................................. 109,079
Burke County Development Authority, PCR, Georgia Power Co.,
160,000 Plant Vogtle Project, 8.00%, 10/01/16 ....................................................... 163,562
10,000,000 Refunding, Plant Vogtle, First Series, MBIA Insured, 6.60%, 07/01/24 ........................ 10,529,700
1,700,000 Chatham County Hospital Authority Revenue, Memorial Medical Center, Inc., Series A,
MBIA Insured, 7.00%, 01/01/21 ............................................................... 1,816,161
90,000 Cherokee County Hospital Authority Revenue, Certificates, MBIA Insured, 8.00%, 12/01/13 ...... 96,256
1,595,000 Cherokee County Water and Sewage Authority Revenue, Refunding, MBIA Insured,
6.90%, 08/01/18 ............................................................................. 1,724,945
200,000 Clark County Hospital Authority Revenue, Certificates, Series A, MBIA Insured, 7.10%, 01/01/08 205,484
1,400,000 Clayton County Development Authority, Special Facility Revenue, Refunding, Delta Air Lines, Inc.
Project, 7.625%, 01/01/20 ................................................................... 1,479,142
2,400,000 Clayton County Hospital Authority Revenue, Anticipation Certificates, Southern Regional
Medical Center, MBIA Insured, 7.00%, 08/01/13 ............................................... 2,630,832
100,000 Cobb County, Kennestone Hospital Authority Revenue, Series A, MBIA Insured, ETM,
7.75%, 02/01/07 ............................................................................. 112,812
1,000,000 Cobb County Residential Care Facilities Authority Revenue, Refunding, 7.50%, 08/01/15 ........ 1,053,670
Colquitt County Hospital Authority Revenue,
1,500,000 eAnticipation Certificates, FSA Insured, 5.50%, 03/01/16.................................... 1,436,055
1,000,000 Certificates, Colquitt Regional Medical Center, MBIA Insured, 6.70%, 03/01/12................ 1,073,980
1,300,000 Columbia County Water and Sewer Revenue, Series A, AMBAC Insured, 6.90%, 06/01/11 ............ 1,406,873
45,000 Columbus Hospital Authority Revenue, Anticipation Certificates, St. Francis Hospital Project,
Series 1987, BIG Insured, Pre-Refunded, 8.25%, 01/01/07 ..................................... 46,515
100,000 Commerce, City of, Combined Public Utility Revenue, Refunding & Improvement,
AMBAC Insured, Pre-Refunded, 7.50%, 12/01/20 ................................................ 110,765
1,000,000 Conyers Water and Sewer Revenue, Series A, AMBAC Insured, 6.60%, 07/01/15 .................... 1,066,870
750,000 Coweta County Association, County Commissioners of Georgia Leasing Program, MBIA Insured,
Pre-Refunded, 7.00%, 12/01/10 ............................................................... 810,578
300,000 Dade County Water and Sewer Authority Revenue, Refunding, FGIC Insured, Pre-Refunded,
7.60%, 07/01/15 ............................................................................. 330,327
2,000,000 Dalton Building Authority Revenue, Northwest Trade and Convention, Pre-Refunded,
7.10%, 07/01/11 ............................................................................. 2,230,320
$ 100,000 Dekalb County Hospital Authority Revenue, Anticipation Certificates, Dekalb Medical Center,
Pre-Refunded, 7.00%, 08/01/09 ............................................................... $ 108,575
440,000 Dekalb County Housing Authority, SFMR, GNMA Secured, 7.70%, 02/01/24 ......................... 469,141
600,000 Dekalb County Water and Sewer Revenue, Series 1990, Pre-Refunded, 7.00%, 10/01/10 ............ 662,388
1,315,000 Dekalb Private Hospital Authority Revenue, Anticipation Certificates, Emory University Project,
7.00%, 04/01/21 ............................................................................. 1,399,384
1,215,000 East Point Building Authority Revenue, Public Facilities and Equipment Project, AMBAC Insured,
Pre-Refunded, 6.70%, 02/01/11 ............................................................... 1,331,944
95,000 Ellijay-Gilmer County Water and Sewer Authority Revenue, Pre-Refunded, 7.875%, 01/01/14 ...... 101,337
1,000,000 Fayetteville Water and Sewer Revenue, Refunding, AMBAC Insured, 5.75%, 11/01/17............... 981,910
960,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A,
MBIA Insured, 6.50%, 07/01/24 ............................................................... 976,243
100,000 Fulco Hospital Authority Revenue, Anticipation Certificates, Shepherd Spinal Center Project,
Series 1988-A, 7.75%, 10/01/08 .............................................................. 105,028
Fulton County Building Authority Revenue,
750,000 Human Resources and Government Facilities Program, 7.10%, 01/01/15 .......................... 807,990
65,000 Judicial Center Facilities Project, Pre-Refunded, 8.20%, 01/01/15 ........................... 67,179
1,000,000 Refunding, Judicial Center Facilities Project, 6.50%, 01/01/15 .............................. 1,034,900
Fulton County School District,
1,300,000 5.625%, 01/01/21 ............................................................................ 1,262,170
60,000 Unlimited Tax, GO, Pre-Refunded, 7.625%, 05/01/17 ........................................... 63,215
115,000 Fulton County Water and Sewer Revenue, Pre-Refunded, 8.25%, 01/01/14 ......................... 123,219
1,480,000 Fulton Dekalb Hospital Authority Revenue, Grady Memorial Hospital Project, Series A,
AMBAC Insured, Pre-Refunded, 7.25%, 01/01/20 ................................................ 1,623,900
Gainesville and Hall County Hospital Authority Revenue, Anticipation Certificates, Refunding,
Northeast Georgia Health Care Project, MBIA Insured,
50,000 5.75%, 10/01/17.............................................................................. 48,688
750,000 6.00%, 10/01/25.............................................................................. 751,763
455,000 Series B, 7.20%, 10/01/20.................................................................... 483,497
Georgia Municipal Electric Authority, Special Obligation, Refunding,
140,000 Second Crossover Series, 8.125%, 01/01/17 ................................................... 148,882
1,000,000 Third Crossover Series, 6.60%, 01/01/18 ..................................................... 1,074,050
Georgia Municipal Electric Power Authority Revenue,
800,000 Refunding, Series R, Pre-Refunded, 7.40%, 01/01/25 .......................................... 867,376
400,000 Series A, Pre-Refunded, 7.40%, 01/01/25 ..................................................... 433,688
7,500,000 Series E, AMBAC Insured, 6.65%, 01/01/21 .................................................... 7,679,025
100,000 Series S, Pre-Refunded, 7.25%, 01/01/09 ..................................................... 108,094
Georgia State HFA Revenue, Homeownership Opportunity Program,
2,895,000 Series A-1, 6.75%, 06/01/17 ................................................................. 3,027,475
880,000 Series C, 6.60%, 12/01/23 ................................................................... 910,932
1,000,000 Georgia State HFA Revenue, MFMR, Club Candlewood Project, FSA Insured, 7.15%, 01/01/25........ 1,036,020
1,995,000 Georgia State HFA Revenue, SFMR, Refunding, Series A, 6.60%, 12/01/23 ........................ 2,020,436
Georgia State Residential Finance Authority, Homeownership Mortgage,
1,230,000 Series B, FHA/VA, 7.00%, 12/01/12 ........................................................... 1,299,065
265,000 Series B, Sub-Series B-1, Convertible Loans, 7.50%, 06/01/17................................. 280,540
395,000 Series E, Sub-Series E-1, FHA Insured, 7.50%, 06/01/17....................................... 417,231
Georgia State Residential Finance Authority, SF Mortgage, FHA Insured, VA/GML,
5,000 Series A, 8.375%, 12/01/19................................................................... 5,123
75,000 Series A-2, 8.40%, 12/01/18.................................................................. 77,071
1,000,000 Georgia State Tollway Authority Revenue, Guaranteed, Georgia 400 Project, 6.80%, 07/01/10..... 1,082,090
3,300,000 Hogansville Combined Public Utility System Revenue, Refunding, FSA Insured, 6.00%, 10/01/23... 3,277,956
2,000,000 Houston County School District, Intergovernmental Contract Trust, MBIA Insured, 6.00%, 03/01/14 2,025,940
1,000,000 La Grange Water and Sewerage Revenue, Pre-Refunded, 7.375%, 01/01/12 ......................... 1,099,410
$ 850,000 Liberty County IDR, Refunding, Leconte Property, Inc. Project, 7.875%, 12/01/14 .............. $ 929,985
1,000,000 Macon-Bibb County Urban Development Authority Revenue, MFHR, Collateralized, Series A,
FNMA Secured, 7.50%, 01/01/24 ............................................................... 1,049,680
Marietta Development Authority Revenue, Life College, Refunding, First Mortgage, Series A,
FSA Insured,
2,600,000 5.75%, 09/01/14 ............................................................................. 2,548,624
1,100,000 5.80%, 09/01/19 ............................................................................. 1,075,415
1,000,000 5.95%, 09/01/19 ............................................................................. 996,260
Metropolitan Atlanta Rapid Transit Authority, Sales Tax Revenue,
6,230,000 Series A, MBIA Insured, 6.90%, 07/01/20 ..................................................... 6,805,091
630,000 Series K, 7.25%, 07/01/10 ................................................................... 664,600
250,000 Series L, Pre-Refunded, 7.20%, 07/01/10 ..................................................... 272,298
1,000,000 Series O, 6.55%, 07/01/20 ................................................................... 1,044,510
Monroe County Development Authority, PCR,
250,000 Georgia Power Co. Plant, Scherer Project, 8.375%, 07/01/17 .................................. 260,958
1,000,000 Georgia Power Co., Scherer Project, First Series, Senior Lien, 5.75%, 09/01/23............... 964,180
1,000,000 Refunding, Georgia Power Co., AMBAC Insured, 6.25%, 07/01/19................................. 1,024,570
1,500,000 Refunding, Oglethorpe Power Co., Scherer Project, Series A, 6.80%, 01/01/12 ................. 1,650,750
500,000 Paulding County Water and Sewer Revenue, AMBAC Insured, 5.80%, 12/01/16....................... 492,920
1,000,000 Pike County School District, Refunding, AMBAC Insured, 5.70%, 02/01/16........................ 999,930
100,000 Polk County Water Authority, Water and Sewerage Revenue, Refunding, MBIA Insured,
7.00%, 12/01/15 ............................................................................. 106,490
50,000 Private Colleges and Universities, Facilities Authority Revenue, Spelman College Project,
7.75%, 06/01/13 ............................................................................. 53,400
250,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A,
Pre-Refunded, 7.875%, 07/01/17 .............................................................. 271,398
Puerto Rico Commonwealth Highway Authority Revenue,
230,000 Refunding, Series R, 7.15%, 07/01/00 ........................................................ 248,067
100,000 Series P, Pre-Refunded, 8.125%, 07/01/13 .................................................... 108,901
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
175,000 7.90%, 07/01/07 ............................................................................. 187,581
50,000 7.50%, 07/01/09 ............................................................................. 53,250
80,000 Puerto Rico Commonwealth Public Improvement GO, Series A, Pre-Refunded, 7.75%, 07/01/13....... 86,674
1,500,000 Puerto Rico Commonwealth, Refunding, Series A, 6.00%, 07/01/14 ............................... 1,504,485
Puerto Rico Electric Power Authority Revenue,
150,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08........................................... 163,026
50,000 Refunding, Series N, 7.125%, 07/01/14 ....................................................... 53,412
130,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14 ......................................... 141,307
1,000,000 Refunding, Series U, 6.00%, 07/01/14......................................................... 994,490
165,000 Series O, 7.125%, 07/01/14 .................................................................. 176,260
235,000 Series O, Pre-Refunded, 7.125%, 07/01/14 .................................................... 255,440
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs,
Series A, 8.00%, 09/01/12 ................................................................... 217,260
110,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ......................... 119,155
Puerto Rico PBA, Guaranteed, Public Education and Health Facilities, Pre-Refunded,
80,000 Series H, 7.875%, 07/01/16 .................................................................. 84,212
100,000 Series J, 7.00%, 07/01/19 ................................................................... 106,572
200,000 Royston Downtown Development Authority Revenue, Cobb Memorial Hospital Project,
Pre-Refunded, 8.20%, 07/01/08 ............................................................... 212,737
1,000,000 Savannah EDA, IDR, Refunding, Hershey Foods Corp. Project, 6.60%, 06/01/12 ................... 1,058,770
3,000,000 Savannah Hospital Authority Revenue, Refunding, St. Joseph's Hospital Project,
6.20%, 07/01/23 ............................................................................. 2,915,730
4,600,000 Savannah Port Authority PCR, Refunding, Union Carbide Plastic Co., Inc., 7.55%, 08/01/04...... 4,665,411
St. Mary's Housing Authority MFMR, FNMA Secured,
$ 700,000 Pine Apartments, Series C, 7.375%, 04/01/22 ................................................. $ 719,676
500,000 Refunding, Cumberland Oaks Apartments, Series A, 7.375%, 09/01/22............................ 527,150
200,000 Sugar Hill Combined Public Utility Revenue, MBIA Insured, Pre-Refunded, 7.35%, 01/01/14....... 206,200
2,330,000 Tilt County School District, MBIA Insured, 6.125%, 02/01/15 .................................. 2,382,961
1,500,000 Walker, Dade and Catoosa County Hospital Authority Revenue, Anticipation Certificates,
Series A, FGIC Insured, 7.00%, 10/01/10 ..................................................... 1,651,245
2,000,000 Walton County Water and Sewer Authority Revenue, Refunding & Improvement, MBIA Insured,
6.00%, 02/01/21.............................................................................. 2,017,940
1,780,000 White County IDA Revenue, Refunding, Clark Schwebel Fiber Glass, 6.85%, 06/01/10 ............. 1,866,738
--------------
Total Long Term Investments (Cost $127,911,175) .............................................. 133,697,051
--------------
a Short Term Investments1.6%
Burke County Development Authority, PCR, Georgia Power Co., Plant Vogtle, Daily VRDN and Put,
100,000 4th Series, 3.80%, 09/01/25.................................................................. 100,000
500,000 5th Series, 3.70%, 07/01/24.................................................................. 500,000
1,600,000 Hapeville Development Authority, IDR, Hapeville Hotel, Ltd., Daily VRDN and Put, 3.80%, 11/01/15 1,600,000
--------------
Total Short Term Investments (Cost $2,200,000) ............................................... 2,200,000
--------------
Total Investments (Cost $130,111,175)99.9% ................................................... 135,897,051
Other Assets and Liabilities, Net.1% ......................................................... 183,407
--------------
Net Assets100.0%.............................................................................. $136,080,458
==============
At August 31, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$130,111,175 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 5,973,172
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (187,296)
--------------
Net unrealized appreciation................................................................... $ 5,785,876
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
COP - Certificate of Participation
EDA - Economic Development Authority
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GML - Guaranteed Mortgage Loan
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
IDA - Industrial Development Authority/Authority
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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
eSee Note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Kentucky Tax-Free Income Fund (Note 1)
Long Term Investments 97.7%
<S> <C> <C>
$ 700,000 Ashland PCR, Refunding, Ashland Oil, Inc. Project, 6.65%, 08/01/09.............................. $ 731,836
1,000,000 Ashland Solid Waste Revenue, Ashland Oil, Inc. Project, 7.20%, 10/01/20 ........................ 1,052,400
Boone County PCR, Refunding, Collateralized, Series A,
1,300,000 Cincinnati Gas and Electric Co., MBIA Insured, 5.50%, 01/01/24................................. 1,223,027
710,000 Dayton Power and Light Co., 6.50%, 11/15/22 ................................................... 741,034
200,000 Campbell County Water Revenue, District No. 1, 6.60%, 12/01/11 ................................. 210,432
325,000 Carroll County PCR, Collateralized, Kentucky Utilities Co. Project, Series B, 6.25%, 02/01/18... 331,916
Danville Multi-City Lease Revenue,
1,500,000 Campbellsville, Series B, MBIA Insured, 6.15%, 07/01/12 ....................................... 1,555,800
125,000 Housing Authority, Jefferson County, 6.50%, 02/01/12 .......................................... 129,433
100,000 Shelbyville, Series H, MBIA Insured, 6.70%, 07/01/11 .......................................... 108,557
Daviess County Hospital Revenue, Odch, Inc., Series A, MBIA Insured,
100,000 6.25%, 08/01/12 ............................................................................... 103,454
210,000 6.25%, 08/01/22 ............................................................................... 215,909
545,000 Daviess County Public Improvement Corp. Revenue, Refunding, First Mortgage, Court Facilities
Project, Series A, 5.70%, 10/01/14 ............................................................ 533,544
100,000 Eastern University Revenues, Consolidated Educational Building, Series Q, AMBAC Insured,
6.40%, 05/01/08 ............................................................................... 105,587
200,000 Edgewood Public Properties Corp. Revenue, First Mortgage, Public Facilities Project, 6.70%, 12/01/21 208,574
500,000 Fulton County Industrial Building Revenue, H.I.S., Inc. Project, 7.50%, 02/01/10 ............... 497,445
400,000 Guam Airport Authority Revenue, Refunding, Series A, 6.50%, 10/01/23 ........................... 402,692
225,000 Guam Power Authority Revenue, Series A, 6.30%, 10/01/22 ........................................ 224,984
1,000,000 Hancock County Solid Waste Disposal Revenue, Willamette Industries, Inc. Project, 6.60%, 05/01/26 1,013,680
125,000 Hopkins County Hospital Revenue, Trover Clinic Foundation, Inc., MBIA Insured, 6.625%, 11/15/11. 134,091
1,000,000 Jefferson County Capital Projects Corp., Lease Revenue, Series A, AMBAC Insured, 5.60%, 04/01/14 975,940
Jefferson County Health Facilities Revenue, Jewish Hospital Health Care Services, Inc., AMBAC Insured,
750,000 6.50%, 05/01/15................................................................................ 786,255
720,000 6.55%, 05/01/22 ............................................................................... 757,015
100,000 Jefferson County Hospital Revenue, Alliant Health System Project, Series C, MBIA Insured,
6.20%, 10/01/04 ............................................................................... 107,150
2,000,000 Jefferson County MFHR, Watterson Park Apartments Project, Series A, 6.35%, 11/15/11............. 2,019,160
Jefferson County PCR,
450,000 DuPont, Series A, 6.30%, 07/01/12.............................................................. 480,596
1,000,000 Louisville Gas and Electric Co. Project, Series B, 5.625%, 0815/19 ............................ 955,950
100,000 Refunding, Louisville Gas and Electric Co. Project, Series A, 7.45%, 06/15/15 ................. 108,580
Jefferson County School District Finance Corp., School Building Revenue, MBIA Insured,
250,000 Refunding, Series B, 6.20%, 01/01/07 .......................................................... 265,715
1,020,000 Series A, 5.125%, 02/01/14..................................................................... 943,010
Kenton County Airport Board Revenue, Delta Airlines Project, Special Facilities,
1,230,000 Cincinnati/Northern Kentucky International Airport, Series B, MBIA Insured, 5.75%, 03/01/13.... 1,224,797
445,000 Delta Airlines Project, Special Facilities, Series A, 7.50%, 02/01/20.......................... 472,933
150,000 Delta Airlines Project, Special Facilities, Series A, 7.125%, 02/01/21 ........................ 156,233
445,000 Delta Airlines Project, Special Facilities, Series B, 7.25%, 02/01/22.......................... 468,870
Kenton County Water District No. 001, Waterworks Revenue,
155,000 Refunding, FGIC Insured, 6.375%, 02/01/17 ..................................................... 163,229
500,000 Series A, MBIA Insured, 5.80%, 02/01/15 ....................................................... 496,615
500,000 Series B, FGIC Insured, 5.70%, 02/01/20 ....................................................... 486,745
750,000 Kentucky Development Finance Authority, Hospital Revenue, Refunding & Improvement,
St. Elizabeth Medical Center, Series A, FGIC Insured, 6.00%, 11/01/10 ......................... 757,530
Kentucky EDA, Hospital Facilities Revenue,
650,000 Refunding, Baptist Healthcare Systems, MBIA Insured, 5.00%, 08/15/24 .......................... 559,273
625,000 St. Elizabeth Medical Center Project, Series A, FGIC Insured, 6.00%, 12/01/22 ................. 630,156
$ 500,000 Kentucky EDA Revenue, Refunding & Improvement, Ashland Hospital Corp. Medical Center,
Series A, CGIC Insured, 6.125%, 02/01/12 ...................................................... $ 514,000
Kentucky HFC, Housing Revenue,
1,500,000 Refunding, Series A, 6.375%, 07/01/28.......................................................... 1,515,330
1,485,000 Series C, FHA Insured, 6.40%, 01/01/17 ........................................................ 1,509,710
40,000 SFMR, Series A, 6.60%, 07/01/11 ............................................................... 41,300
150,000 SFMR, Series B, 6.60%, 07/01/11 ............................................................... 154,875
130,000 SFMR, Series D, FHA/VA, 7.45%, 01/01/23........................................................ 133,323
Kentucky Infrastructure Authority Revenue, Revolving Fund Program,
100,000 Series E, 6.50%, 06/01/11 ..................................................................... 103,678
100,000 Series G, 6.30%, 06/01/12 ..................................................................... 102,009
500,000 Series J, 6.375%, 06/01/14 .................................................................... 521,465
300,000 Wastewater, Series D, 5.75%, 06/01/15 ......................................................... 290,286
1,400,000 Kentucky Local Correctional Facilities Construction Authority Revenue, Refunding, FSA Insured,
5.50%, 11/01/14 ............................................................................... 1,339,492
Kentucky State Development Finance Authority Revenue,
100,000 Refunding, Sisters of Charity of Nazareth Health Corp., 6.75%, 11/01/12 ....................... 106,259
110,000 St. Claire Medical Center Project, Pre-Refunded, 7.125%, 09/01/21 ............................. 122,081
Kentucky State Property and Buildings Commission Revenue,
45,000 Project No. 50, Pre-Refunded, 6.00%, 02/01/10 ................................................. 47,174
700,000 Project No. 56, 6.00%, 09/01/14 ............................................................... 703,122
15,000 Kentucky State Turnpike Authority, EDR, Revitalization Road Project, Pre-Refunded, 7.25%, 05/15/10 16,488
660,000 Lexington-Fayette Urban County Government, Public Facilities Corp., Mortgage Revenue,
FSA Insured, 5.10%, 11/01/15 .................................................................. 598,429
Lexington-Fayette Urban County Government Revenue, University of Kentucky Library Project,
MBIA Insured,
500,000 6.625%, 11/01/13 .............................................................................. 531,275
750,000 6.75%, 11/01/24................................................................................ 804,030
600,000 Louisville and Jefferson County Metropolitan Sewer District Revenue, Refunding, Series A,
MBIA Insured, 5.50%, 05/15/21 ................................................................. 565,968
Louisville and Jefferson County Metropolitan Sewer District, Sewer and Drain System Revenue, Series A,
500,000 FGIC Insured, 5.40%, 05/15/22 ................................................................. 464,600
500,000 FGIC Insured, 5.20%, 05/15/26.................................................................. 450,540
500,000 Refunding, AMBAC Insured, 6.75%, 05/15/25 ..................................................... 547,140
500,000 McCracken County Hospital Revenue, Refunding, Mercy Health System, Series A, MBIA Insured,
6.40%, 11/01/07 ............................................................................... 537,835
625,000 Mount Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 6.10%, 03/01/08 ........ 636,163
1,050,000 Pendleton Multi-County Association Trust, Lease Revenue, Series A, 6.50%, 03/01/19 ............. 1,073,310
430,000 Puerto Rico Commonwealth GO, 6.45%, 07/01/17 ................................................... 452,304
100,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series V,
6.625%, 07/01/12 .............................................................................. 105,752
1,000,000 Puerto Rico Electric Power Authority Revenue, Refunding, Series U, 6.00%, 07/01/14.............. 994,490
1,480,000 Puerto Rico Industrial, Medical and Environmental Pollution Control Facilities, Financing Authority
Revenue, Special Facilities, American Airlines, Series A, 6.45%, 12/01/25...................... 1,509,112
50,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series L, Pre-Refunded,
6.875%, 07/01/21 .............................................................................. 55,997
350,000 Russell Health System Facilities Revenue, Franciscan Health Center, Series B, 8.10%, 07/01/15... 392,238
100,000 Somerset Water Project Revenue, MBIA Insured, 6.40%, 12/01/06 .................................. 102,208
University of Kentucky Revenues, Community College Educational Buildings,
350,000 Refunding, Series J, 5.10%, 05/01/10 .......................................................... 335,674
100,000 Series I, 6.40%, 05/01/08 ..................................................................... 105,866
$ 145,000 University of Kentucky Revenues, Consolidated Educational Buildings, Series M, 6.40%, 05/01/10 . $ 152,973
750,000 University of Louisville Revenues, Refunding, Consolidated Educational Buildings, Series I,
5.40%, 05/01/16 ............................................................................... 717,562
--------------
Total Long Term Investments (Cost $39,917,506) ................................................. 40,694,205
--------------
a Short Term Investments.5%
200,000 Kentucky Development Financing Authority Revenue, Pooled Loan Program, Series A, FGIC Insured,
Weekly VRDN and Put, 3.40%, 12/01/15 (Cost $200,000) .......................................... 200,000
--------------
Total Investments (Cost $40,117,506)98.2%....................................................... 40,894,205
Other Assets and Liabilities, Net1.8%........................................................... 748,244
--------------
Net Assets100.0%................................................................................ $41,642,449
==============
At August 31, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $40,117,506 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................................. $ 1,100,537
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................................. (323,838)
--------------
Net unrealized appreciation..................................................................... $ 776,699
==============
</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
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
VA - Veterans Administration
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S.Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Louisiana Tax-Free Income Fund (Note 1)
Long Term Investments 100.8%
Bonds 99.1%
Ascension Parish Sales and Use Tax, Gravity Drainage District No. 1, Pre-Refunded,
<S> <C> <C>
$ 300,000 7.25%, 12/01/06 .............................................................................. $ 327,333
300,000 7.25%, 12/01/07 .............................................................................. 327,333
200,000 7.25%, 12/01/08 .............................................................................. 218,222
500,000 Bastrop, Inc., IDB, PCR, Refunding, International Paper Co. Project, 6.90%, 03/01/07 .......... 534,300
150,000 Baton Rouge Public Improvement, Sales and Use Tax Revenue, AMBAC Insured, 7.00%, 08/01/08...... 160,736
200,000 Caddo Parish School District GO, Refunding, MBIA Insured, Pre-Refunded, 7.20%, 03/01/05 ....... 203,192
400,000 Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Memorial Hospital Project,
BIG Insured, Pre-Refunded, 7.50%, 12/01/18 ................................................... 416,620
50,000 Calcasieu Parish Public School ID No. 30, GO, Ward 4, Unlimited Tax, Pre-Refunded, 8.00%, 08/01/04 53,196
Calcasieu Parish Public Trust Mortgage Authority Revenue, Refunding,
1,135,000 Series A, 7.75%, 06/01/12 .................................................................... 1,196,778
1,085,000 Series B, 6.875%, 11/01/12 ................................................................... 1,118,950
1,380,000 Denham Springs-Livingston Housing and Mortgage Finance Authority, SFMR, ETM, 7.20%, 08/01/10 .. 1,569,681
1,500,000 DeSoto Parish Environmental Improvement Revenue, International Paper Co. Project, Series A,
7.70%, 11/01/18............................................................................... 1,678,845
DeSoto Parish GO,
150,000 School District No. 1, Pre-Refunded, 8.00%, 01/01/09 ......................................... 161,199
50,000 School District No. 2, 8.00%, 08/01/06 ....................................................... 54,027
East Baton Rouge Mortgage Finance Authority,
840,000 MBS, Series A, 7.875%, 08/01/23 .............................................................. 883,235
1,305,000 SF Purchase, Series F, GNMA Secured, 7.875%, 12/01/21 ........................................ 1,383,939
East Baton Rouge Parish Public Improvement, Sales and Use Tax, MBIA Insured, Pre-Refunded,
145,000 7.25%, 02/01/09 .............................................................................. 156,216
425,000 7.25%, 02/01/13 .............................................................................. 457,874
750,000 East Baton Rouge Parish Sales and Use Tax, FGIC Insured, 5.90%, 02/01/18....................... 743,648
50,000 Franklin Public Improvement GO, Sales and Use Tax Revenue, Refunding, Pre-Refunded,
8.40%, 12/01/03 .............................................................................. 53,473
Iberville Parish Consolidated School District No. 005, Pre-Refunded,
125,000 8.125%, 10/01/08 ............................................................................. 136,613
245,000 GO, Unlimited Tax, 8.00%, 10/01/04 ........................................................... 267,160
115,000 Jefferson Parish Home Mortgage Authority, SFMR, GNMA Secured, Series A, 8.30%, 04/01/20 ....... 120,584
Jefferson Parish Road District No. 1, GO, FGIC Insured, Pre-Refunded,
100,000 7.40%, 03/01/06 .............................................................................. 104,615
50,000 7.40%, 03/01/08 .............................................................................. 52,308
500,000 Jefferson Parish School Board, Sales and Use Tax Revenue, Series A, ETM, 7.35%, 02/01/03....... 514,005
400,000 Lafayette Parish Consolidated School District No. 1, FGIC Insured, Pre-Refunded, 7.70%, 03/01/07 433,200
415,000 Lafayette Public Electric Power Authority Revenue, Refunding, 7.25%, 11/01/12 ................. 428,990
25,000 Lafayette Public Improvement, Sales Tax Revenue, Refunding, Series 1988, FGIC Insured,
Pre-Refunded, 8.00%, 03/01/08................................................................. 26,820
Lafayette Public Trust Financing Authority, SFMR, Series A,
30,000 ETM, 7.20%, 04/01/11.......................................................................... 33,463
381,220 Refunding, 8.50%, 11/15/12.................................................................... 402,653
95,000 Lafourche Parish Home Mortgage Authority, SFMR, ETM, 7.40%, 07/01/10 .......................... 106,885
3,000,000 Lake Charles Harbor and Terminal District, Port Facilities Revenue, Refunding, Occidental
Petroleum Corp., 7.20%, 12/01/20 ............................................................. 3,229,410
750,000 Lake Charles Nonprofit HDC, Section 8, Assisted Mortgage Revenue, Refunding, Chateau Project,
Series 1990-A, CGIC Insured, 7.875%, 02/15/25 ................................................ 772,493
1,750,000 Leesville, IDBR, Refunding, Wal-Mart Stores, Inc. Project, 7.10%, 03/01/11 .................... 1,841,578
500,000 Louisiana Gas Fuel Tax Revenue, 7.25%, 11/15/04 ............................................... 538,550
Louisiana Mortgage, HFA Revenue,
2,795,000 MF, Refunding, Series A, FHA Insured, 7.00%, 07/01/22 ........................................ 2,863,394
750,000 MF, Westview Project, FHA Insured, 7.80%, 04/01/30 ........................................... 783,780
Bonds (cont.)
Louisiana Mortgage, HFA Revenue, (cont.)
$ 20,000 SF, GNMA Secured, 9.125%, 11/01/18 ........................................................... $ 20,801
635,000 SF, GNMA Secured, 8.30%, 11/01/20 ............................................................ 655,936
1,160,000 SF, Refunding, Series C-1, MBIA Insured, 5.75%, 06/01/17 ..................................... 1,125,722
1,600,000 Louisiana Office Capital Facility Corp., Non-Profit Corp., 7.75%, 12/01/10 .................... 1,752,432
Louisiana Public Facilities Authority, Hospital Revenue, Refunding,
75,000 Touro Infirmary Project, Series A, BIG Insured, Pre-Refunded, 8.00%, 06/01/09 ................ 81,026
3,000,000 Women's Hospital Foundation Project, 7.25%, 10/01/22.......................................... 3,156,660
65,000 Women's Hospital Foundation Project, FGIC Insured, Pre-Refunded, 8.125%, 10/01/14 ............ 71,039
1,230,000 Louisiana Public Facilities Authority, Lease Revenue, Orleans Parish School Board Project,
FSA Insured, 5.65%, 06/15/11.................................................................. 1,191,575
Louisiana Public Facilities Authority Revenue,
930,000 Alton Ochsner Medical Foundation Project, Series C, MBIA Insured, 6.50%, 05/15/22 ............ 964,010
62,783 MFHR, Pontchartrain Apartments, Series A, GNMA Secured, 8.375%, 07/20/23...................... 65,841
200,000 Refunding, Jefferson Parish Eastbank Office, FGIC Insured, 7.70%, 08/01/10 ................... 218,156
1,900,000 Refunding, MF Housing, Series A, One Lakeshore, GNMA Secured, 6.40%, 07/20/20................. 1,906,707
2,012,956 SFM Purchase, Series C, 8.45%, 12/01/12....................................................... 2,131,983
1,500,000 Student Loan, Series A, Sub-Series 3, 7.00%, 09/01/06 ........................................ 1,560,330
5,500,000 Tulane University, AMBAC Insured, 6.05%, 10/01/25............................................. 5,504,345
50,000 Tulane University, Series B, Pre-Refunded, 8.00%, 08/15/15 ................................... 52,787
30,000 Louisiana Public Facilities Authority, SFM Purchase, Series C, GNMA Secured, 8.80%, 04/01/13 .. 31,844
Louisiana Stadium and Exposition District, Hotel Occupancy Tax and Stadium Revenue, FGIC Insured,
5,000,000 Series A, 6.00%, 07/01/16 .................................................................... 5,077,300
2,500,000 Series B, 5.25%, 07/01/20 .................................................................... 2,266,625
Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Loop, Inc. Project,
First Stage, Refunding,
1,000,000 Series B, 7.20%, 09/01/08 .................................................................... 1,095,430
1,000,000 Series E, 7.60%, 09/01/10 .................................................................... 1,094,160
3,000,000e Louisiana State University, Agricultural and Mechanical College, University Revenues, Auxiliary,
MBIA Insured, 5.50%, 07/01/26................................................................. 2,776,980
1,050,000 Mississippi River Bridge Authority Revenue, 6.75%, 11/01/12 ................................... 1,123,521
50,000 Morgan City GO, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%, 12/01/03 ........... 53,504
Natchitoches Parish GO, Consolidated School, District No. 7, Pre-Refunded,
125,000 8.30%, 03/01/10 .............................................................................. 136,968
230,000 Series B, 7.50%, 03/01/09 .................................................................... 249,959
235,000 Series B, 7.50%, 03/01/10 .................................................................... 255,393
65,000 New Orleans Audubon Park Commission, Aquarium Project, MBIA Insured, Pre-Refunded,
7.90%, 10/01/08 .............................................................................. 68,863
2,000,000 New Orleans GO, Refunding, AMBAC Insured, 6.00%, 09/01/21 ..................................... 2,018,800
560,000 New Orleans Home Mortgage Authority, SFMR, Series A, Pre-Refunded, 7.50%, 10/01/18 ............ 595,095
50,000 New Orleans International Airport Revenue, Series A, FGIC Insured, Pre-Refunded, 8.875%, 08/01/17 53,052
New Orleans Public Improvement GO,
300,000 CGIC Insured, Pre-Refunded, 7.125%, 10/01/03.................................................. 315,579
1,000,000 FGIC Insured, 5.90%, 11/01/25................................................................. 995,760
1,000,000 New Roads Electric System Revenue, 7.00%, 07/01/17 ............................................ 1,043,210
Orleans Levee District,
1,000,000 GO, Levee Improvement, FSA Insured, 5.95%, 11/01/14 .......................................... 993,320
50,000 Refunding, Public Improvement, Series A, 8.25%, 11/01/15 ..................................... 51,206
Orleans Parish Law Enforcement District, GO, AMBAC Insured,
185,000 7.10%, 05/01/05 .............................................................................. 196,548
750,000 7.10%, 05/01/10 .............................................................................. 797,070
Ouachita Parish Hospital Service Revenue, District No. 1, Glenwood Regional Medical Center,
$ 3,500,000 Pre-Refunded, 7.50%, 07/01/21................................................................. $ 3,946,530
2,500,000 Refunding, FSA Insured, 5.75%, 05/15/21....................................................... 2,394,950
75,000 Plaquemines Parish GO, Unlimited Tax, Pre-Refunded, 8.40%, 08/01/06 ........................... 80,535
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
500,000 7.90%, 07/01/07 .............................................................................. 543,015
1,000,000 7.875%, 07/01/17 ............................................................................. 1,085,590
500,000 Puerto Rico Commonwealth GO, Series 1990, Pre-Refunded, 7.70%, 07/01/20 ....................... 563,620
1,000,000 Puerto Rico Commonwealth Highway Transportation Authority Revenue, Series S, Pre-Refunded,
8.00%, 07/01/18............................................................................... 1,135,770
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
525,000 7.90%, 07/01/07 .............................................................................. 562,742
100,000 7.75%, 07/01/08 .............................................................................. 106,931
Puerto Rico Electric Power Authority Revenue, Pre-Refunded,
100,000 Refunding, Series M, 8.00%, 07/01/08 ......................................................... 108,684
1,000,000 Series P, 7.00%, 07/01/21 .................................................................... 1,117,790
560,000 Puerto Rico Electric Power Authority Revenue, Refunding, Water Resources, Series N,
7.125%, 07/01/14.............................................................................. 598,214
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
10,000 Series A, 7.80%, 10/15/21 .................................................................... 10,408
275,000 Series B, 7.65%, 10/15/22 .................................................................... 288,742
665,000 Series C, 6.85%, 10/15/23 .................................................................... 693,755
150,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs.,
Series A, 8.00%, 09/01/12 .................................................................... 162,945
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Pre-Refunded,
100,000 Series H, 7.875%, 07/01/16 ................................................................... 105,266
1,000,000 Series J, 7.25%, 07/01/17 .................................................................... 1,070,070
75,000 Rapides Parish GO, Consolidated School District No. 52, Pineville, 8.40%, 03/01/03 ............ 79,744
1,370,000 Rapides Parish Housing and Mortgage Finance Authority, SFM, ETM, 7.25%, 08/01/10 .............. 1,499,945
150,000 Shreveport GO, Series A, Pre-Refunded, 7.50%, 01/01/09 ........................................ 159,734
3,500,000 Shreveport Water and Sewer Revenue, Refunding, Series A, FGIC Insured, 5.95%, 12/01/14 ........ 3,509,870
St. Bernard Parish Home Mortgage Authority Revenue, SFMR, Series A,
435,000 FGIC Insured, ETM, 7.50%, 09/01/10............................................................ 503,373
918,665 Refunding, 8.00%, 03/25/12.................................................................... 948,476
2,500,000 St. Charles Parish PCR, Louisiana Power and Light Co. Project, 7.50%, 06/01/21 ................ 2,645,450
St. Charles Parish Solid Waste Disposal Revenue, Louisiana Power and Light Co. Project,
1,500,000 7.05%, 04/01/22 .............................................................................. 1,549,920
750,000 Series A, 7.00%, 12/01/22 .................................................................... 777,390
St. John's Baptist Parish Sales Tax District,
430,000 7.30%, 12/01/08 .............................................................................. 463,845
275,000 7.30%, 12/01/09 .............................................................................. 295,111
50,000 St. Mary's Parish Public Improvement, Sales and Use Tax Revenue, Refunding, Pre-Refunded,
8.40%, 12/01/03............................................................................... 53,504
437,831 St. Mary's Public Trust Financing Authority, SFMR, Refunding, Series A, 7.625%, 03/25/12....... 465,200
125,000 St. Tammany's Parish Hospital Service Revenue, District No. 2, Pre-Refunded, 8.00%, 10/01/08 .. 136,305
St. Tammany's Public Trust Financing Authority, SFMR, Series A, ETM,
165,000 7.20%, 07/01/10 .............................................................................. 187,074
50,000 7.20%, 07/01/11 .............................................................................. 55,402
5,500,000 Tangipahoa Parish Hospital Service Revenue, District No. 1, Refunding, AMBAC Insured,
6.25%, 02/01/24 .............................................................................. 5,601,310
125,000 Terrebonne Parish Hospital Service Revenue, District No. 1, Refunding, Terrebonne General
Medical Center Project, BIG Insured, 7.50%, 04/01/15 ......................................... 132,150
$ 205,000 Ville Platte Utilities Revenue, Refunding, Pre-Refunded, 7.80%, 05/01/02 ...................... $ 223,181
West Feliciana Parish PCR, Gulf States Utilities,
6,500,000 7.70%, 12/01/14 .............................................................................. 6,971,120
5,000,000 Refunding, 8.00%, 12/01/24 ................................................................... 5,306,900
--------------
Total Bonds (Cost $106,802,176)................................................................ 112,245,396
--------------
Zero Coupon Bonds1.7%
5,000,000 Shreveport Water and Sewer Revenue, Refunding, Series B, FGIC Insured, (original accretion
rate 7.05%), 12/01/11 (Cost $1,726,204) ...................................................... 1,879,200
--------------
Total Long Term Investments (Cost $108,528,380) ............................................... 114,124,596
--------------
a Short Term Investments.4%
500,000 Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, ACES, Refunding, Loop, Inc.
Project, First Stage, Daily VRDN and Put, 3.80%, 09/01/06 (Cost $500,000)..................... 500,000
--------------
Total Investments (Cost $109,028,380)101.2% ................................................... 114,624,596
Liabilities in Excess of other Assets(1.2)%.................................................... (1,327,843)
--------------
Net Assets 100.0%.............................................................................. $113,296,753
==============
At August 31, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $109,028,380 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 5,868,976
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (272,760)
--------------
Net unrealized appreciation.................................................................... $ 5,596,216
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
ACES - Adjustable Convertible Exempt Securities
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
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
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
eSee Note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Maryland Tax-Free Income Fund (Note 1)
Long Term Investments 94.8%
<S> <C> <C>
$ 200,000 Anne Arundel County GO, Second Issue, 7.75%, 03/15/08......................................... $ 217,132
1,650,000 Anne Arundel County Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.00%, 01/01/26 ..... 1,653,185
9,500,000 Anne Arundel County PCR, Refunding, Baltimore Gas and Electric Co. Project, 6.00%, 04/01/24 .. 9,513,110
4,250,000 Baltimore Convention Center Revenue, FGIC Insured, 6.15%, 09/01/19 ........................... 4,327,690
545,000 Baltimore COP, Refunding, Series C, MBIA Insured, 7.25%, 04/01/16............................. 588,001
90,000 Baltimore County Authority Revenue, Series 1989, 7.20%, 07/01/19 ............................. 95,702
Baltimore County Mortgage Revenue, Old Orchard Apartments Project, Refunding, Series A,
MBIA Insured,
1,000,000 7.00%, 07/01/16 ............................................................................. 1,049,070
3,000,000 7.125%, 01/01/27 ............................................................................ 3,174,330
Baltimore Economic Development Lease Revenue, Refunding, Armistead Partnership, Series A,
1,435,000 6.75%, 08/01/02.............................................................................. 1,524,300
3,225,000 7.00%, 08/01/11 ............................................................................. 3,456,233
1,000,000 Baltimore GO, Series B, 7.15%, 10/15/08 ...................................................... 1,147,280
1,850,000 Baltimore Port Facilities Revenue, Consolidated Coal Sales, Series A, 6.50%, 10/01/11 ........ 1,980,203
5,000,000 Baltimore Revenue, Refunding, Waste Water Project, Series A, FGIC Insured, 5.80%, 07/01/15.... 5,003,750
250,000 Bel Air COP, Parking Facilities, CGIC Insured, Pre-Refunded, 7.80%, 06/01/10 ................. 274,023
350,000 Frederick County College Revenue, Hood College Project, 7.20%, 07/01/09 ...................... 371,683
500,000 Frederick County EDR, Refunding, Manekin Frederick Project, Series A, 7.50%, 12/01/14 ........ 546,520
Gaithersburg Hospital Facilities, Shady Grove Hospital,
10,000,000 Improvement Revenue, Series A, Pre-Refunded, 8.25%, 09/01/21................................. 11,638,300
8,000,000 Refunding & Improvement, FSA Insured, 6.00%, 09/01/21........................................ 8,012,640
3,000,000 Harford County Mortgage Revenue, Refunding, Greenbrier V Apartments Project, FHA Insured,
6.50%, 11/01/26 ............................................................................. 3,095,070
1,250,000 Howard County EDR, Refunding, 7.75%, 06/01/12................................................. 1,332,613
215,000 Howard County Metropolitan District, Series A, Pre-Refunded, 7.40%, 02/15/18 ................. 231,387
300,000 Kent County College Revenue, Refunding, Washington College Project, 7.70%, 07/01/18 .......... 321,429
1,900,000 Maryland Environmental Services, COP, Water and Waste Facilities, Series A, 6.70%, 06/01/11... 2,023,139
650,000 Maryland Local Government Insurance Trust Capitalization Program, Series A, 7.125%, 08/01/09 . 702,624
Maryland State CDA, Department of Economic and Community Development,
1,000,000 SFHR Program, Fourth Series, 7.30%, 04/01/17................................................. 1,045,420
350,000 SF Program, First Series, 7.00%, 04/01/14.................................................... 359,499
Maryland State CDA, Department of Housing and Community Development,
130,000 Infrastructure Financing, Series A, AMBAC Insured, 7.25%, 06/01/09 .......................... 139,342
675,000 MFH Mortgage, Series E, 7.10%, 05/15/28...................................................... 701,426
990,000 MFHR Mortgage, Series A, 7.80%, 05/15/32 .................................................... 1,038,797
1,800,000 MFHR Mortgage, Series A, 6.85%, 05/15/33 .................................................... 1,851,678
1,000,000 MFHR Mortgage, Series D, 7.70%, 05/15/20 .................................................... 1,061,710
140,000 SF Program, 1st Series, 7.40%, 04/01/17...................................................... 145,240
710,000 SF Program, 2nd Series, 7.60%, 04/01/23 ..................................................... 743,853
295,000 SF Program, 2nd Series, 7.85%, 04/01/29 ..................................................... 310,355
300,000 SF Program, 3rd Series, 7.375%, 04/01/26..................................................... 307,956
1,435,000 SF Program, 3rd Series, 7.25%, 04/01/27...................................................... 1,488,612
995,000 SF Program, 4th Series, 7.375%, 04/01/10 .................................................... 1,035,556
955,000 SF Program, 4th Series, 7.45%, 04/01/32...................................................... 990,450
1,955,000 SF Program, 5th Series, 6.85%, 04/01/11...................................................... 2,047,276
25,000 SF Program, 6th Series, 8.125%, 04/01/17..................................................... 25,873
Maryland State Community Development Administration, MFHR, Series A,
200,000 Department of Economics and Community Development, 7.375%, 05/15/26 ......................... 203,888
30,000 Department of Housing and Community Development, 7.50%, 05/15/31 ............................ 31,046
1,000,000 Maryland State EDC Lease Revenue, Hilton Street Facilities, Series A, 7.00%, 01/01/10 ........ 1,087,300
3,000,000 Maryland State Energy Financing Adminstration, Solid Waste Disposal Revenue, Limited Obligation,
Wheelabrator Water Projects, 6.45%, 12/01/16................................................. 3,035,040
Maryland State Health and Higher Educational Facilities Authority Revenue,
$ 1,000,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/12 ................................... $ 1,157,960
250,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/22 ................................... 289,490
150,000 Franklin Square Hospital, MBIA Insured, 7.50%, 07/01/19 ..................................... 163,596
100,000 Harford Memorial Hospital and Fallston General Hospital, 8.50%, 07/01/14 .................... 103,621
500,000 Holy Cross Hospital, Series A, AMBAC Insured, Pre-Refunded, 7.125%, 07/01/10 ................ 552,705
9,750,000 Johns Hopkins Medical Institutions, Parking Facilities, AMBAC Insured, 5.50%, 07/01/26....... 9,204,780
1,700,000 Kernan Hospital, Connie Lee Insured, 6.10%, 07/01/24 ........................................ 1,708,534
100,000 North Arundel Hospital, BIG Insured, Pre-Refunded, 7.875%, 07/01/21 ......................... 108,374
3,000,000 Refunding, Doctors Community Hospital, 5.75%, 07/01/13 ...................................... 2,812,290
150,000 Refunding, Johns Hopkins Hospital, 7.375%, 07/01/09 ......................................... 160,131
100,000 Refunding, Johns Hopkins University, 7.375%, 07/01/08 ....................................... 106,417
2,460,000 Refunding, Junior Lien, Francis Scott Key Facility, 5.625%, 07/01/25......................... 2,321,133
1,350,000 Maryland State IDA Financing, EDR, FSA Insured, 7.10%, 07/01/18 .............................. 1,462,833
6,000,000 Maryland State IDA Revenue Financing, American Center Physics Headquarters, 6.625%, 01/01/17 . 6,100,800
4,655,000 Maryland State Stadium Authority, Lease Revenue, Convention Center Expansion, AMBAC Insured,
5.875%, 12/15/14............................................................................. 4,651,881
Maryland State Stadium Authority, Sports Facilities Lease Revenue,
5,000,000 AMBAC Insured, 5.75%, 03/01/22............................................................... 4,812,550
500,000 Series D, 7.60%, 12/15/19 ................................................................... 542,865
5,400,000 Maryland State Transportation Facilities Authority Revenue, Refunding, Series 1992, 5.75%, 07/01/13 5,280,012
1,000,000 Maryland Water Quality Financing Administration Revenue, Revolving Loan Fund, Series A,
6.55%, 09/01/14 ............................................................................. 1,063,330
Montgomery County Housing Opportunities Commission, MFMR, Series A,
1,580,000 7.25%, 07/01/11 ............................................................................. 1,666,473
2,410,000 7.00%, 07/01/23 ............................................................................. 2,490,108
Montgomery County Housing Opportunities Commission, SFMR, Series A,
2,055,000 6.80%, 07/01/17 ............................................................................. 2,109,869
460,000 7.50%, 07/01/17 ............................................................................. 482,618
175,000 7.625%, 07/01/17 ............................................................................ 180,408
Northeast Solid Waste Disposal Authority Revenue, Montgomery County Resources Recreation
Project, Series A,
3,100,000 6.20%, 07/01/10 ............................................................................. 3,118,476
6,000,000 6.30%, 07/01/16 ............................................................................. 5,899,380
Ocean City GO, Refunding, MBIA Insured,
1,880,000 5.75%, 03/15/12.............................................................................. 1,903,331
1,120,000 5.75%, 03/15/13 ............................................................................. 1,129,778
1,180,000 5.75%, 03/15/14 ............................................................................. 1,181,687
2,050,000 Prince George's County COP, Real Estate Acquisition Program II, MBIA Insured, 6.00%, 09/15/14 2,080,791
130,000 Prince George's County GO, Consolidated Public Improvement, Series A, Pre-Refunded,
7.20%, 02/01/08.............................................................................. 139,478
Prince George's County Hospital Revenue, Dimensions Health Corp., Pre-Refunded,
3,500,000 7.25%, 07/01/17.............................................................................. 3,980,025
1,000,000 7.00%, 07/01/22 ............................................................................. 1,124,590
5,500,000 Prince George's County Housing Authority, MFHR, Emerson House Project, Series A,
7.00%, 04/15/19 ............................................................................. 5,663,955
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.................................. 2,987,087
2,750,000 Prince George's County IDA Lease Revenue, Upper Marlboro Justice Center Project, MBIA Insured,
5.80%, 06/30/14.............................................................................. 2,755,363
500,000 Prince George's County, Maryland Parking Authority Revenue, Refunding, Justice Center
Facilities Project, 6.45%, 05/01/05 ......................................................... 538,815
Prince George's County PCR, Refunding, Potomac Electric Project,
$ 1,200,000 6.00%, 09/01/22.............................................................................. $ 1,207,536
2,975,000 6.375%, 01/15/23 ............................................................................ 3,104,799
3,000,000 Puerto Rico Commonwealth GO, 5.50%, 07/01/17.................................................. 2,856,930
1,145,000 Rockville Mortgage Revenue, Refunding, Summit Apartments Project, Series A, MBIA Insured,
5.70%, 01/01/26.............................................................................. 1,102,325
Washington Suburban Sanitary District, General Construction,
1,330,000 5.25%, 06/01/19 ............................................................................. 1,227,084
100,000 Pre-Refunded, 7.25%, 12/01/09 ............................................................... 108,332
--------------
Total Long Term Investments (Cost $166,039,896) .............................................. 171,572,271
--------------
a Short Term Investments1.0%
600,000 Baltimore County MF Revenue, Refunding, Lincoln Woods Apartments, Weekly VRDN and Put,
3.65%, 11/01/16 ............................................................................. 600,000
100,000 Maryland State Health & Higher Educational Facilities Authority Revenue, Pooled Loan Program,
Kennedy Krieger Facility, Series D, Weekly VRDN and Put, 3.50%, 07/01/23..................... 100,000
400,000 Maryland State Health & Higher Educational Facilities Authority Revenue, Pooled Loan Program,
Refunding, Series A, Weekly VRDN and Put, 3.50%, 04/01/35.................................... 400,000
800,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.10%, 12/01/15.............................................................................. 800,000
--------------
Total Short Term Investments (Cost $1,900,000) ............................................... 1,900,000
--------------
Total Investments (Cost $167,939,896)95.8%.................................................... 173,472,271
Other Assets and Liablities, Net4.2%.......................................................... 7,558,359
--------------
Net Assets100.0%.............................................................................. $181,030,630
==============
At August 31, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$167,939,896 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 6,498,484
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (966,109)
--------------
Net unrealized appreciation................................................................... $ 5,532,375
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CDA - Community Development Authority/Agency
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
EDC - Economic Development Corp.
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assistance
GO - General Obligation
IDA - Industrial Development Authority/Agency
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Missouri Tax-Free Income Fund (Note 1)
Long Term Investments 98.2%
<S> <C> <C>
$ 500,000 Audrain County Hospital Revenue, Refunding, Audrain Medical Center Project, AMBAC Insured,
7.35%, 11/01/08 ............................................................................. $ 559,555
3,000,000 Bi-State Development Agency, Missouri-Illinois Metropolitan District No. 5, Refunding, American
Commercial Terminals, 7.75%, 06/01/10........................................................ 3,249,450
600,000 Bi-State Development Agency, Missouri-Illinois Metropolitan District Revenue, Refunding,
Arch Parking Facility, 7.25%, 01/02/13....................................................... 611,610
1,400,000 Bowling Green School District R1, Building Corp., Leasehold Revenue, MBIA Insured,
6.50%, 03/01/13 ............................................................................. 1,467,564
1,180,000 Christian County Reorganized School District No. R-6, AMBAC Insured, 7.05%, 03/01/11.......... 1,283,580
1,000,000e Columbia Special Obligation, Capital Improvement, 5.50%, 02/01/16............................. 957,410
Franklin County Consolidated School District No. 2, GO, FGIC Insured, Pre-Refunded,
500,000 7.20%, 03/01/05............................................................................ 522,750
500,000 7.25%, 03/01/06 ............................................................................. 523,110
Guam Airport Authority Revenue,
1,075,000 Refunding, Series A, 6.50%, 10/01/23 ........................................................ 1,082,235
500,000 Series B, 6.60%, 10/01/10 ................................................................... 510,210
4,000,000 Series B, 6.70%, 10/01/23 ................................................................... 4,040,280
1,300,000 Hannibal IDA, Health Facilities, 5.75%, 03/01/22.............................................. 1,269,424
1,745,000 Hazelwood IDA, MFHR, Refunding, Lakes Apartments Project, Series A, 6.10%, 09/20/26........... 1,723,624
3,000,000 Jackson County IDA Revenue, St. Joseph's Health Center Corp., MBIA Insured, 6.50%, 07/01/19 .. 3,149,460
880,000 Jackson County Lease COP, Longview Recreation Complex Project, Pre-Refunded, 8.00%, 11/01/07.. 934,859
370,000 Jefferson County Reorganized School District No. R-3, AMBAC Insured, 7.00%, 03/01/09 ......... 392,563
Joplin Catholic Health Facilities Corp. Revenue, IDA, St. John's Regional Medical Center Project,
Series 1987,
150,000 COP, 7.125%, 06/01/14 ....................................................................... 154,461
200,000 Refunding, MBIA Insured, 7.125%, 06/01/14 ................................................... 207,192
605,000 Kansas City Airport Revenue, General Improvement, Series B, CGIC Insured, 6.875%, 09/01/12 ... 656,395
3,345,000 Kansas City IDA, MFHR, Mews Apartments Project, Series A, 6.30%, 07/01/20..................... 3,349,817
5,000,000 Kansas City Land Clearance, Redevelopment Authority Lease Revenue, Municipal Auditorium and
Muehlebach Hotel, Series A, FSA Insured, 5.90%, 12/01/18 .................................... 4,968,800
Kansas City MAC, Leasehold Revenue, Capital Improvement,
7,790,000 Citywide Infrastructure, Series B, CGIC Insured, 6.50%, 03/01/14 ............................ 8,204,272
1,750,000 Refunding, Roe Bartle, Series B-1, AMBAC Insured, Pre-Refunded, 7.125%, 04/15/16 ............ 1,929,988
1,905,000 Roe Bartel, Series B, AMBAC Insured, Pre-Refunded, 6.625%, 04/15/15 ......................... 2,092,738
1,665,000 Truman Medical Center, Series A, 7.00%, 11/01/11............................................. 1,777,154
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........................................ 1,982,016
3,525,000 Kansas City Tax Increment Financing Commission, Tax Increment Revenue, Briarcliff West Project,
Series B, 7.00%, 11/01/14.................................................................... 3,610,023
1,800,000 Kansas City Water Revenue, Seventh Issue, Series A, 7.00%, 12/01/08........................... 1,829,664
Lake of The Ozarks Community Bridge Corp., Bridge System Revenue,
3,035,000 6.25%, 12/01/16.............................................................................. 2,881,247
7,000,000 6.40%, 12/01/25 ............................................................................. 6,637,050
75,000 Lee's Summit COP, 8.50%, 08/01/02............................................................. 77,249
Lee's Summit IDA Revenue, John Knox Village Project,
1,000,000 6.55%, 08/15/10 ............................................................................. 1,016,340
2,000,000 6.625%, 08/15/13............................................................................. 2,017,700
40,000 Marion County Nursing Home District Revenue, Refunding, Pre-Refunded, 9.00%, 08/01/03......... 42,518
1,000,000 Missouri School Board Association COP, Lease Participation, North St. Francois County Project,
MBIA Insured, Pre-Refunded, 7.375%, 04/01/10 ................................................ 1,063,970
Missouri School Board Association COP, Pooled Finance Program, BIG Insured,
130,000 Series A-3, 7.875%, 03/01/06 ................................................................ 135,160
225,000 Series A-5, 7.375%, 03/01/06 ................................................................ 235,517
Missouri School Boards Association, Lease Participation Certificates, FSA Insured,
$ 6,150,000 Fox C-6 School District, 5.75%, 03/01/16..................................................... $ 6,050,924
2,220,000 Refunding, Republic R-3 School District Project, 6.00%, 03/01/16............................. 2,245,574
Missouri State Environmental Improvement and Energy Resources Authority, PCR,
2,100,000 National Rural Association, Electric Project, Series 1984 G-6, AMBAC Insured, 5.85%, 02/01/13 2,088,912
950,000 Revolving Fund, Lee's Summit, Series B, 7.125%, 12/01/10..................................... 1,051,565
4,500,000 Revolving Fund, Series A, 6.55%, 07/01/14.................................................... 4,809,465
1,000,000 Revolving Fund, Series A, Kansas City Project, 5.75%, 01/01/16............................... 996,440
1,945,000 Revolving Fund, Springfield Project, Series A, 7.00%, 10/01/10 .............................. 2,133,548
1,000,000 Revolving Fund Program, Series A, CGIC Insured, 6.05%, 07/01/16 ............................. 1,023,680
1,000,000 Revolving Fund Program, Series B, 5.80%, 01/01/15............................................ 1,001,440
2,000,000 Revolving Fund Program, Series B, 7.20%, 07/01/16............................................ 2,268,480
2,000,000 Thomas Hill Electric Cooperative, 5.50%, 12/01/11............................................ 1,965,420
2,390,000 Missouri State Environmental Improvement and Energy Resources Authority, Union Electric Project,
7.40%, 05/01/20.............................................................................. 2,593,222
Missouri State Health and Educational Facilities Authority, Health Facilities Revenue,
2,000,000 Barnes Hospital, Pre-Refunded, 7.125%, 12/15/20.............................................. 2,229,280
100,000 Bethesda Health Group, Inc. Project, Pre-Refunded, 8.00%, 04/01/13 .......................... 106,781
3,500,000 Lake of The Ozarks General Hospital, Pre-Refunded, 8.00%, 02/15/11 .......................... 3,845,765
4,000,000 eLutheran Senior Services, Series A, 6.375%, 02/01/27....................................... 3,940,000
125,000 Refunding, Charles E. Still Osteopathic Hospital Project, 7.625%, 02/01/08................... 126,565
865,000 Refunding, Heartland Health Systems Project, 8.125%, 10/01/10 ............................... 947,659
1,250,000 Refunding, Lake Of The Ozarks General Hospital, 6.25%, 02/15/11 ............................. 1,244,063
1,000,000 Refunding, Lake Of The Ozarks General Hospital, 6.50%, 02/15/21.............................. 987,890
1,000,000 Refunding & Improvement, Christian Health, Series A, FGIC Insured, Pre-Refunded,
6.875%, 02/15/21............................................................................. 1,103,830
950,000 Sisters of St. Mary's Health Care Project, BIG Insured, Pre-Refunded, 7.75%, 06/01/16 ....... 1,025,734
175,000 Spelman-St. Luke's Hospital Corp. Project, Pre-Refunded, 7.875%, 10/01/18 ................... 190,948
Missouri State Health and Educational Facilities Authority Revenue,
5,000,000 Health Midwest, Series A, MBIA Insured, 6.40%, 02/15/15 ..................................... 5,212,750
700,000 Health Midwest, Series B, MBIA Insured, 6.10%, 06/01/11 ..................................... 724,332
1,990,000 Health Midwest, Series B, MBIA Insured, 6.25%, 06/01/14...................................... 2,063,192
1,100,000 Health Midwest, Series B, MBIA Insured, 6.25%, 02/15/22...................................... 1,130,195
2,745,000 Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 ............................. 2,852,933
4,000,000 Jefferson Memorial Hospital Obligated Group, 6.75%, 05/15/15................................. 3,982,640
3,000,000 Jefferson Memorial Hospital Obligated Group, 6.80%, 05/15/25 ................................ 2,966,010
1,000,000 Refunding, SSM Health Care, Series AA, MBIA Insured, 6.25%, 06/01/16 ........................ 1,031,400
50,000 Refunding, St. Louis University, Series A, AMBAC Insured, 7.875%, 06/01/12 .................. 52,089
1,200,000 Refunding & Improvement, St. Luke's Hospital of Kansas City Project, MBIA Insured,
Pre-Refunded, 7.00%, 11/15/13................................................................ 1,346,412
Missouri State Housing Development Commission, GNMA Secured,
2,240,000 Series B, 6.40%, 12/01/24.................................................................... 2,269,725
150,000 SFMR, Series A, 7.90%, 02/01/21.............................................................. 155,945
460,000 SFMR, Series A, 7.625%, 02/01/22 ............................................................ 479,196
2,000,000 SFMR, Series B, 6.10%, 09/01/14.............................................................. 2,009,500
375,000 SFMR, Series B, 7.625%, 06/01/21............................................................. 388,980
1,805,000 SFMR, Series B, 7.75%, 06/01/22.............................................................. 1,901,441
2,000,000 SFMR, Series B, 6.45%, 09/01/27.............................................................. 2,014,900
1,620,000 SFMR, Series C, 6.90%, 07/01/18.............................................................. 1,678,612
135,000 Missouri State Housing Development Commission, MFHR, FHA Insured, 8.50%, 12/01/29............. 141,288
5,000,000 Missouri State Western College Revenue, Refunding, Student Housing, Pre-Refunded,
8.00%, 10/01/16.............................................................................. 5,798,450
$ 1,000,000 Moberly Combined Waterworks and Sewerage System, Refunding & Improvement Bonds,
FGIC Insured, Pre-Refunded, 7.50%, 08/01/15.................................................. $ 1,120,420
50,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc., Pre-Refunded,
8.75%, 03/01/16.............................................................................. 54,486
1,000,000 Northeast State University Recreational Facility Revenue, Campus Recreational Center Project,
AMBAC Insured, 5.80%, 06/01/15 .............................................................. 990,880
300,000 North Kansas City School District Facilities Authority, BIG Insured, 7.40%, 03/01/06.......... 310,902
5,200,000 Northwest R-I Educational Facilities Authority, Leasehold Revenue, Jefferson County, FSA Insured,
5.70%, 03/01/15.............................................................................. 5,038,332
5,000,000 Phelps County Hospital Revenue, Refunding, Phelps County Regional Medical Center,
Connie Lee Insured, 6.00%, 05/15/13 ......................................................... 4,989,000
250,000 Platte County Reorganized School District No. R-5, Pre-Refunded, 7.25%, 03/01/06.............. 261,370
2,820,000 Poplar Bluff Public Building Corp., Leasehold Revenue, Series A, MBIA Insured, 5.50%, 09/01/12 2,770,001
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Pre-Refunded,
40,000 Refunding, Series 1985-A, FSA Insured, 9.00%, 07/01/09....................................... 50,478
500,000 Series 1988-A, 7.90%, 07/01/07............................................................... 543,015
375,000 Series 1988-A, 7.875%, 07/01/17.............................................................. 407,096
4,000,000 Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue, Series Y,
5.50%, 07/01/26.............................................................................. 3,733,920
75,000 Puerto Rico Commonwealth Highway Authority Revenue, Series P, Pre-Refunded, 8.125%, 07/01/13 . 81,676
20,000 Puerto Rico Commonwealth IDC, General Purpose Revenues, 8.00%, 01/01/03 ...................... 20,081
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
200,000 7.90%, 07/01/07.............................................................................. 214,378
975,000 7.75%, 07/01/08 ............................................................................. 1,042,577
120,000 Puerto Rico Commonwealth Public Improvement GO, Pre-Refunded, Series A, 7.75%, 07/01/13....... 130,010
Puerto Rico Electric Power Authority Revenue,
15,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15........................................... 15,840
25,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 .......................................... 27,171
1,110,000 Refunding, Series N, 7.125%, 07/01/14 ....................................................... 1,185,746
280,000 Series O, 7.125%, 07/01/14................................................................... 299,107
520,000 Series O, Pre-Refunded, 7.125%, 07/01/14..................................................... 565,230
380,000 Puerto Rico HFC, MFMR, Portfolio A, Series 1, 7.50%, 04/01/22 ................................ 397,860
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
50,000 Series A, 7.80%, 10/15/21 ................................................................... 52,041
1,325,000 Series C, 6.85%, 10/15/23.................................................................... 1,382,293
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
350,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12............................................. 380,205
300,000 Upjohn Co. Project, 7.50%, 12/01/23.......................................................... 326,271
2,500,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities, Financing
Authority, Industrial Revenue, Guaynabo Municipal Government Center, Series A, 5.625%, 07/01/22 2,259,425
130,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ......................... 140,821
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
175,000 7.875%, 07/01/16............................................................................. 184,216
1,750,000 7.25%, 07/01/17 ............................................................................. 1,872,623
2,500,000 Puerto Rico Ports Authority Revenue, Special Facilities, American Airlines, Series A, 6.25%,06/01/26 2,482,975
1,000,000 Raymore GO, CGIC Insured, 6.00%, 03/01/14 .................................................... 1,019,870
250,000 Southwest University Housing System Revenue, FGIC Insured, Pre-Refunded, 7.00%, 10/01/10 ..... 262,927
2,000,000 Springfield Waterworks Revenue, Series A, 5.60%, 05/01/23..................................... 1,930,120
500,000 St. Charles County Community College, Pre-Refunded, 7.25%, 03/01/06 .......................... 547,075
St. Charles Public Facility Authority, Leasehold Revenue, AMBAC Insured,
3,000,000 Refunding, 5.80%, 02/01/10................................................................... 2,997,030
1,500,000 Series 1990, Pre-Refunded, 7.20%, 03/01/10................................................... 1,625,880
$ 2,000,000 St. Louis Airport Revenue, Lambert-St. Louis International Airport, Refunding & Improvement,
FGIC Insured, 6.125%, 07/01/15 .............................................................. $ 2,028,900
St. Louis County Housing Authority, MFHR, Kensington Square Apartments Project, Refunding,
1,000,000 6.55%, 03/01/14.............................................................................. 1,034,480
2,750,000 6.65%, 03/01/20.............................................................................. 2,844,353
St. Louis County IDA, Health Facilities Revenue,
1,930,000 Mother of Perpetual Help, 6.40%, 08/01/35 ................................................... 1,967,230
295,000 Normandy Osteopathic Hospitals Project, Refunding & Improvement, First Mortgage,
9.125%, 08/01/13............................................................................. 308,555
25,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19............................. 26,184
St. Louis County Regional Convention and Sports Complex Authority, Convention and Sports Project,
Series B,
5,050,000 Pre-Refunded, 7.00%, 08/15/21 ............................................................... 5,677,160
4,765,000 Refunding, 5.50%, 08/15/13................................................................... 4,394,521
5,565,000 Refunding, 5.75%, 08/15/21................................................................... 5,104,051
1,000,000 St. Louis IDA, Sewer and Solid Waste Disposal Facilities Revenue, Anheuser-Busch Project,
5.875%, 11/01/26 ............................................................................ 961,060
250,000 St. Louis Land Clearance RDA, Leasehold Revenue, Capital Improvement, Pre-Refunded,
7.60%, 08/15/08 ............................................................................. 266,088
St. Louis Municipal Finance Corp., Leasehold Revenue, Series A,
5,370,000 City Justice Center Improvement, AMBAC Insured, 6.00%, 02/15/19.............................. 5,369,732
10,000,000 Refunding, 6.00%, 07/15/13................................................................... 10,100,000
470,000 St. Louis Parking Facilities Revenue, 6.625%, 12/15/21........................................ 478,465
St. Louis Regional Convention and Sports Complex Authority, Series C,
3,060,000 7.75%, 08/15/01.............................................................................. 3,208,838
11,900,000 7.90%, 08/15/21 ............................................................................. 13,040,853
300,000 Sullivan County Public Water Supply District No. 1, Waterworks Revenue, Refunding, 7.70%, 12/15/13 316,616
500,000 Washington County GO, Industrial Bonds, Pauwels Transformers Project, Series A, 7.60%, 12/01/09 522,124
2,000,000 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Series A, 8.625%, 09/15/20.. 2,139,700
1,600,000 West Plains Improvement Authority, Leasehold Revenue, Civic Center, Inc. Project, FGIC Insured,
6.85%, 04/01/06.............................................................................. 1,704,127
--------------
Total Long Term Investments (Cost $243,591,065)............................................... 252,530,515
--------------
a Short Term Investments 2.0%
Kansas City IDA, Hospital Revenue, Research Health Services System, MBIA Insured,
Daily VRDN and Put,
3,300,000 3.90%, 10/15/14.............................................................................. 3,300,000
400,000 3.90%, 04/15/15.............................................................................. 400,000
1,000,000 3.90%, 10/15/15.............................................................................. 1,000,000
400,000 Missouri State Health and Educational Facilities Authority Revenue, Christian Health Services,
Series A, Weekly VRDN and Put, 3.35%, 11/01/19............................................... 400,000
--------------
Total Short Term Investments (Cost $5,100,000) ............................................... 5,100,000
--------------
Total Investments (Cost $248,691,065) 100.2%................................................. 257,630,515
Liabilities In Excess Of Other Assets (.2)%.................................................. (593,064)
--------------
Net Assets 100.0%............................................................................ $257,037,451
==============
At August 31, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$248,691,751 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 10,235,164
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (1,296,400)
--------------
Net unrealized appreciation................................................................... $ 8,938,764
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFC - Housing Finance Corp.
IDA - Industrial Development Authority/Agency
IDC - Industrial Development Corp.
MAC - Municipal Assistance Corp.
MBIA - Municipal Bond Investors Asssurance 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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
eSee Note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin North Carolina Tax-Free Income Fund (Note 1)
Long Term Investments 98.1%
<S> <C> <C>
$ 1,075,000 Appalachian State University Revenue, Appalachian State Teachers College Utility System,
MBIA Insured, 6.10%, 05/15/13 ............................................................... $ 1,110,615
2,000,000 Buncombe County Metropolitan Sewage District System Revenue, Series B, 6.75%, 07/01/16 ....... 2,218,660
100,000 Charlotte Airport Revenue, 8.50%, 07/01/17.................................................... 104,752
2,250,000 Charlotte COP, Convention Facility Project, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/11 ..... 2,520,675
1,000,000 Charlotte GO, Water and Sewer, 5.90%, 02/01/18 ............................................... 1,015,790
Charlotte-Mecklenburg Hospital Authority, Health Care System Revenue,
6,100,000 Refunding, Series 1992, 6.25%, 01/01/20...................................................... 6,224,806
150,000 Refunding, Series G, Pre-Refunded, 7.875%, 10/01/15.......................................... 159,041
350,000 Refunding, Series I, Pre-Refunded, 7.80%, 10/01/18 .......................................... 381,381
5,000,000 Series A, 5.90%, 01/15/16.................................................................... 4,999,550
Charlotte Special Facilities Revenue, Piedmont Aviation, Inc. Project, Douglas International Airport,
260,000 8.375%, 07/01/17............................................................................. 262,150
1,255,000 9.00%, 07/01/17.............................................................................. 1,309,141
200,000 Chowan County Hospital Revenue, Refunding, 7.625%, 10/01/10................................... 200,602
3,100,000 Coastal Solid Waste Disposal System Authority Revenue, Refunding, Regional Solid Waste
Management, 6.50%, 06/01/08 ................................................................. 3,237,330
2,180,000 Concord COP, Series B, MBIA Insured, 6.125%, 06/01/21......................................... 2,213,485
1,000,000 County of Cleveland GO, AMBAC Insured, Pre-Refunded, 7.10%, 06/01/06 ......................... 1,101,020
1,400,000 Craven County Regional Medical Facility, MBIA Insured, Pre-Refunded, 7.20%, 10/01/19 ......... 1,555,862
Cumberland County COP, Civic Center Project, Series A, AMBAC Insured,
3,500,000 6.40%, 12/01/19.............................................................................. 3,668,280
3,765,000 6.40%, 12/01/24 ............................................................................. 3,931,225
Cumberland County Hospital Facility System Revenue,
110,000 BIG Insured, Pre-Refunded, 7.875%, 10/01/14 ................................................. 120,024
2,500,000 MBIA Insured, 6.00%, 10/01/21 ............................................................... 2,519,375
1,000,000 Dare County Utility System Revenue, MBIA Insured, 5.75%, 06/01/14 ............................ 984,610
Davie County GO, North Carolina Water, Unlimited Tax,
350,000 7.10%, 04/01/10 ............................................................................. 379,981
250,000 7.10%, 04/01/11 ............................................................................. 271,330
2,000,000 Duplin County COP, Social Service Administrative Building, Solid Waste Project, FGIC Insured,
6.75%, 09/01/12 ............................................................................. 2,138,280
1,650,000 Durham COP, Series 1991, 6.875%, 04/01/09 .................................................... 1,791,405
Durham County COP, Hospital and Office Facilities Project,
3,000,000 6.00%, 05/01/14 ............................................................................. 3,032,550
3,200,000 6.00%, 05/01/17 ............................................................................. 3,199,680
3,000,000 Durham County COP, Jail Facilities and Computer Equipment Project, 6.625%, 05/01/14 .......... 3,158,400
Fayetteville Public Works Commission Revenue,
1,650,000 FGIC Insured, Pre-Refunded, 7.00%, 03/01/11 ................................................. 1,803,318
2,000,000 Series A, FSA Insured, 6.00%, 03/01/16 ...................................................... 2,033,700
750,000 Gaston County Industrial Facilities and PCFA Revenue, 7.70%, 10/01/12......................... 818,633
2,200,000 Gastonia Combined Utilities System Revenue, MBIA Insured, 6.10%, 05/01/19..................... 2,262,810
1,500,000 Gastonia COP, Police Station Project, FGIC Insured, 5.70%, 08/01/15........................... 1,474,365
Greensboro COP,
1,610,000 Coliseum Arena Expansion Project, 6.75%, 12/01/09............................................ 1,729,156
350,000 Greensboro Center City Corp., Pre-Refunded, 7.90%, 07/01/09 ................................. 379,463
1,320,000 Greensboro HDC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.70%, 01/01/24 ......... 1,360,260
1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08...................................... 1,023,650
400,000 Halifax County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp.,
8.15%, 11/01/19.............................................................................. 432,900
2,000,000 Haywood County Industrial Facilities and PCFA, Environmental Improvement Revenue,
Champion International Project, 6.25%, 09/01/25............................................... 1,973,620
$ 200,000 Haywood County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp.,
8.10%, 11/01/09.............................................................................. $ 215,326
1,500,000 Highpoint Special Obligation Sales Tax Revenue, Solid Waste Management Project, 7.15%, 07/01/01 1,557,780
1,700,000 Kinston Enterprise System Revenue, Combined Enterprise System, FSA Insured, 5.70%, 04/01/21... 1,673,412
3,155,000 Kinston Housing Authority Mortgage Revenue, Refunding, Kinston Towers Project, 6.75%, 12/01/18 3,203,461
Martin County Industrial Facilities and PCFA Revenue,
3,000,000 Refunding, 6.375%, 01/01/10 ................................................................. 3,132,390
3,000,000 Solid Waste, Weyerhaeuser Co. Project, 6.00%, 11/01/25 ...................................... 2,919,240
1,000,000 Mooresville Grade School District, COP, AMBAC Insured, 6.35%, 10/01/14 ....................... 1,046,130
1,000,000 New Hanover County Industrial Facilities and PCFA Revenue, Refunding, 6.70%, 07/01/19......... 1,044,350
North Carolina Eastern Municipal Power Agency System Revenue,
775,000 Refunding, Series 1987-A, 7.25%, 01/01/21.................................................... 794,042
400,000 Refunding, Series 1988-A, Pre-Refunded, 8.00%, 01/01/21...................................... 427,316
750,000 Refunding, Series 1989-A, Pre-Refunded, 7.75%, 01/01/12...................................... 818,895
9,000,000 Refunding, Series 1991-A, 6.50%, 01/01/17 ................................................... 9,071,730
3,000,000 Refunding, Series 1991-A, 6.50%, 01/01/18.................................................... 3,090,930
6,000,000 Series 1993-A, 6.40%, 01/01/21 .............................................................. 5,991,960
North Carolina Educational Facilities Finance Agency Revenue, Highpoint College Project,
190,000 7.10%, 12/01/07 ............................................................................. 204,073
205,000 7.10%, 12/01/08 ............................................................................. 219,867
220,000 7.10%, 12/01/09 ............................................................................. 235,545
2,925,000 North Carolina HFA, MFR, Refunding, Series B, 6.90%, 07/01/24 ................................ 3,072,215
North Carolina HFA, Refunding,
3,000,000 MF, Series A, AMBAC Insured, 5.90%, 07/01/20 ................................................ 2,906,520
4,855,000 Series F, 6.70%, 01/01/27 ................................................................... 5,056,385
2,500,000 Series H-1984, Mortage Loan Resolution, 6.05%, 07/01/28...................................... 2,499,725
3,000,000 SF, Series DD, 6.20%, 09/01/27 .............................................................. 2,999,940
5,000,000 SF, Series JJ, 6.45%, 09/01/27............................................................... 5,012,000
North Carolina HFA, SFMR,
35,000 Series C, 8.00%, 03/01/17.................................................................... 36,289
95,000 Series H, 8.05%, 03/01/19 ................................................................... 97,857
185,000 Series J, 7.40%, 03/01/22 ................................................................... 191,597
460,000 Series M, 7.85%, 09/01/28 ................................................................... 478,193
North Carolina HFA, SFR,
3,355,000 Refunding, Series S, 6.95%, 03/01/17......................................................... 3,528,454
955,000 Series AA, 6.25%, 03/01/17 .................................................................. 973,374
2,135,000 Series X, 6.65%, 09/01/19.................................................................... 2,206,202
North Carolina Medical Care Commission, Health Care Facilities Revenue, Pre-Refunded,
700,000 Gaston Health Care Support Project, 7.25%, 02/15/19.......................................... 757,974
1,250,000 Stanley Memorial Hospital, 7.80%, 10/01/19 .................................................. 1,388,100
North Carolina Medical Care Commission, Hospital Revenue,
3,500,000 Halifax Memorial Hospital Project, 6.75%, 08/15/24........................................... 3,527,545
160,000 Memorial Mission Hospital Project, MBIA Insured, Pre-Refunded, 7.80%, 10/01/18 .............. 174,346
1,850,000 Presbyterian Hospital Project, Pre-Refunded, 7.375%, 10/01/20................................ 2,067,856
4,700,000 Refunding, Annie Pen Memorial Hospital Project, 7.50%, 08/15/21 ............................. 4,858,954
100,000 Refunding, Carolina Medicorp Project, Series A, Pre-Refunded, 7.875%, 05/01/15 .............. 104,543
4,830,000 Refunding, North Carolina Baptist Hospitals Project, Series A, 6.00%, 06/01/22............... 4,844,249
250,000 Refunding, St. Joseph's Hospital Project, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/14....... 269,713
3,000,000 Roanoke-Chowan Hospital Project, 7.75%, 10/01/19............................................. 3,140,040
195,000 Scotland Memorial Hospital, MBIA Insured, Pre-Refunded, 8.625%, 10/01/11..................... 215,233
1,000,000 Wayne Memorial Hospital Project, AMBAC Insured, 6.00%, 10/01/21.............................. 1,005,080
3,240,000 Wilson Memorial Hospital Project, AMBAC Insured, 6.50%, 11/01/20............................. 3,357,353
$ 10,500,000 North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, Refunding,
Series 1992, 6.25%, 01/01/17 ................................................................ $ 10,368,015
North Carolina State Education Assistance Authority Revenue, Guaranteed, Student Loan,
Subordinated Lien,
3,310,000 Series A, 6.05%, 07/01/10 ................................................................... 3,291,265
1,500,000 Series A, 6.30%, 07/01/15 ................................................................... 1,510,350
4,500,000 Series C, 6.35%, 07/01/16.................................................................... 4,514,310
400,000 Northampton County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp.,
8.05%, 11/01/04.............................................................................. 431,160
1,000,000 Onslow County Combined Enterprise System Revenue, MBIA Insured, 6.00%, 06/01/15 .............. 1,027,340
350,000 Orange County GO, Series 1989, Pre-Refunded, 7.20%, 05/01/08 ................................. 379,869
1,195,000 Pender County COP, Pre-Refunded, 7.70%, 06/01/11.............................................. 1,360,926
2,165,000 Person County COP, Person County Law Enforcement Center Project, Series 1991, MBIA Insured,
7.125%, 06/01/11 ............................................................................ 2,359,352
Pitt County COP, FGIC Insured,
2,750,000 6.90%, 04/01/08 ............................................................................. 2,937,880
750,000 6.00%, 04/01/12.............................................................................. 766,875
Polk County School GO, FGIC Insured,
700,000 6.70%, 05/01/08 ............................................................................. 763,000
700,000 6.70%, 05/01/09.............................................................................. 763,000
1,000,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A, Pre-Refunded,
7.875%, 07/01/17 ............................................................................ 1,085,590
Puerto Rico Commonwealth GO,
8,050,000 6.45%, 07/01/17 ............................................................................. 8,467,554
500,000 Series 1990, Pre-Refunded, 7.25%, 07/01/10................................................... 554,875
Puerto Rico Commonwealth Highway Authority Revenue,
100,000 Refunding, Series N, Pre-Refunded, 8.00%, 07/01/03 .......................................... 108,684
170,000 Series P, Pre-Refunded, 8.125%, 07/01/13 .................................................... 185,132
1,250,000 Series R, 7.15%, 07/01/00 ................................................................... 1,348,188
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
250,000 7.75%, 07/01/08.............................................................................. 267,328
250,000 7.50%, 07/01/09 ............................................................................. 266,250
Puerto Rico Electric Power Authority Revenue,
5,000,000 6.125%, 07/01/21 ............................................................................ 4,983,650
250,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 ..................................... 271,710
160,000 Refunding, Series N, 7.125%, 07/01/14 ....................................................... 170,918
340,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14.......................................... 369,573
850,000 Series O, 7.125%, 07/01/14................................................................... 908,004
1,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ..................................................... 1,117,790
1,000,000 Series T, 6.375%, 07/01/24 .................................................................. 1,023,690
410,000 Puerto Rico HFC, MFMR, Portfolio A, Series I, 7.50%, 04/01/22 ................................ 429,270
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
45,000 Series A, 7.80%, 10/15/21.................................................................... 46,837
2,310,000 Series C, 6.85%, 10/15/23 ................................................................... 2,409,884
300,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project,
7.50%, 12/01/23.............................................................................. 326,271
125,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ......................... 135,405
Puerto Rico Telephone Authority Revenue, Series L, Refunding,
1,885,000 6.00%, 01/01/12 ............................................................................. 1,903,680
1,490,000 6.125%, 01/01/22 ............................................................................ 1,498,121
1,445,000 Raeford HDC Revenue, First Lien, Refunding, Yadkin Trail, Series A, 6.00%, 07/15/22........... 1,437,342
Robeson County GO, Refunding,
$ 110,000 7.20%, 06/01/10.............................................................................. $ 117,418
115,000 7.20%, 06/01/11.............................................................................. 122,786
120,000 7.20%, 06/01/12.............................................................................. 126,860
145,000 Pre-Refunded, 7.80%, 06/01/11 ............................................................... 156,552
1,750,000 Robeson County Industrial Facilities and PCFA Revenue, Refunding, Campbell Soup Co. Project,
6.40%, 12/01/06.............................................................................. 1,891,803
1,850,000 Rutherford County COP, Public Facilities Project, FGIC Insured, 6.25%, 06/01/23............... 1,899,987
1,000,000 Scotland County COP, Jail/Courthouse Project, CGIC Insured, 6.75%, 03/01/11................... 1,065,610
1,000,000 Shelby Producing Facilities System Revenue, Capital Improvement, Pre-Refunded, 6.625%, 06/01/17 1,099,380
150,000 Southern Pines GO, Refunding, Pre-Refunded, 7.40%, 06/01/08................................... 160,824
1,000,000 Stokes County COP, MBIA Insured, 7.00%, 03/01/06.............................................. 1,086,690
4,000,000 University of North Carolina at Chapel Hill, University Hospital Revenue, 5.00%, 02/15/29..... 3,446,280
University of North Carolina at Charlotte Revenue,
100,000 Refunding, Series K, Pre-Refunded, 7.375%, 01/01/03 ......................................... 106,032
2,680,000 Student Activity Center, MBIA Insured, 5.50%, 06/01/16 ...................................... 2,567,734
3,500,000 Student Activity Center, MBIA Insured, 5.50%, 06/01/21 ...................................... 3,314,290
250,000 University of North Carolina at Wilmington, Student Union System Revenue, AMBAC Insured,
6.90%, 01/01/07.............................................................................. 267,877
250,000 Wake County Hospital Revenue, MBIA Insured, 7.40%, 10/01/16 .................................. 263,207
10,000,000 Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co. Project,
6.90%, 04/01/09 ............................................................................. 10,659,600
400,000 Wilmington City GO, Sanitary Sewer, 6.90%, 03/01/05........................................... 427,860
405,000 Winston-Salem SFMR, 8.00%, 09/01/07........................................................... 427,493
2,250,000 Winston-Salem Water and Sewer System Revenue, Series B, 5.70%, 06/01/17 ...................... 2,178,044
--------------
Total Long Term Investments (Cost $242,079,329) .............................................. 250,693,474
--------------
a Short Term Investments.3%
800,000 North Carolina Medical Care Commission, Hospital Revenue, North Carolina Baptist Hospitals
Project, Series B, Weekly VRDN and Put, 3.40%, 06/01/22, (Cost $800,000)..................... 800,000
--------------
Total Investments (Cost $242,879,329)98.4% ................................................... 251,493,474
Other Assets and Liabilities, Net1.6%......................................................... 4,140,236
--------------
Net Assets100.0%.............................................................................. $255,633,710
==============
At August 31, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of
$242,881,149 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $ 9,284,097
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (671,772)
--------------
Net unrealized appreciation................................................................... $ 8,612,325
==============
</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
HDC - Housing Development Corp.
HFA - Housing Finance Agency/Authority
HFC - Housing Financial Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SF - Single Family
SFMR - Single Family Mortgage Revenue
SFR - Single Family Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Texas Tax-Free Income Fund (Note 1)
Investments 101.1%
<S> <C> <C>
$ 2,250,000 Alliance Airport Authority, Inc., Texas Special Facilities Revenue, American Airlines, Inc. Project,
7.00%, 12/01/11............................................................................... $ 2,420,888
Austin Combined Utility System Revenue,
2,000,000 Refunding, AMBAC Insured, Pre-Refunded, 7.00%, 05/15/16 ...................................... 2,164,660
3,000,000 eRefunding, Series B, MBIA Insured, 5.625%, 11/15/25......................................... 2,849,520
800,000 Series A, AMBAC Insured, 6.75%, 11/15/07 ..................................................... 862,288
50,000 Series A, Pre-Refunded, 8.00%, 11/15/16 ...................................................... 56,604
3,000,000 Bexar County Health Facilities Development Corp. Revenue, Refunding, Incarnate World Health
Services, FSA Insured, 6.00%, 11/15/15 ....................................................... 3,019,110
100,000 Bexar County HFC Revenue, GNMA Secured, 8.10%, 03/01/24........................................ 104,112
3,210,000 Bexar Metropolitan Water District, Waterworks System Revenue, Refunding, MBIA Insured,
6.35%, 05/01/25 .............................................................................. 3,322,735
Brazos Higher Education Authority Revenue, Student Loan, Inc.,
1,000,000 Refunding, Series A-2, 6.80%, 12/01/04........................................................ 1,050,620
1,300,000 Series B-2, 8.25%, 06/01/23 .................................................................. 1,310,699
Brazos River Authority, PCR, Collateralized, Series A,
70,000 Houston Light and Power Co. Project, 7.875%, 11/01/08......................................... 71,711
150,000 Texas Utilities Electric Co. Project, 7.875%, 03/01/17........................................ 154,599
500,000 Texas Utilities Electric Co. Project, 7.875%, 03/01/21........................................ 546,975
100,000 Brazos River Authority Revenue, Refunding, Collateralized, Houston Light and Power Co. Project,
Series A, 7.625%, 05/01/19 ................................................................... 108,201
1,500,000 Brownsville Utilities System Priority Revenue, AMBAC Insured, Pre-Refunded, 6.875%, 09/01/10... 1,646,925
80,000 Cameron County HFC, Collateralized Mortgage Obligation, Refunding, Series B, FGIC Insured,
Pre-Refunded, 7.85%, 03/01/24.................................................................. 84,006
2,000,000 Castleberry Independent School District, Refunding, 6.00%, 08/15/25............................ 2,011,800
Cimarron MUD, Waterworks and Sewer System, Asset Guaranteed, Refunding, Combined Tax
and Revenue,
2,775,000 7.50%, 03/01/15 .............................................................................. 2,952,600
1,225,000 Pre-Refunded, 7.50%, 03/01/15 ................................................................ 1,333,351
4,000,000 Clinton ISD, Refunding, 7.00%, 03/01/15........................................................ 4,206,960
50,000 Coastal Water Authority, Water Conveyance System Revenue, Pre-Refunded, 8.20%, 12/15/07 ....... 52,573
1,750,000 Comal County Health Facilities Development Corp. Revenue, Refunding, McKenna Memorial Hospital,
FHA Insured, 7.375%, 01/15/21 ................................................................ 1,858,973
1,500,000 Coppell ISD, Refunding, 6.50%, 08/15/26 ....................................................... 1,562,145
1,305,000 Corpus Christi HFC, SFMR, Refunding, Series A, MBIA Insured, 7.70%, 07/01/11................... 1,384,892
Dallas Civic Center Convention Complex Revenue, Senior Lien, AMBAC Insured,
2,000,000 7.00%, 01/01/10 .............................................................................. 2,124,840
1,000,000 Refunding, 6.75%, 01/01/12.................................................................... 1,036,460
Dallas-Ft. Worth International Airport Facilities Improvement Corp. Revenue,
1,000,000 American Airlines, Inc., 8.00%, 11/01/24 ..................................................... 1,079,680
2,000,000 Delta Airlines, Inc., 7.625%, 11/01/21 ....................................................... 2,143,000
2,000,000 Refunding, American Airlines, Inc., 6.00%, 11/01/14 .......................................... 1,954,440
155,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 ............................................... 161,619
500,000 Dallas Housing Corp. Capital Projects Revenue, Refunding, Section Eight, Assisted Projects,
7.70%, 08/01/05............................................................................... 520,800
1,250,000 Denison Hospital Authority Revenue, Texoma Medical Center, Inc. Project, 7.00%, 08/15/14 ...... 1,271,388
2,000,000 Ector County Hospital District Revenue, Medical Center Hospital, 7.30%, 04/15/12 .............. 2,163,780
El Paso County HFC, SFMR, Refunding,
60,000 Series 1988, GNMA Secured, 8.20%, 09/01/20 ................................................... 62,690
605,000 Series A, 8.75%, 10/01/11..................................................................... 653,817
1,120,000 Ft. Worth HFC, HMR, Refunding, Series A, 8.50%, 10/01/11....................................... 1,211,795
25,000 Ft. Worth HFC, SFMR, GNMA Secured, 8.25%, 12/01/11............................................. 25,461
100,000 Gonzales County Hospital District GO, Refunding, MBIA Insured, 7.65%, 02/15/07................. 105,857
$ 1,200,000 Gulf Coast Waste Disposal Authority, PCR, Union Carbide Chemical and Plastic Co., 7.45%, 08/01/04 $ 1,212,192
1,000,000 Gulf Coast Waste Disposal Authority Revenue, Champion International Corp., Series A,
6.875%, 12/01/28.............................................................................. 1,017,270
5,000,000 Harris County Health Facilities Development Corp., Health Care System Revenue, Sisters of Charity,
7.10%, 07/01/21............................................................................... 5,413,450
Harris County Health Facilities Development Corp., Hospital Revenue,
225,000 Memorial Hospital System, AMBAC Insured, 7.00%, 06/01/12 ..................................... 237,501
45,000 The Herman Trust, Pre-Refunded, 9.00%, 10/01/17 .............................................. 48,189
750,000 Harris County Health Facilities Development Corp. Revenue, Herman Hospital Project, FSA Insured,
7.00%, 10/01/14............................................................................... 811,598
500,000 Harris County Health Facilities Development Corp., Special Facilities Revenue, Texas Medical Center
Project, MBIA Insured, 7.375%, 05/15/20....................................................... 547,705
80,000 Harris County MUD No. 208, Waterworks and Sewer System, Unlimited Tax, Pre-Refunded,
8.00%, 11/01/13............................................................................... 85,990
70,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, Series 1988, MBIA Insured,
Pre-Refunded, 7.75%, 12/15/07 ................................................................ 76,579
Harris County Toll Road, Pre-Refunded,
1,750,000 Multimode Senior Lien, Series A, 7.30%, 08/15/07 ............................................. 1,828,103
2,250,000 Multimode Senior Lien, Series A, 7.40%, 08/15/17.............................................. 2,351,408
830,000 Multimode Senior Lien, Series C, 8.125%, 08/15/17 ............................................ 898,981
250,000 Senior Lien Revenue, Refunding, 8.70%, 08/15/17............................................... 268,193
250,000 Hidalgo County Health Services Corp. Revenue, Refunding, Mission Hospital, Series B, BIG Insured,
7.35%, 08/01/25............................................................................... 269,385
2,000,000 Houston Airport System Revenue, Sub Lien, Series B, FGIC Insured, 6.625%, 07/01/22............. 2,117,020
Houston Water and Sewer System Revenue,
50,000 Exchange, Prior Lien, Pre-Refunded, 8.125%, 12/01/17.......................................... 53,403
6,500,000 Junior Lien, Refunding, Series A, MBIA Insured, 6.20%, 12/01/20 .............................. 6,627,335
285,000 Irving Hospital Authority Revenue, Irving Health Care System, Series 1990, FGIC Insured,
Pre-Refunded, 7.25%, 07/01/15 ................................................................ 305,774
2,500,000 Joshua Independent School District, Refunding, Series B, 6.125%, 02/15/26...................... 2,514,200
125,000 Keller Waterworks and Sewer System Revenue, Refunding, AMBAC Insured, Pre-Refunded,
7.70%, 01/01/10............................................................................... 133,943
200,000 Laredo Airport, Certificates of Obligation, Limited Tax, AMBAC Insured, 7.00%, 08/01/09........ 210,018
400,000 Laredo International Toll Bridge System Revenue, Pre-Refunded, 7.40%, 10/01/06................. 454,484
2,000,000 Leon County PCR, Refunding, Nucor Corp. Project, Series A, 7.375%, 08/01/09.................... 2,213,500
Lower Colorado River Authority Revenue, Refunding,
75,000 Priority, MBIA Insured, Pre-Refunded, 7.625%, 01/01/16 ....................................... 79,763
205,000 Series B, AMBAC Insured, 7.00%, 01/01/11 ..................................................... 221,886
1,000,000 Lower Neches Valley Authority IDC, Marine Terminal Revenue, Refunding, Mobil Oil Refining Corp.
Project, 6.85%, 05/01/12 ..................................................................... 1,034,420
10,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, BIG Insured,
8.875%, 12/01/12 ............................................................................. 10,060
Matagorda County Navigation District No. 1, PCR, Central Power and Light Co. Project,
1,200,000 Collateralized, 7.50%, 12/15/14............................................................... 1,315,152
1,500,000 Refunding, MBIA Insured, 6.10%, 07/01/28 ..................................................... 1,504,935
Matagorda County Navigation District No. 1 Revenue, Collateralized, Houston Light and Power Co.,
Refunding,
100,000 Series B, 7.70%, 02/01/19..................................................................... 105,297
1,500,000 Series C, FGIC Insured, 7.125%, 07/01/19 ..................................................... 1,609,290
50,000 Metropolitan Health Facilities Development Corp. Revenue, Refunding & Improvement,
Wilson N. Jones Memorial Hospital Project, Pre-Refunded, 7.75%, 01/01/05 ..................... 51,605
1,000,000 Midland County Hospital District Revenue, Midland Memorial Hospital, 7.50%, 06/01/16........... 1,034,650
Montgomery County Library, Refunding, FGIC Insured,
$ 775,000 6.75%, 09/01/10 .............................................................................. $ 829,149
825,000 6.75%, 09/01/11............................................................................... 880,465
285,000 North Harris Co., Junior College District, FGIC Insured, 7.20%, 08/15/10 ...................... 306,443
1,000,000 Panhandle-Plains Higher Education Authority, Inc., Student Loan Revenue, Series B, 8.75%, 06/01/23 1,066,150
3,000,000 Red River Authority, PCR, Refunding, West Texas Utilities Co., Public Service Co., Oklahoma Central
Power & Light Co., MBIA Insured, 6.00%, 06/01/20.............................................. 2,999,640
Sabine River Authority, PCR, Refunding,
1,200,000 Collateralized, Texas Utilities Electric Co. Project, FGIC Insured, 6.55%, 10/01/22 .......... 1,263,600
3,615,000 Collateralized, Texas Utilities Electric Co. Project, Series A, MBIA Insured, 5.85%, 05/01/22 3,544,110
5,000,000 Southwestern Electric Power, MBIA Insured, 6.10%, 04/01/18.................................... 5,041,000
San Antonio Electric and Gas Revenue, Refunding,
100,000 7.00%, 02/01/09............................................................................... 105,479
150,000 Pre-Refunded, 7.00%, 02/01/09................................................................. 160,578
2,000,000 San Antonio Hotel Occupancy Revenue, Henry B. Gonzalez Convention Center Project, FGIC Insured,
5.75%, 08/15/19............................................................................... 1,952,640
20,000 San Antonio Sewer Improvement Revenue, Prior Lien, Pre-Refunded, 7.90%, 05/01/14............... 20,808
300,000 San Antonio Water Revenue, Prior Lien, Refunding, Series A, Pre-Refunded, 7.35%, 05/01/07...... 319,287
350,000 South Padre Island, Certificate of Obligation, Pre-Refunded, 7.875%, 03/01/10.................. 385,137
50,000 Texarkana Health Facilities Development Corp., Hospital Revenue, Refunding & Improvement,
Wadley Regional Medical Center Project, 8.50%, 10/01/12....................................... 51,944
500,000 Texas City IDC, Marine Terminal Revenue, Refunding, Arco Pipe Line Co. Project, 7.375%, 10/01/20 591,960
Texas HFA, SFMR,
45,000 Series 1986-A, 8.25%, 03/01/16 ............................................................... 45,599
10,000 Series 1987-B, 8.20%, 03/01/16................................................................ 10,263
1,410,000 Texas Housing Agency, Residential Development Revenue, Series A, 7.60%, 07/01/16 .............. 1,465,173
1,665,000 Texas State Department of Housing and Community Affairs, HMR, Refunding, Series A, GNMA
Secured, 6.95%, 07/01/23 ..................................................................... 1,737,394
1,000,000 Texas State GO, Veterans Housing Assistance Fund I, Refunding, Series A, 6.15%, 12/01/25 ...... 1,007,950
1,635,000 Texas State Higher Education Coordinating Board, College Student Loan Revenue, Senior Lien,
7.70%, 10/01/25............................................................................... 1,684,099
1,000,000 Texas State National Research Laboratory Commission, GO, Superconducting Super Collider Project,
Pre-Refunded, 7.125%, 04/01/11................................................................ 1,096,820
Texas State Turnpike Authority Revenue, Dallas North Tollway, Pre-Refunded,
225,000 Series 1989, 7.125%, 01/01/15 ................................................................ 237,708
1,000,000 Series 1990, AMBAC Insured, 7.125%, 01/01/15.................................................. 1,077,060
50,000 Texas State Turnpike Authority Revenue, Mountain Creek Lake Bridge, 7.00%, 01/01/07 ........... 51,466
Texas Water Development Board Revenue, State Revolving, Senior Lien, Series A
3,275,000 5.75%, 07/15/16............................................................................... 3,225,220
2,000,000 5.25%, 07/15/17............................................................................... 1,854,040
945,000 Texas Water Resources Finance Authority Revenue, 7.625%, 08/15/08 ............................. 1,012,624
80,000 Travis County HFC, SFMR, GNMA Secured, 8.20%, 04/01/22 ........................................ 82,467
550,000 Trinity River Authority, Regional Waste Water System Improvement Revenue, AMBAC Insured,
Pre-Refunded, 7.10%, 08/01/16 ................................................................ 597,178
250,000 Trinity River Authority, Tex Big Bear Creek Interceptor, System Control, MBIA Insured, Pre-Refunded,
7.40%, 02/01/09 .............................................................................. 270,424
University of Texas Revenues, Refunding, Financing System,
665,000 Series A, 7.00%, 08/15/07..................................................................... 734,585
1,300,000 Series B, 6.75%, 08/15/13..................................................................... 1,409,980
500,000 Waco Health Facilities Development Corp., Hospital Revenue, Hillcrest Baptist Medical Center Project,
MBIA Insured, 7.125%, 09/01/14 ............................................................... 550,020
1,300,000 Weatherford Utility System Revenue, MBIA Insured, Pre-Refunded, 7.00%, 09/01/11................ 1,430,376
160,000 Webb County GO, Limited Tax, CGIC Insured, Pre-Refunded, 7.25%, 02/15/09 ...................... 170,375
$ 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 ........................................... $ 1,100,540
50,000 Wichita County, Wichita Falls General Hospital Revenue, Refunding, 7.50%, 09/01/09............. 51,931
1,000,000 Wylie GO, ISD, Taylor County, Refunding, 7.00%, 08/15/24 ...................................... 1,143,720
200,000 Ysleta GO, ISD, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.10%, 08/15/05 ................... 214,353
--------------
Total Investments (Cost $121,927,453)101.1% ................................................... 128,095,608
Liabilities In Excess Of Other Assets(1.1)%.................................................... (1,370,361)
--------------
Net Assets100.0%............................................................................... $126,725,247
==============
At August 31, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $121,927,453 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 6,246,884
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (78,729)
--------------
Net unrealized appreciation.................................................................... $ 6,168,155
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency/Authority
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing 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
eSee Note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Virginia Tax-Free Income Fund (Note 1)
Long Term Investments 98.8%
<S> <C> <C>
$ 5,000,000 Albermarle County IDA Revenue, Refunding, Martha Jefferson Hospital, 5.875%, 10/01/13 ......... $ 4,917,800
1,125,000 Albermarle County IDA Revenue, University of Virigina Health Services Foundation, 6.50%, 10/01/22 1,141,830
1,690,000 Alexandria IDA Revenue, Alexandria/Arlington Waste Resource Recovery, 7.40%, 01/01/08.......... 1,706,596
1,375,000 Appomattox River Water Authority Revenue, Refunding, Pre-Refunded, 7.50%, 10/01/13 ............ 1,406,254
2,085,000 Arlington County GO, 6.00%, 08/01/13 .......................................................... 2,165,273
2,000,000 Arlington County IDA, Hospital Facility Revenue, Arlington Hospital, Series A, Pre-Refunded,
7.125%, 09/01/21 ............................................................................. 2,243,260
100,000 Ashland GO, Refunding, Pre-Refunded, 7.75%, 08/01/12 .......................................... 108,335
Augusta County IDA Revenue, Augusta Hospital Corp. Project,
1,000,000 AMBAC Insured, 6.625%, 09/01/12............................................................... 1,065,550
2,000,000 Pre-Refunded, 7.00%, 09/01/21................................................................. 2,227,540
1,230,000 Blacksburg Polytechnic Institute, Sanitation Authority Sewer System Revenue, 6.25%, 11/01/12 .. 1,253,444
950,000 Campbell County Utilities Services Authority, Water and Sewer Revenue, MBIA Insured,
Pre-Refunded, 7.25%, 10/01/19 ................................................................ 1,041,571
2,000,000 Charlottesville IDA Revenue, Martha Jefferson Hospital, Pre-Refunded, 7.375%, 10/01/20......... 2,235,520
Chesapeake Hospital Authority Facilities Revenue, Chesapeake General Hospital,
2,500,000 8.20%, 07/01/05 .............................................................................. 2,777,475
450,000 BIG Insured, Pre-Refunded, 7.625%, 07/01/18................................................... 485,730
240,000 Chesapeake IDA, Nursing Home Revenue, Sentara Life Care Corp. Project, 8.00%, 11/01/17 ........ 258,166
3,940,000 Chesapeake IDA, Public Facilities Lease Revenue, Chesapeake Jail Project, MBIA Insured,
6.00%, 06/01/12 .............................................................................. 4,053,669
50,000 Chesapeake Water and Sewer System Revenue, Pre-Refunded, 7.75%, 07/01/17....................... 52,520
50,000 Chesterfield County COP, Pre-Refunded, 7.90%, 12/15/01 ........................................ 51,591
5,000,000 Covington-Alleghany County IDA, PCR, Refunding, Westvaco Corp. Project, 6.65%, 09/01/18........ 5,310,950
2,000,000 Danville COP, Social Services, 7.625%, 04/01/13 ............................................... 2,180,480
Danville GO, Series 1991,
655,000 6.75%, 02/01/10 .............................................................................. 697,182
705,000 6.75%, 02/01/11 .............................................................................. 750,402
5,000,000 Danville IDA, Hospital Revenue, Refunding, Danville Regional Medical Center, FGIC Insured,
6.50%, 10/01/24 .............................................................................. 5,247,700
500,000 Danville IDA, Solid Waste Disposal Revenue, International Paper Co., 6.50%, 03/01/19 .......... 511,820
1,000,000 Fairfax County EDA, Parking Revenue, Huntington Metrorail, 7.00%, 09/01/10..................... 1,079,630
1,500,000 Fairfax County EDA, Resource Recovery Revenue, Ogden Martin System of Fairfax, Inc. Project,
Series 1988-A, 7.75%, 02/01/11................................................................ 1,617,630
Fairfax County IDA Revenue,
5,000,000 Health Care, Inova Health System Project, 6.00%, 08/15/26..................................... 4,958,550
150,000 Refunding, Fairfax Hospital Association, Series A, Pre-Refunded, 7.875%, 10/01/17............. 154,952
4,700,000 Fairfax County Redevelopment and Housing Authority, MFR, Cedar Ridge Apartments,
GNMA Secured, 6.30%, 12/20/27................................................................. 4,831,976
Fairfax County Sewer Revenue,
6,500,000 MBIA Insured, 5.875%, 07/15/28................................................................ 6,466,915
1,000,000 Series A, AMBAC Insured, Pre-Refunded, 7.00%, 11/15/16 ....................................... 1,091,810
2,500,000 Fairfax County Water Authority Revenue, Series 1989, Pre-Refunded, 7.25%, 01/01/27 ............ 2,743,075
2,040,000 Frederick County IDA Lease Revenue, Government Complex Facilities Project, MBIA Insured,
6.50%, 12/01/09 .............................................................................. 2,173,192
250,000 Frederick Winchester Sewer Service Authority Revenue, Refunding, AMBAC Insured, Pre-Refunded,
7.20%, 10/01/08 .............................................................................. 273,743
165,000 Fredericksburg IDA Revenue, Crossover Refunding, Mary Washington Hospital, AMBAC Insured,
Pre-Refunded, 7.80%, 07/01/14 ................................................................ 178,603
30,000 Front Royal and Warren County IDA Revenue, Refunding, Mortgage, Heritage Hall No. 13,
FHA Insured, 8.25%, 07/15/05 ................................................................. 30,418
Guam Airport Authority Revenue, Refunding, Series A,
$ 830,000 6.375%, 10/01/10 ............................................................................. $ 842,782
1,000,000 6.50%, 10/01/23 .............................................................................. 1,006,730
3,000,000 Halifax County IDA, Exempt Facilities Revenue, Old Dominion Electric Cooperative Project,
6.50%, 12/01/12 .............................................................................. 3,094,050
Hampton Museum Revenue, Pre-Refunded,
1,200,000 Series 1989, 7.50%, 01/01/14 ................................................................. 1,302,288
1,000,000 Series 1990, 7.30%, 01/01/14.................................................................. 1,097,130
1,100,000 Hampton Redevelopment and Housing Authority, Senior Living Association Revenue, Refunding,
Series 1996-A, GNMA Secured, 6.00%, 01/20/26 ................................................. 1,093,884
1,500,000 Hampton Roads Medical College General Revenue, Refunding, Series A, 6.875%, 11/15/16........... 1,587,285
10,000,000 Hampton Roads Regional Jail Authority, Jail Facility Revenue, Series A, MBIA Insured,
5.00%, 07/01/28............................................................................... 8,662,300
3,500,000 Hampton Roads Sanitation District, Primary Pledge Sewer Revenue, Pre-Refunded, 7.20%, 07/01/09. 3,817,065
2,000,000 Hanover County IDA, Hospital Revenue, Bon Secours Health Systems Projects, MBIA Insured,
5.50%, 08/15/25 .............................................................................. 1,871,140
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 ..................................................... 298,906
Henrico County IDA Revenue, Bon Secours,
250,000 Maryview Nursing Center, Series B, Pre-Refunded, 7.625%, 08/15/18 ............................ 270,578
790,000 St. Mary's Hospital, Series C, Pre-Refunded, 7.50%, 09/01/07 ................................. 854,385
300,000 Henry County Public Service Authority, Water and Sewer Revenue, FGIC Insured, Pre-Refunded,
7.75%, 11/15/18 .............................................................................. 305,319
1,250,000 Leesburg Utilities System Revenue, MBIA Insured, 6.30%, 07/01/17 .............................. 1,299,875
Loudoun County Sanitation Authority, Water and Sewer Revenue,
650,000 AMBAC Insured, Pre-Refunded, 7.50%, 01/01/10 ................................................. 706,160
3,500,000 eSeries 96, FGIC Insured, 5.25%, 01/01/26................................................... 3,179,645
1,000,000 eSeries 96, FGIC Insured, 5.25%, 01/01/30................................................... 897,610
190,000 Lynchburg IDA, Hospital Facilities Revenue, Refunding, First Mortgage, Centra Health, Inc.,
8.125%, 01/01/16 ............................................................................. 201,784
1,000,000 Lynchburg Redevelopment and Housing Authority Revenue, Refunding, Waldon Pond III, Series A,
GNMA Secured, 6.20%, 07/20/27 ................................................................ 1,011,810
50,000 Manassas GO, Series 1988-A, Pre-Refunded, 7.20%, 03/01/06 ..................................... 51,792
500,000 Manassas IDA, Hospital Revenue, Prince William Hospital, Pre-Refunded, 8.125%, 04/01/19 ....... 552,195
1,180,000 Martinsville IDA, Hospital Facility Revenue, Memorial Hospital of Martinsville and Henry,
7.00%, 01/01/11............................................................................... 1,223,743
4,500,000 Mecklenburg County IDA Revenue, Exempt Facility, Series A, 7.35%, 05/01/08..................... 4,732,425
1,000,000 Metropolitan Washington D.C. Airports, General Airport Authority Revenue, Series A, 7.60%, 10/01/14 1,091,280
3,000,000 Newport News IDA, Mortgage Revenue, Mennowood Communities, Inc., GNMA, Series A,
6.25%, 08/01/36............................................................................... 3,007,680
2,075,000 Norfolk GO, MBIA Insured, 5.75%, 06/01/14 ..................................................... 2,067,924
Norfolk IDA Revenue,
50,000 Children's Hospital of the Kings' Daughters, Inc., Series A, 8.375%, 06/01/12 ................ 52,216
3,000,000 Children's Hospital of the Kings' Group, Inc., AMBAC Insured, Pre-Refunded, 7.00%, 06/01/11... 3,335,220
20,000 Medical Center Hospital Project, Series A, 7.00%, 11/01/07.................................... 20,544
30,000 Medical Center Hospital Project, Series A, Pre-Refunded, 7.00%, 11/01/07...................... 31,015
Norfolk Water Revenue, MBIA Insured,
5,000,000 5.875%, 11/01/20.............................................................................. 4,958,100
5,000,000 5.90%, 11/01/25............................................................................... 4,937,800
360,000 Northern Virginia Transportation District Commission, Commuter Rail Revenue, Railway Express
Project, CGIC Insured, 7.00%, 07/01/05 ....................................................... 389,254
1,000,000 Peninsula Airport Commission Revenue, Airport Improvement, 7.25%, 07/15/11..................... 1,080,560
$ 5,480,000 Peninsula Ports Authority, Coal Terminal Revenue, Refunding, Coal Terminal Association Project,
7.375%, 06/01/20 ............................................................................. $ 5,760,412
50,000 Peninsula Ports Authority, Hospital Facility Revenue, Refunding, Whittaker Memorial Hospital
Project, FHA Insured, 8.70%, 08/01/23......................................................... 52,415
6,000,000 Peninsula Ports Authority Revenue, Refunding, Riverside Health System Project, Series A,
6.625%, 07/01/18 ............................................................................. 6,226,920
50,000 Portsmouth Public Utility, GO, Refunding, Pre-Refunded, 7.50%, 11/01/12........................ 53,165
5,500,000 Prince William County Service Authority, Water and Sewer Systems Revenue, FGIC Insured,
6.00%, 07/01/29 .............................................................................. 5,517,655
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A,
1,000,000 Pre-Refunded, 7.90%, 07/01/07................................................................. 1,086,030
2,700,000 Pre-Refunded, 7.875%, 07/01/17 ............................................................... 2,931,093
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources, Pre-Refunded,
55,000 Refunding, Series L, 8.40%, 07/01/15 ......................................................... 58,081
600,000 Refunding, Series M, 8.00%, 07/01/08 ......................................................... 652,104
1,500,000 Series P, 7.00%, 07/01/21..................................................................... 1,676,685
Puerto Rico Commonwealth GO,
10,000 Public Improvement, Refunding, 7.125%, 07/01/02 .............................................. 10,413
5,000 Public Improvement, Refunding, Pre-Refunded, 7.125%, 07/01/02 ................................ 5,233
75,000 Public Improvement, Series 1988, Pre-Refunded, 7.75%, 07/01/13 ............................... 81,257
1,000,000 Series 1990, Pre-Refunded, 7.30%, 07/01/20.................................................... 1,113,350
Puerto Rico Commonwealth Highway Authority Revenue, Pre-Refunded,
225,000 Series P, 8.125%, 07/01/13 ................................................................... 245,027
2,000,000 Series R, 7.20%, 07/01/01..................................................................... 2,212,300
1,000,000 Series Q, 8.00%, 07/01/18 .................................................................... 1,135,770
2,000,000 Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue, Series Y,
6.00%, 07/01/22............................................................................... 2,001,460
30,000 Puerto Rico Commonwealth IDC, General Purpose Revenues, 8.00%, 01/01/03........................ 30,122
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
750,000 7.75%, 07/01/08 .............................................................................. 801,983
350,000 7.90%, 07/01/07............................................................................... 375,162
Puerto Rico HFC Revenue,
20,000 FHA Mortgage Insured, Section Eight Assisted, Sixth Portfolio, 7.75%, 12/01/26................ 23,790
2,460,000 MFM, Series A-1, 7.50%, 04/01/22.............................................................. 2,575,620
310,000 Puerto Rico HFC, SFMR, Portfolio 1, Series B, GNMA Secured, 7.65%, 10/15/22.................... 325,491
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
300,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12.............................................. 325,890
250,000 Upjohn Co. Project, 7.50%, 12/01/23 .......................................................... 271,893
185,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 200,399
Puerto Rico PBA, Guaranteed, Public Education and Health Facilities, Pre-Refunded,
175,000 Series H, 7.875%, 07/01/16 ................................................................... 184,216
1,925,000 Series J, 7.25%, 07/01/17..................................................................... 2,059,885
5,000,000 Puerto Rico Telephone Authority Revenue, Series L, 6.125%, 01/01/22............................ 5,027,250
Richmond Metropolitan Authority, Expressway Revenue,
2,000,000 AMBAC Insured, 7.00%, 10/15/13................................................................ 2,125,680
2,500,000 Refunding, Series A, FGIC Insured, 6.375%, 07/15/16 .......................................... 2,600,675
5,000,000 Series B, FGIC Insured, 6.25%, 07/15/22 ...................................................... 5,111,500
175,000 Richmond Public Utilities Revenue, Series A, Pre-Refunded, 8.00%, 01/15/18 .................... 187,194
1,650,000 Roanoke IDA, Hospital Revenue, Refunding, Roanoke Memorial Hospitals Project, Series A,
MBIA Insured, 5.00%, 07/01/24................................................................. 1,433,933
3,000,000 Roanoke IDA Revenue, Roanoke Memorial Hospital, Pre-Refunded, 7.50%, 07/01/20 ................. 3,349,650
4,250,000 South Boston IDA Revenue, Halifax-Community Hospital, Inc. Project, 7.375%, 09/01/11........... 4,448,900
$ 1,000,000 Southeastern Public Service Authority Revenue, Senior Regional Solid Waste System, Series B,
Refunding, BIG Insured, Pre-Refunded, 7.00%, 07/01/13......................................... $ 1,085,340
945,000 Staunton IDA, Facilities Revenue, Pre-Refunded, Mary Baldwin College, Series B, 8.00%, 11/01/17 1,015,705
200,000 Suffolk County GO, Series 1988, Pre-Refunded, 7.40%, 08/01/05.................................. 210,076
345,000 Suffolk IDA Revenue, Louise Obici Memorial Hospital, 7.875%, 01/01/05.......................... 363,644
3,000,000 Upper Occoquan Sewer Authority, Regional Sewer Revenue, Series A, MBIA Insured, 5.15%, 07/01/20 2,749,650
50,000 Virginia Beach Development Authority, General Hospital Facility Revenue, Series A, Pre-Refunded,
8.75%, 12/01/17 .............................................................................. 53,777
Virginia College Building Authority, Educational Facilities Revenue,
750,000 Hampton University Project, Series A, Pre-Refunded, 7.75%, 04/01/14 .......................... 822,495
1,750,000 Marymount University Project, 7.00%, 07/01/22 ................................................ 1,834,437
2,345,000 Refunding, Washington and Lee University Project, 5.75%, 01/01/19............................. 2,278,776
175,000 Virginia Education Loan Authority, Guaranteed, Student Loan Program Revenue, Series B,
Pre-Refunded, 8.00%, 03/01/04................................................................. 187,603
900,000 Virginia Polytechnic Institute Revenue, Dormitory and Dining Hall, BIG Insured, 7.00%, 06/01/09 959,255
400,000 Virginia Port Authority Revenue, Commonwealth Port Fund, 8.20%, 07/01/08 ...................... 431,411
Virginia State HDA, Commonwealth Mortgage,
1,000,000 Series A, 7.10%, 01/01/17 .................................................................... 1,053,400
5,500,000 Series A, 7.15%, 01/01/33 .................................................................... 5,760,314
5,000 Series A-1, 8.10%, 01/01/17................................................................... 5,181
5,000,000 Series B-1, 7.20%, 07/01/17................................................................... 5,334,650
250,000 Series B-3, 7.375%, 07/01/17.................................................................. 262,902
2,000,000 Series B-3, 6.80%, 01/01/27................................................................... 2,080,260
5,000,000 Series B-4, 6.85%, 07/01/17................................................................... 5,202,150
1,000,000 Series B-4, 6.55%, 01/01/27................................................................... 1,032,430
5,000,000 Series D-1, 6.40%, 07/01/17................................................................... 5,097,750
1,500,000 Series D-2, 7.35%, 07/01/17................................................................... 1,546,890
1,000,000 Series D-3, 7.375%, 07/01/17 ................................................................. 1,041,890
2,000,000 Series H-2, 6.55%, 01/01/27 .................................................................. 2,051,100
9,000,000 Virginia State HDA, MF, Series F, 7.10%, 05/01/13 ............................................. 9,495,270
2,000,000 Virginia State Resources Authority, Sewer System Revenue, Refunding, Harrisonburg Rockingham
Region, Series A, 6.00%, 05/01/22 ............................................................ 2,011,780
Virginia State Resources Authority, Water and Sewer System Revenue,
1,000,000 Lot #7, Rapidan Service Authority, 7.125%, 10/01/16 .......................................... 1,064,680
400,000 Pooled Loan Program, Series A, 7.35%, 11/01/16 ............................................... 424,083
100,000 Pooled Loan Program, Series A, 7.45%, 11/01/16................................................ 106,178
100,000 Pooled Loan Program, Series A, Pre-Refunded, 7.85%, 11/01/17.................................. 110,011
190,000 Pooled Loan Program, Series A, Pre-Refunded, 7.35%, 11/01/16.................................. 206,921
Virginia State Resources Authority, Water System Revenue,
1,000,000 Refunding, Series A, 6.125%, 04/01/19 ........................................................ 1,008,610
85,000 Series 1988, Pre-Refunded, 7.875%, 10/01/18 .................................................. 92,657
Virginia State Transportation Board, Transportation Contract Revenue,
9,000,000 Refunding, U.S. Route 28 Project, 6.50%, 04/01/18 ............................................ 9,336,510
475,000 U.S. Route 28 Project, Pre-Refunded, 7.80%, 03/01/16 ......................................... 509,285
2,500,000 U.S. Route 58 Corridor Development Program, 6.00%, 05/15/19................................... 2,509,274
3,295,000 Washington County IDA, College Facilities Revenue, Emory and Henry College Project,
6.375%, 04/01/23 ............................................................................. 3,350,191
3,000,000 Washington County IDA, Hospital Facilities Revenue, First Mortgage, Johnston Memorial Hospital,
7.00%, 07/01/22............................................................................... 3,184,740
$ 5,450,000 West Point IDA, Solid Waste Disposal Revenue, Refunding, Chesapeake Corp. Project, Series B,
6.25%, 03/01/19............................................................................... $ 5,484,771
2,000,000 Winchester IDA, Educational Facilities Revenue, Refunding, First Mortgage, Shenandoah University
Project, Asset Guaranteed, 6.80%, 10/01/24.................................................... 2,167,440
--------------
Total Long Term Investments (Cost $264,606,601) ............................................... 276,225,716
--------------
a Short Term Investments1.0%
300,000 Capital Region Airport Commission, Airport Revenue, Richmond International Airport Projects,
Series B, AMBAC Insured, Weekly VRDN and Put, 3.30%, 07/01/25................................. 300,000
700,000 Lynchburg IDA, Hospital Facilities, First Mortgage Revenue, VHA, Mid-Atlantic, AMBAC Insured,
Weekly VRDN and Put, Capital Series F, 3.35%, 12/01/25........................................ 700,000
100,000 Peninsula Ports Authority, Coal Terminal Revenue, DATES, Dominion Terminal Project, Refunding,
Daily VRDN and Put, Series D, 3.65%, 07/01/16................................................. 100,000
1,300,000 Peninsula Ports Authority Revenue Updates, Refunding, Port Facility, Shell Oil Co., Series A,
Daily VRDN and Put, 3.80%, 12/01/05........................................................... 1,300,000
300,000 Southampton County IDA Revenue, Various Exempt Facilities, Hadson Power, Series 11-A,
Daily VRDN and Put, 4.10%, 04/01/15........................................................... 300,000
--------------
Total Short Term Investments (Cost $2,700,000) ................................................ 2,700,000
--------------
Total Investments (Cost $267,306,601)99.8% .................................................... 278,925,716
Other Assets and Liabilities, Net.2% .......................................................... 639,855
--------------
Net Assets100.0%............................................................................... $279,565,571
==============
At August 31, 1996, the net unrealized appreciation based on the
cost of investments for income tax purposes of $267,306,601 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 12,265,570
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (646,455)
--------------
Net unrealized appreciation.................................................................... $ 11,619,115
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
DATES - Demand Adjustable Tax-Exempt Securities
EDA - Economic Development Authority
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HFC - Housing Financial Corp.
IDA - Industrial Development Authority
IDC - Industrial Development Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFM - Multi-Family Mortgage
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
VHA - Volunteer Hospital of America
aVariable rate demand notes (VRDNs) are tax exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). eSee Note 1(h) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
August 31, 1996 (unaudited)
<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
--------- ---------- --------- -------- ---------
Assets:
Investments in securities:
<S> <C> <C> <C> <C> <C>
At identified cost......................... $178,451,458 $1,327,556,313 $130,111,175 $40,117,506 $109,028,380
========= ========== ========= ======== =========
At value................................... 185,989,490 1,389,361,354 135,897,051 40,894,205 114,624,596
Cash........................................ 5,428 1,290,407 25,881 170,287 3,787
Receivables:
Interest................................... 3,267,958 24,630,660 1,985,141 644,010 1,840,524
Investment securities sold................. -- 3,907,019 -- -- 15,415
Capital shares sold........................ 255,012 1,530,226 226,025 65 7,902
--------- ---------- --------- -------- ---------
Total assets................................. 189,517,888 1,420,719,666 138,134,098 41,708,567 116,492,224
--------- ---------- --------- -------- ---------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery............................ 1,003,994 -- -- -- --
When-issued basis (Note 1).................. -- 40,766,570 1,482,996 -- 2,888,323
Distributions payable to shareholders...... 223,600 1,710,205 190,932 49,051 136,883
Capital shares repurchased................. 129,837 579,617 271,795 512 77,658
Management fees............................ 88,708 537,320 67,202 5,392 57,633
Distribution fees.......................... 21,619 149,950 20,367 1,462 17,979
Shareholder servicing costs................ 4,026 35,118 156 -- 5,072
Accrued expenses and other liabilities...... 22,274 92,498 20,192 9,701 11,923
--------- ---------- --------- -------- ---------
Total liabilities............................ 1,494,058 43,871,278 2,053,640 66,118 3,195,471
--------- ---------- --------- -------- ---------
Net assets, at value......................... $188,023,830 $1,376,848,388 $136,080,458 $41,642,449 $113,296,753
========= ========== ========= ======== =========
Net assets consist of:
Undistributed net investment income......... $ 358,091 $ 3,083,340 -- $ 31,037 $ 319,883
Accumulated distributions in excess of
net investment income (Note 1).............. -- -- (24,494) -- --
Net unrealized appreciation on investments.. 7,538,032 61,805,041 5,785,876 776,699 5,596,216
Net realized loss........................... (192,906) (2,800,584) (1,135,075) (1,076,468) (2,876,091)
Class I capital shares...................... 176,816,167 1,300,188,036 128,255,377 41,911,181 107,732,734
Class II capital shares..................... 3,504,446 14,572,555 3,198,774 -- 2,524,011
--------- ---------- --------- -------- ---------
Net assets, at value......................... $188,023,830 $1,376,848,388 $136,080,458 $41,642,449 $113,296,753
========= ========== ========= ======== =========
Class I shares:
Net Assets, at value........................ $184,545,118 $1,362,428,741 $132,904,386 $41,642,449 $110,795,213
========= ========== ========= ======== =========
Shares outstanding.......................... 16,021,761 119,095,474 11,384,419 3,860,530 9,936,304
========= ========== ========= ======== =========
Net asset value per share*.................. $11.52 $11.44 $11.67 $10.79 $11.15
========= ========== ========= ======== =========
Class II shares:
Net Assets, at value........................ $ 3,478,712 $ 14,419,647 $ 3,176,072 -- $ 2,501,540
========= ========== ========= ======== =========
Shares outstanding.......................... 300,988 1,253,512 270,892 -- 223,372
========= ========== ========= ======== =========
Net asset value per share*.................. $11.56 $11.50 $11.72 -- $11.20
========= ========== ========= ======== =========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
August 31, 1996 (unaudited)
<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
--------- --------- --------- --------- ---------
Assets:
Investments in securities:
<S> <C> <C> <C> <C> <C>
At identified cost.......................... $167,939,896 $248,691,065 $242,879,329 $121,927,453 $267,306,601
========= ========= ========= ========= =========
At value.................................... 173,472,271 257,630,515 251,493,474 128,095,608 278,925,716
Cash......................................... 334,692 12,566 287,415 2,859 28,994
Receivables:
Interest.................................... 3,239,735 3,806,909 4,088,876 2,053,362 4,613,972
Investment securities sold.................. 3,488,400 894,750 20,000 -- 45,000
Capital shares sold......................... 834,391 103,555 241,495 83,140 282,931
--------- --------- --------- --------- ---------
Total assets.................................. 181,369,489 262,448,295 256,131,260 130,234,969 283,896,613
--------- --------- --------- --------- ---------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1)................. -- 4,930,020 -- 2,951,633 3,780,547
Distributions payable to shareholders....... 209,481 297,093 286,894 155,443 327,056
Capital shares repurchased.................. 7,075 15,730 35,296 317,298 40,073
Management fees............................. 85,544 117,229 116,679 63,343 125,665
Distribution fees........................... 23,393 39,663 39,762 12,390 37,654
Shareholder servicing costs................. 4,067 4,109 4,629 2,336 4,891
Accrued expenses and other liabilities....... 9,299 7,000 14,290 7,279 15,156
--------- --------- --------- --------- ---------
Total liabilities............................. 338,859 5,410,844 497,550 3,509,722 4,331,042
--------- --------- --------- --------- ---------
Net assets, at value.......................... $181,030,630 $257,037,451 $255,633,710 $126,725,247 $279,565,571
========= ========= ========= ========= =========
Net assets consist of:
Undistributed net investment income.......... $ 238,306 $ 527,215 $ 33,166 $ 213,642 $ 617,697
Net unrealized appreciation on investments... 5,532,375 8,939,450 8,614,145 6,168,155 11,619,115
Net realized gain (loss)..................... (309,897) 796,822 (3,257,216) 1,393,043 373,587
Class I capital shares....................... 172,628,581 244,579,302 244,208,082 118,592,919 262,639,910
Class II capital shares...................... 2,941,265 2,194,662 6,035,533 357,488 4,315,262
--------- --------- --------- --------- ---------
Net assets, at value.......................... $181,030,630 $257,037,451 $255,633,710 $126,725,247 $279,565,571
========= ========= ========= ========= =========
Class I shares:
Net Assets, at value......................... $178,113,498 $254,854,892 $249,638,365 $126,370,733 $275,283,251
========= ========= ========= ========= =========
Shares outstanding........................... 16,004,212 21,831,705 21,650,588 11,062,555 23,944,541
========= ========= ========= ========= =========
Net asset value per share*................... $11.13 $11.67 $11.53 $11.42 $11.50
========= ========= ========= ========= =========
Class II shares:
Net Assets, at value......................... $ 2,917,132 $ 2,182,559 $ 5,995,345 $ 354,514 $ 4,282,320
========= ========= ========= ========= =========
Shares outstanding........................... 260,496 186,532 517,572 30,741 370,666
========= ========= ========= ========= =========
Net asset value per share*................... $11.20 $11.70 $11.58 $11.53 $11.55
========= ========= ========= ========= =========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Operations
for the six months ended August 31, 1996 (unaudited)
<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
-------- --------- -------- -------- --------
Investment income:
<S> <C> <C> <C> <C> <C>
Interest (Note 1)..................................... $5,965,668 $43,814,786 $4,203,251 $1,212,604 $3,631,606
-------- --------- -------- -------- --------
Expenses:
Management fees (Note 5).............................. 529,637 3,188,678 397,666 127,158 339,300
Distribution fees - Class I (Note 5).................. 66,401 483,701 53,091 16,367 43,145
Distribution fees - Class II (Note 5)................. 9,127 47,385 6,968 -- 6,886
Shareholder servicing costs (Note 5).................. 26,488 165,161 18,335 5,947 17,963
Reports to shareholders............................... 18,857 120,753 11,455 2,786 9,724
Pricing service fee................................... 10,364 17,620 7,690 5,301 6,950
Custodian fees........................................ 3,581 32,302 877 304 629
Registration and filing fees.......................... 3,154 6,286 1,952 1,183 1,625
Professional fees..................................... 2,828 18,583 2,003 944 2,084
Trustees' fees and expenses........................... 1,427 9,920 948 301 860
Other................................................. 4,846 43,147 16,417 2,716 4,120
Expenses waived by Manager (Note 5)................... -- -- -- (96,143) --
-------- --------- -------- -------- --------
Total expenses......................................... 676,710 4,133,536 517,402 66,864 433,286
-------- --------- -------- -------- --------
Net investment income.................................. 5,288,958 39,681,250 3,685,849 1,145,740 3,198,320
-------- --------- -------- -------- --------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss).............................. (44,150) (383,017) (301,206) (197,501) 61,773
Net unrealized depreciation........................... (3,324,937) (28,121,433) (1,897,492) (689,601) (1,697,699)
-------- --------- -------- -------- --------
Net realized and unrealized loss on investments........ (3,369,087) (28,504,450) (2,198,698) (887,102) (1,635,926)
-------- --------- -------- -------- --------
Net increase in net assets resulting from operations... $1,919,871 $11,176,800 $1,487,151 $ 258,638 $1,562,394
======== ========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended August 31, 1996 (unaudited)
<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
-------- --------- -------- -------- --------
Investment income:
<S> <C> <C> <C> <C> <C>
Interest (Note 1)..................................... $5,515,549 $7,871,809 $7,794,400 $4,176,838 $8,650,354
-------- --------- -------- -------- --------
Expenses:
Management fees (Note 5).............................. 504,732 687,932 690,348 377,789 744,554
Distribution fees - Class I (Note 5).................. 72,114 104,927 101,465 45,264 106,129
Distribution fees - Class II (Note 5)................. 5,390 6,127 14,150 692 10,332
Shareholder servicing costs (Note 5).................. 30,765 38,656 35,505 17,689 41,071
Reports to shareholders............................... 17,599 22,371 22,072 10,837 28,370
Pricing service fee................................... 7,512 9,689 10,254 6,153 10,091
Custodian fees........................................ 888 1,230 1,256 1,255 1,331
Registration and filing fees.......................... 1,357 2,351 1,727 5,484 1,486
Professional fees..................................... 2,872 3,540 3,596 2,072 4,231
Trustees' fees and expenses........................... 1,260 1,693 1,775 963 2,023
Other................................................. 6,736 2,854 10,741 9,148 10,672
-------- --------- -------- -------- --------
Total expenses......................................... 651,225 881,370 892,889 477,346 960,290
-------- --------- -------- -------- --------
Net investment income.................................. 4,864,324 6,990,439 6,901,511 3,699,492 7,690,064
-------- --------- -------- -------- --------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss).............................. 970,248 805,316 (327,312) 1,382,156 887,823
Net unrealized depreciation........................... (4,839,151) (6,493,305) (4,388,487) (3,143,803) (6,069,144)
-------- --------- -------- -------- --------
Net realized and unrealized loss on investments........ (3,868,903) (5,687,989) (4,715,799) (1,761,647) (5,181,321)
-------- --------- -------- -------- --------
Net increase in net assets resulting from operations... $ 995,421 $1,302,450 $2,185,712 $1,937,845 $2,508,743
======== ========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended August 31, 1996
(unaudited) and the year ended February 29, 1996
<TABLE>
<CAPTION>
Franklin Alabama Franklin Florida Franklin Georgia
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------- ---------------------- --------------------
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
8/31/96 2/29/96 8/31/96 2/29/96 8/31/96 2/29/96
--------- --------- ---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income......... $ 5,288,958 $ 10,196,076 $ 39,681,250 $ 77,913,019 $ 3,685,849 $ 6,882,131
Net realized gain (loss) from
security transactions.......... (44,150) 1,639,699 (383,017) 5,260,309 (301,206) 792,584
Net unrealized appreciation
(depreciation) on
investments.................... (3,324,937) 4,747,672 (28,121,433) 33,040,146 (1,897,492) 2,701,329
--------- --------- ---------- ---------- --------- ---------
Net increase in net
assets resulting from
operations..................... 1,919,871 16,583,447 11,176,800 116,213,474 1,487,151 10,376,044
Distributions to shareholders:
From undistributed net
investment income:
Class I (Note 7)............ (5,235,202) (10,122,459) (39,910,606) (77,720,760) (3,674,556) (6,924,143)
Class II (Note 7)........... (70,919) (24,970) (289,574) (136,954) (51,848) (16,079)
In excess of net investment
income Class I (Note 1)........ -- -- -- -- (24,494) --
Increase in net assets from
capital share transactions
(Note 2)....................... 3,767,266 11,155,927 44,687,441 57,810,132 6,628,925 11,508,122
--------- --------- ---------- ---------- --------- ---------
Net increase in
net assets..................... 381,016 17,591,945 15,664,061 96,165,892 4,365,178 14,943,944
Net assets:
Beginning of period............ 187,642,814 170,050,869 1,361,184,327 1,265,018,435 131,715,280 116,771,336
--------- --------- ---------- ---------- --------- ---------
End of period.................. $188,023,830 $187,642,814 $1,376,848,388 $1,361,184,327 $136,080,458 $131,715,280
========= ========= ========== ========== ========= =========
Undistributed net
investment income
(accumulated distributions
in excess of net
investment income)
included in net assets:
Beginning of period........... $ 375,254 $ 326,607 $ 3,602,270 $ 3,546,965 $ 40,555 $ 98,646
========= ========= ========== ========== ========= =========
End of period................. $ 358,091 $ 375,254 $ 3,083,340 $ 3,602,270 $ (24,494) $ 40,555
========= ========= ========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
<TABLE>
<CAPTION>
Franklin Kentucky Franklin Louisiana Franklin Maryland
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------ -------------------- --------------------
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
8/31/96 2/29/96 8/31/96 2/29/96 8/31/96 2/29/96
-------- -------- --------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.............. $ 1,145,740 $ 2,010,309 $ 3,198,320 $ 6,230,184 $ 4,864,324 $ 9,164,640
Net realized gain (loss) from
security transactions............... (197,501) (93,203) 61,773 315,845 970,248 (339,820)
Net unrealized appreciation
(depreciation) on investments....... (689,601) 1,657,762 (1,697,699) 2,327,110 (4,839,151) 6,976,565
-------- -------- --------- --------- --------- ---------
Net increase in net assets
resulting from operations........... 258,638 3,574,868 1,562,394 8,873,139 995,421 15,801,385
Distributions to shareholders:
From undistributed net investment income:
Class I (Note 7)................... (1,139,246) (2,006,847) (3,129,013) (6,126,121) (4,857,416) (9,178,594)
Class II (Note 7).................. -- -- (54,483) (13,421) (40,187) (14,480)
Increase in net assets from capital
share transactions (Note 2)......... 3,531,933 4,591,799 6,018,691 1,185,776 8,941,574 16,238,350
-------- -------- --------- --------- --------- ---------
Net increase in net assets........... 2,651,325 6,159,820 4,397,589 3,919,373 5,039,392 22,846,661
Net assets:
Beginning of period................. 38,991,124 32,831,304 108,899,164 104,979,791 175,991,238 153,144,577
-------- -------- --------- --------- --------- ---------
End of period....................... $41,642,449 $38,991,124 $113,296,753 $108,899,164 $181,030,630 $175,991,238
======== ======== ========= ========= ========= =========
Undistributed net investment
income included in net assets:
Beginning of period................ $ 24,543 $ 21,081 $ 305,059 $ 214,417 $ 271,585 $ 300,019
======== ======== ========= ========= ========= =========
End of period...................... $ 31,037 $ 24,543 $ 319,883 $ 305,059 $ 238,306 $ 271,585
======== ======== ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
<TABLE>
<CAPTION>
Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
-------------------- --------------------
Six months Year Six months Year
ended ended ended ended
8/31/96 2/29/96 8/31/96 2/29/96
--------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income....................................... $ 6,990,439 $ 13,262,649 $ 6,901,511 $ 12,805,534
Net realized gain (loss) from security transactions......... 805,316 2,429,032 (327,312) 55,992
Net unrealized appreciation (depreciation) on investments... (6,493,305) 7,364,664 (4,388,487) 7,436,156
--------- --------- --------- ---------
Net increase in net assets resulting from operations.......... 1,302,450 23,056,345 2,185,712 20,297,682
Distributions to shareholders:
From undistributed net investment income:
Class I (Note 7)............................................. (6,822,449) (13,013,408) (6,733,375) (12,897,164)
Class II (Note 7)............................................ (46,642) (22,756) (104,753) (33,638)
In excess of net investment income Class I (Note 1).......... -- -- -- (30,868)
Increase in net assets from capital share transactions (Note 2) 13,757,376 11,385,029 10,824,352
25,862,266
--------- --------- --------- ---------
Net increase in net assets.................................... 8,190,735 21,405,210 6,171,936 33,198,278
Net assets:
Beginning of period.......................................... 248,846,716 227,441,506 249,461,774 216,263,496
--------- --------- --------- ---------
End of period................................................ $257,037,451 $248,846,716 $255,633,710 $249,461,774
========= ========= ========= =========
Undistributed net investment income
(accumulated distributions in excess of net
investment income) included in net assets:
Beginning of period.......................................... $ 405,867 $ 179,382 $ (30,217) $ 125,919
========= ========= ========= =========
End of period................................................ $ 527,215 $ 405,867 $ 33,166 $ (30,217)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
<TABLE>
<CAPTION>
Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund
-------------------- --------------------
Six months Year Six months Year
ended ended ended ended
8/31/96 2/29/96 8/31/96 2/29/96
--------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income....................................... $ 3,699,492 $ 7,632,670 $ 7,690,064 $ 14,937,405
Net realized gain from security transactions................ 1,382,156 1,250,561 887,823 2,856,048
Net unrealized appreciation (depreciation) on investments... (3,143,803) 2,598,262 (6,069,144) 5,708,436
--------- --------- --------- ---------
Net increase in net assets resulting from operations.......... 1,937,845 11,481,493 2,508,743 23,501,889
Distributions to shareholders from undistributed
net investment income:
Class I (Note 7)............................................ (3,728,363) (7,659,213) (7,585,221) (14,797,398)
Class II (Note 7)........................................... (5,369) (1,044) (78,417) (36,166)
Increase (decrease) in net assets from capital share
transactions (Note 2)........................................ (1,259,973) (4,724,511) 11,274,374 8,813,058
--------- --------- --------- ---------
Net increase (decrease) in net assets......................... (3,055,860) (903,275) 6,119,479 17,481,383
Net assets:
Beginning of period.......................................... 129,781,107 130,684,382 273,446,092 255,964,709
--------- --------- --------- ---------
End of period................................................ $126,725,247 $129,781,107 $279,565,571 $273,446,092
========= ========= ========= =========
Undistributed net investment income included in net assets:
Beginning of period.......................................... $ 247,882 $ 275,469 $ 591,271 $ 487,430
========= ========= ========= =========
End of period................................................ $ 213,642 $ 247,882 $ 617,697 $ 591,271
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Free Trust (the Trust) is an open-end management investment company
(mutual fund), registered under the Investment Company Act of 1940, as amended.
The Trust currently consists of twenty-eight separate funds. This report
pertains only to the ten funds (the Funds) included in the accompanying
financial statements. Each Fund seeks to maximize income exempt from federal
income taxes and from the personal income taxes, if any, for resident
shareholders of the named state to the extent consistent with prudent investing
and the preservation of shareholders' capital. Each of the Funds issues a
separate series of the Trust's shares and maintains a totally separate
investment portfolio. All funds in this report are diversified except the
Franklin Maryland Tax-Free Income Fund.
All of the funds within this report, except for the Franklin Kentucky Tax-Free
Income Fund, offer two classes of shares, Class I and Class II. Class I shares
are sold with a higher front-end sales charge than Class II shares. Each class
of shares may be subject to a contingent deferred sales charge and has the same
rights, except with respect to the effect of the respective sales charges, the
distribution fees borne by each class, voting rights on matters affecting a
single class and the exchange privilege of each class.
The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares.
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 Valuation:
Tax-free bonds generally trade in the over-the-counter market rather than on a
national securities exchange. In the absence of a sale or reported bid and asked
prices, information with respect to bond and note transactions, quotations from
bond dealers, market transactions in comparable securities, and various
relationships between securities are used to determine the value of the
security. The 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 (the Board). Securities for which
market quotations are not available are valued in accordance with procedures
established by the Board.
b. Municipal Bonds or Notes with "Puts":
The Funds have 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. Income Taxes:
The Funds intend 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 shareholders which will be sufficient to relieve the
Funds from income and excise taxes. 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.
e. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Original issue discount and
premium are amortized as required by the 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 day
following the 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, and are payable to
shareholders of record at the beginning of business on the ex-dividend date.
Once each month dividends are reinvested in additional shares of the Funds, or
paid in cash as requested by the shareholders.
Realized and unrealized gains or losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
The distribution in excess of net investment income for the Franklin Georgia
Tax-Free Income Fund is not expected to result in a tax basis return of capital
at fiscal year end because of the timing differences between book and tax
recognition of dividend distributions.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale transactions.
f. 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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
g. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
h. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Funds may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding the
securities, they may sell the 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.
2. TRUST SHARES
At August 31, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares were
as follows:
<TABLE>
<CAPTION>
Franklin Alabama Franklin Florida Franklin Georgia
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------- --------------------- -------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- --------- ----------- -------- ----------
Six months ended August 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.............................. 865,829 $ 9,977,294 8,841,265 $101,463,414 996,627 $11,663,440
Shares issued in reinvestment
of distributions......................... 184,452 2,127,575 921,641 10,583,275 158,397 1,852,961
Shares redeemed.......................... (885,151) (10,189,037) (6,481,012) (74,314,756) (748,408) (8,752,044)
-------- ---------- --------- ----------- -------- ----------
Net increase.............................. 165,130 $ 1,915,832 3,281,894 $ 37,731,933 406,616 $ 4,764,357
======== ========== ========= =========== ======== ==========
Year ended February 29, 1996
Shares sold.............................. 2,001,806 $23,206,134 18,302,298 $212,348,253 2,163,964 $25,515,781
Shares issued in reinvestment
of distributions......................... 342,773 3,965,753 1,715,131 19,860,564 285,166 3,357,019
Shares redeemed.......................... (1,525,925) (17,668,972) (15,697,038) (182,015,732) (1,586,419) (18,698,884)
-------- ---------- --------- ----------- -------- ----------
Net increase.............................. 818,654 $ 9,502,915 4,320,391 $ 50,193,085 862,711 $10,173,916
======== ========== ========= =========== ======== ==========
Class II Shares:
Six months ended August 31, 1996
Shares sold.............................. 164,317 $ 1,904,522 621,766 $ 7,168,544 167,990 $ 1,972,252
Shares issued in reinvestment
of distributions......................... 2,390 27,664 14,192 163,908 2,893 33,968
Shares redeemed.......................... (6,992) (80,752) (32,658) (376,944) (11,990) (141,652)
-------- ---------- --------- ----------- -------- ----------
Net increase.............................. 159,715 $ 1,851,434 603,300 $ 6,955,508 158,893 $ 1,864,568
======== ========== ========= =========== ======== ==========
Period ended February 29,1996*
Shares sold.............................. 140,587 $ 1,644,981 686,966 $ 8,047,000 115,112 $ 1,371,417
Shares issued in reinvestment
of distributions......................... 686 8,031 6,504 76,439 1,080 12,860
Shares redeemed.......................... -- -- (43,258) (506,392) (4,193) (50,071)
-------- ---------- --------- ----------- -------- ----------
Net increase.............................. 141,273 $ 1,653,012 650,212 $ 7,617,047 111,999 $ 1,334,206
======== ========== ========= =========== ======== ==========
*For the period May 1, 1995 to February 29, 1996.
2. TRUST SHARES (cont.)
Franklin Kentucky Franklin Louisiana Franklin Maryland
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
----------------- ------------------- -------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
------- --------- -------- ---------- -------- ----------
Six months ended August 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................... 443,326 $4,776,998 912,912 $10,157,633 1,308,974 $14,608,851
Shares issued in reinvestment of distributions. 51,178 553,454 115,291 1,284,380 220,353 2,460,920
Shares redeemed................................ (166,854) (1,798,519) (584,682) (6,503,911) (911,874) (10,164,034)
------- --------- -------- ---------- -------- ----------
Net increase.................................... 327,650 $3,531,933 443,521 $ 4,938,102 617,453 $ 6,905,737
======= ========= ======== ========== ======== ==========
Year ended February 29, 1996
Shares sold.................................... 601,004 $6,578,326 901,479 $10,128,261 2,688,694 $30,261,244
Shares issued in reinvestment of distributions. 87,040 945,363 221,661 2,484,257 405,922 4,557,510
Shares redeemed................................ (268,807) (2,931,890) (1,148,001) (12,870,164) (1,734,342) (19,485,831)
------- --------- -------- ---------- -------- ----------
Net increase (decrease)......................... 419,237 $4,591,799 (24,861) $ (257,646) 1,360,274 $15,332,923
======= ========= ======== ========== ======== ==========
Class II Shares:
Six months ended August 31, 1996
<S> <C> <C> <C> <C>
Shares sold............................................................. 102,103 $ 1,139,336 189,152 $ 2,131,030
Shares issued in reinvestment of distributions.......................... 2,135 23,901 2,018 22,693
Shares redeemed......................................................... (7,337) (82,648) (10,527) (117,886)
-------- ---------- -------- ----------
Net increase............................................................. 96,901 $ 1,080,589 180,643 $ 2,035,837
======== ========== ======== ==========
Period ended February 29,1996*
Shares sold............................................................. 126,335 $ 1,441,883 83,626 $ 948,051
Shares issued in reinvestment of distributions.......................... 163 1,853 759 8,655
Shares redeemed......................................................... (27) (314) (4,532) (51,279)
-------- ---------- -------- ----------
Net increase............................................................. 126,471 $ 1,443,422 79,853 $ 905,427
======== ========== ======== ==========
Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
------------------- -------------------
Class I Shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
Six months ended August 31, 1996
<S> <C> <C> <C> <C>
Shares sold............................................................. 2,144,225 $25,069,326 1,705,251 $19,708,121
Shares issued in reinvestment of distributions.......................... 266,991 3,120,615 288,261 3,330,806
Shares redeemed......................................................... (1,311,411) (15,316,966) (1,373,596) (15,826,651)
-------- ---------- -------- ----------
Net increase............................................................. 1,099,805 $12,872,975 619,916 $ 7,212,276
======== ========== ======== ==========
Year ended February 29, 1996
Shares sold............................................................. 2,530,350 $29,702,868 3,644,032 $42,477,836
Shares issued in reinvestment of distributions.......................... 492,617 5,775,215 534,072 6,211,974
Shares redeemed......................................................... (2,165,784) (25,403,313) (2,170,445) (25,251,001)
-------- ---------- -------- ----------
Net increase............................................................. 857,183 $10,074,770 2,007,659 $23,438,809
======== ========== ======== ==========
Class II Shares:
Six months ended August 31, 1996
Shares sold............................................................. 94,420 $ 1,103,661 315,449 $ 3,656,495
Shares issued in reinvestment of distributions.......................... 3,065 35,911 5,662 65,739
Shares redeemed......................................................... (21,678) (255,171) (9,503) (110,158)
-------- ---------- -------- ----------
Net increase............................................................. 75,807 $ 884,401 311,608 $ 3,612,076
======== ========== ======== ==========
Period ended February 29,1996*
Shares sold............................................................. 110,467 $ 1,307,175 204,503 $ 2,406,207
Shares issued in reinvestment of distributions.......................... 1,383 16,439 1,461 17,250
Shares redeemed......................................................... (1,125) (13,355) -- --
-------- ---------- -------- ----------
Net increase............................................................. 110,725 $ 1,310,259 205,964 $ 2,423,457
======== ========== ======== ==========
*For the period May 1, 1995 to February 29, 1996.
2. TRUST SHARES (cont.)
Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund
------------------- -------------------
Class I Shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
Six months ended August 31, 1996
<S> <C> <C> <C> <C>
Shares sold............................................................ 430,483 $ 4,925,024 1,717,298 $19,790,784
Shares issued in reinvestment of distributions......................... 132,842 1,521,675 293,815 3,388,626
Shares redeemed........................................................ (697,521) (7,985,324) (1,231,107) (14,183,536)
-------- ---------- -------- ----------
Net increase (decrease)................................................. (134,196) $ (1,538,625) 780,006 $ 8,995,874
======== ========== ======== ==========
Year ended February 29, 1996
Shares sold............................................................ 908,569 $10,449,046 2,697,710 $31,279,664
Shares issued in reinvestment of distributions......................... 259,186 2,975,696 570,171 6,603,993
Shares redeemed........................................................ (1,588,268) (18,228,089) (2,687,517) (31,107,361)
-------- ---------- -------- ----------
Net increase (decrease)................................................. (420,513) $ (4,803,347) 580,364 $ 6,776,296
======== ========== ======== ==========
Class II Shares:
Six months ended August 31, 1996
Shares sold............................................................ 23,639 $ 274,353 196,614 $ 2,280,124
Shares issued in reinvestment of distributions......................... 416 4,817 3,960 45,904
Shares redeemed........................................................ (45) (518) (4,093) (47,528)
-------- ---------- -------- ----------
Net increase............................................................ 24,010 $ 278,652 196,481 $ 2,278,500
======== ========== ======== ==========
Period ended February 29,1996*
Shares sold............................................................ 9,645 $ 113,077 173,487 $ 2,028,731
Shares issued in reinvestment of distributions......................... 61 720 1,930 22,660
Shares redeemed........................................................ (2,975) (34,961) (1,232) (14,629)
-------- ---------- -------- ----------
Net increase............................................................ 6,731 $ 78,836 174,185 $ 2,036,762
======== ========== ======== ==========
*For the period May 1, 1995 to February 29, 1996.
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 29, 1996, for tax purposes, the Funds had capital loss carryovers as
follows:
Franklin Franklin Franklin Franklin Franklin
Alabama Florida Georgia Kentucky Louisiana
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- -------- -------- -------- --------
Capital Loss carryovers
<S> <C> <C> <C> <C> <C>
expiring in: 2000 .......................................... $-- $-- $-- $ 495 $--
2001........................................... -- -- -- 1,213 --
2002........................................... -- -- -- 24,595 --
2003........................................... 148,006 2,417,567 833,869 759,461 2,937,864
2004........................................... -- -- -- 65,388 --
--------- -------- -------- -------- --------
$148,006 $2,417,567 $833,869 $851,152 $2,937,864
========= ======== ======== ======== ========
Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Virginia
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
--------- -------- --------- --------
expiring in: 1999 ......................................... $ 25,303 $-- $ -- $ --
2000.......................................... 125 -- 19,393 --
2001.......................................... 249,775 -- 147,462 --
2002.......................................... 359,934 -- 14,532 --
2003.......................................... 305,188 7,808 2,746,697 514,236
2004.......................................... 339,820 -- -- --
--------- -------- --------- --------
$1,280,145 $7,808 $2,928,084 $514,236
========= ======== ========= ========
</TABLE>
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS (cont.)
From November 1, 1995 through February 29, 1996, the Franklin Kentucky Tax-Free
Income Fund incurred $27,815 of net realized capital loss. As permitted by tax
regulations, the Fund intends to elect to defer this loss and treat it as having
arisen in the year ended February 28, 1997. For income tax purposes, the
aggregate cost of securities is higher (and unrealized appreciation is lower)
than for financial reporting purposes at August 31, 1996, by $750 in the
Franklin Alabama Tax-Free Income Fund, $686 in the Franklin Missouri Tax-Free
Income Fund, and $1,820 in the Franklin North Carolina Tax-Free Income Fund.
For income tax purposes, the Franklin Texas Tax-Free Income Fund had an
accumulated net realized gain in the amount of $10,887 at February 29, 1996.
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the six months ended August 31, 1996 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............................................. $21,560,252 $138,376,870 $20,814,750 $8,592,841 $17,283,456
Sales ................................................ $18,530,450 $104,834,731 $10,806,208 $5,145,868 $ 8,375,720
Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
---------- ---------- ---------- ---------- ---------
Purchases............................................. $27,049,860 $58,682,154 $27,267,994 $27,429,851 $48,378,983
Sales ................................................ $21,666,651 $46,114,898 $13,730,434 $26,981,848 $35,255,302
</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers),
provides investment advice, administrative services, office space and facilities
to each Fund, and receives fees computed monthly based on the net assets of each
Fund on the last day of the month as follows:
Annualized Fee Rate Month End Net Assets
- ------------- ----------------------------------
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% In excess of $250 million
The terms of the management agreement provide that annual aggregate expenses of
each Fund 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 each Fund's shares are registered. For the six months ended August 31,
1996, the Funds' expenses did not exceed these limitations. However, Advisers
agreed in advance to waive management fees for the Franklin Kentucky Tax-Free
Income Fund, as noted in the Statement of Operations.
b. Shareholder Services Agreement:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investors Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the six months ended August 31, 1996, aggregated $397,580, of which $333,162 was
paid to Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Funds reimburse Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to a maximum of 0.10% per
annum for Class I and 0.65% per annum for Class II, of the average daily net
assets of such class for costs incurred in the promotion, offering and marketing
of the Funds' shares. The Plans do not permit nor require payments of excess
costs after termination. Fees incurred by the Funds under the Plans aggregated
$1,199,661 for the six months ended August 31, 1996.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Distribution Plans and Underwriting Agreement: (cont.)
In its capacity as underwriter for the shares of the Funds, Distributors
receives commissions on sales of the Funds' shares of beneficial interest.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Funds, and as such are not expenses of the Funds. Distributors may
also make payments, out of its own resources, to the dealers for certain sales
of the Funds' shares. Commissions received by Distributors, the amounts paid to
other dealers, and any applicable contingent deferred sales charges for the six
months ended August 31, 1996 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
Class I Income Fund Income Fund Income Fund Income Fund Income Fund
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total commissions received................................. $343,633 $2,245,595 $280,146 $124,162 $278,096
Paid to other dealers...................................... $320,657 $2,187,861 $295,554 $121,908 $268,256
Class II
Total commissions received................................. $ 19,519 $ 73,073 $18,547 -- $ 11,229
Paid to other dealers...................................... $ 38,097 $ 142,418 $36,698 -- $ 23,005
Contingent deferred sales charge........................... $ 484 $ 2,492 $ 532 -- $ 146
Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Class I Income Fund Income Fund Income Fund Income Fund Income Fund
--------- -------- --------- -------- --------
Total commissions received................................ $443,633 $514,060 $568,490 $119,817 $573,183
Paid to other dealers..................................... $417,377 $540,791 $547,552 $112,023 $541,708
Class II
Total commissions received................................ $ 20,052 $ 11,322 $ 37,758 $ 2,835 $ 23,542
Paid to other dealers..................................... $ 41,092 $ 22,283 $ 73,682 $ 5,541 $ 45,973
Contingent deferred sales charge.......................... $ 415 $ 2,197 $ 704 -- $ 441
</TABLE>
d. Other Affiliated Parties and Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, and Investor Services, all wholly-owned subsidiaries of
Franklin Resources, Inc.
6. CREDIT RISK
All of the Funds' investments are in the securities of issuers within their
respective states and U.S. territories and possessions. Such concentration may
subject the Funds more significantly to economic changes occurring within those
states and territories.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period, by Fund, are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------------- --------------------------------
Net Ratio of Net
Net Asset Realized & DistributionsNet Asset Ratio of Investment
Year Value at Net Unrealized Total From From Net Value Net Assets at Expenses Income Portfolio
Ended Beginning Investment Gain (Loss)Investment Investment at End Total End of Periodto Average to Average Turnover
Feb. 28, of Period Income on SecuritiesOperations Income of Period Return1 (in 000's) Net Assets Net Assets Rate
Franklin Alabama Tax-Free Income Fund
Class I Shares:
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $10.75 $.66 $.346 $1.006 $(.756)$11.00 9.51% $ 96,254 .71% 6.21% 1.21%
1993 11.00 .68 .714 1.394 (.684) 11.71 12.84 144,480 .68 6.04 11.27
1994 11.71 .66 .094 .754 (.664) 11.80 6.35 178,414 .64 5.62 14.87
1995 11.80 .66 (.500) .160 (.650) 11.31 1.54 170,051 .72 5.88 19.85
1996 11.31 .66 .416 1.076 (.656) 11.73 9.74 185,981 .72 5.69 12.39
1996*** 11.73 .33 (.211) .119 (.329) 11.52 1.04 184,545 .71* 5.66* 10.12
Class II Shares:
1996+ 11.36 .49 .405 .895 (.485) 11.77 8.01 1,662 1.29* 5.09* 12.39
1996*** 11.77 .27 (.186) .084 (.294) 11.56 .74 3,479 1.30* 5.11* 10.12
7. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------------- --------------------------------
Net Ratio of Net
Net Asset Realized & DistributionsNet Asset Ratio of Investment
Year Value at Net Unrealized Total From From Net Value Net Assets at Expenses Income Portfolio
Ended Beginning Investment Gain (Loss)Investment Investment at End Total End of Periodto Average to Average Turnover
Feb. 28, of Period Income on SecuritiesOperations Income of Period Return1 (in 000's) Net Assets Net Assets Rate
Franklin Florida Tax-Free Income Fund
Class I Shares:
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $10.75 $.71 $.348 $1.058 $(.768)$11.04 10.02% $ 886,110 .54% 6.60% 16.69%
1993 11.04 .71 .647 1.357 (.717) 11.68 12.45 1,164,827 .54 6.30 11.72
1994 11.68 .70 .086 .786 (.696) 11.77 6.63 1,361,583 .52 5.90 11.77
1995 11.77 .69 (.436) .254 (.674) 11.35 2.36 1,265,018 .59 6.15 14.34
1996 11.35 .69 .338 1.028 (.688) 11.69 9.28 1,353,541 .60 5.93 11.78
1996*** 11.69 .34 (.249) .091 (.341) 11.44 .80 1,362,429 .60* 5.83* 7.93
Class II Shares:
1996+ 11.37 .52 .382 .902 (.512) 11.76 8.05 7,644 1.18* 5.33* 11.78
1996*** 11.76 .30 (.255) .045 (.305) 11.50 .40 14,420 1.19* 5.26* 7.93
Franklin Georgia Tax-Free Income Fund
Class I Shares:
1992 10.94 .65 .349 .999 (.759) 11.18 9.32 68,546 .72 6.11 6.18
1993 11.18 .68 .658 1.338 (.668) 11.85 12.09 91,017 .71 5.91 17.10
1994 11.85 .66 .154 .814 (.664) 12.00 6.77 120,882 .69 5.48 16.75
1995 12.00 .66 (.458) .202 (.662) 11.54 1.87 116,771 .76 5.76 36.17
1996 11.54 .66 .343 1.003 (.663) 11.88 8.90 130,380 .77 5.58 10.98
1996*** 11.88 .32 (.201) .119 (.329)**11.67 1.03 132,904 .76* 5.52* 8.23
Class II Shares:
1996+ 11.57 .50 .343 .843 (.493) 11.92 7.40 1,335 1.34* 5.04* 10.98
1996*** 11.92 .31 (.221) .089 (.289) 11.72 .77 3,176 1.32* 4.97* 8.23
Franklin Kentucky Tax-Free Income Fund
Class I Shares:
1992++ 10.00 .15 .164 .314 (.014) 10.30 8.37* 3,032 --3 3.52* 53.90
1993 10.30 .57 .832 1.402 (.652) 11.05 13.81 11,678 --3 6.11 18.41
1994 11.05 .63 .164 .794 (.664) 11.18 7.07 28,057 --3 5.73 13.22
1995 11.18 .61 (.625) (.015) (.625) 10.54 .11 32,831 .293 5.94 32.92
1996 10.54 .62 .495 1.115 (.615) 11.04 10.73 38,991 .333 5.65 31.89
1996*** 11.04 .31 (.255) .055 (.305) 10.79 .52 41,642 .33*3 5.67* 12.99
Franklin Louisiana Tax-Free Income Fund
Class I Shares:
1992 10.68 .67 .326 .996 (.776) 10.90 9.49 72,923 .70 6.33 10.51
1993 10.90 .69 .668 1.358 (.688) 11.57 12.61 95,368 .70 6.18 23.37
1994 11.57 .67 (.005) .665 (.675) 11.56 5.63 115,971 .68 5.70 17.63
1995 11.56 .66 (.549) .111 (.641) 11.03 1.14 104,980 .75 5.98 32.28
1996 11.03 .66 .281 .941 (.651) 11.32 8.75 107,461 .78 5.89 5.23
1996*** 11.32 .32 (.167) .153 (.323) 11.15 1.39 110,795 .77* 5.80* 7.69
Class II Shares:
1996+ 11.01 .49 .351 .841 (.481) 11.37 7.76 1,438 1.35* 5.27* 5.23
1996*** 11.37 .29 (.169) .121 (.291) 11.20 1.10 2,502 1.35* 5.32* 7.69
Franklin Maryland Tax-Free Income Fund
Class I Shares:
1992 10.37 .64 .300 .940 (.710) 10.60 9.21 71,538 .71 6.15 16.65
1993 10.60 .65 .672 1.322 (.652) 11.27 12.64 115,873 .71 6.00 14.73
1994 11.27 .64 .092 .732 (.642) 11.36 6.40 156,683 .66 5.58 18.38
1995 11.36 .63 (.453) .177 (.617) 10.92 1.78 153,145 .73 5.86 20.30
1996 10.92 .62 .467 1.087 (.627) 11.38 10.18 175,078 .74 5.56 8.11
1996*** 11.38 .31 (.249) .061 (.311) 11.13 .56 178,113 .73* 5.51* 12.60
Class II Shares:
1996+ 10.93 .47 .506 .976 (.466) 11.44 9.06 913 1.31* 4.95* 8.11
1996*** 11.44 .26 (.223) .037 (.277) 11.20 .34 2,917 1.30* 4.94* 12.60
Franklin Missouri Tax-Free Income Fund
Class I Shares:
1992 10.74 .65 .409 1.059 (.729) 11.07 10.04 110,940 .71 6.21 16.40
1993 11.07 .68 .676 1.356 (.676) 11.75 12.40 164,122 .67 6.03 10.28
1994 11.75 .66 .206 .866 (.676) 11.94 7.29 228,149 .64 5.55 11.02
1995 11.94 .65 (.501) .149 (.649) 11.44 1.44 227,442 .70 5.75 19.84
1996 11.44 .65 .494 1.144 (.644) 11.94 10.23 247,522 .71 5.58 18.27
1996*** 11.94 .33 (.277) .053 (.323) 11.67 .47 254,855 .70* 5.59* 18.69
7. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------------- --------------------------------
Net Ratio of Net
Net Asset Realized & DistributionsNet Asset Ratio of Investment
Year Value at Net Unrealized Total From From Net Value Net Assets at Expenses Income Portfolio
Ended Beginning Investment Gain (Loss)Investment Investment at End Total End of Periodto Average to Average Turnover
Feb. 28, of Period Income on SecuritiesOperations Income of Period Return1 (in 000's) Net Assets Net Assets Rate
Franklin Missouri Tax-Free Income Fund (cont.)
Class II Shares:
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996+ $11.47 $.48 $.497 $.977 $(.477)$11.97 8.66% $ 1,325 1.27%* 4.94%* 18.27%
1996*** 11.97 .29 (.270) .020 (.290) 11.70 .19 2,183 1.28* 5.11* 18.69
Franklin North Carolina Tax-Free Income Fund
Class I Shares:
1992 10.86 .64 .352 .992 (.732) 11.12 9.28 106,960 .71 6.03 3.16
1993 11.12 .67 .754 1.424 (.664) 11.88 12.97 156,517 .67 5.86 8.48
1994 11.88 .65 .054 .704 (.664) 11.92 5.81 215,540 .63 5.44 3.86
1995 11.92 .65 (.550) .100 (.650) 11.37 1.06 216,263 .70 5.75 25.05
1996 11.37 .64 .391 1.031 (.651)**11.75 9.28 247,031 .71 5.52 25.19
1996*** 11.75 .32 (.224) .096 (.316) 11.53 .84 249,638 .70* 5.51* 5.56
Class II Shares:
1996+ 11.41 .49 .384 .874 (.484) 11.80 7.77 2,430 1.28* 4.90* 25.19
1996*** 11.80 .29 (.226) .064 (.284) 11.58 .56 5,995 1.26* 5.03* 5.56
Franklin Texas Tax-Free Income Fund
Class I Shares:
1992 10.77 .67 .370 1.040 (.780) 11.03 9.84 123,722 .70 6.14 6.44
1993 11.03 .69 .661 1.351 (.691) 11.69 12.41 139,389 .66 6.15 12.33
1994 11.69 .69 .032 .722 (.692) 11.72 6.09 148,684 .65 5.85 20.18
1995 11.72 .68 (.487) .193 (.663) 11.25 1.80 130,684 .73 6.05 6.36
1996 11.25 .67 .335 1.005 (.675) 11.58 9.152 129,702 .76 5.86 18.38
1996*** 11.58 .33 (.155) .175 (.335) 11.42 1.54 126,371 .74* 5.78* 21.19
Class II Shares:
1996+ 11.27 .51 .403 .913 (.503) 11.68 8.23 79 1.33* 5.23* 18.38
1996*** 11.68 .30 (.149) .151 (.301) 11.53 1.32 355 1.32* 5.24* 21.19
Franklin Virginia Tax-Free Income Fund
Class I Shares:
1992 10.70 .66 .362 1.022 (.742) 10.98 9.71 152,615 .68 6.17 4.33
1993 10.98 .67 .704 1.374 (.664) 11.69 12.67 211,171 .65 5.98 5.74
1994 11.69 .67 .136 .806 (.676) 11.82 6.80 260,913 .62 5.65 6.86
1995 11.82 .66 (.499) .161 (.651) 11.33 1.56 255,965 .69 5.86 21.73
1996 11.33 .66 .381 1.041 (.651) 11.72 9.41 271,396 .69 5.66 12.96
1996*** 11.72 .32 (.217) .103 (.323) 11.50 .90 275,283 .69* 5.60* 13.03
Class II Shares:
1996+ 11.35 .49 .412 .902 (.482) 11.77 8.07 2,050 1.26* 5.06* 12.72
1996*** 11.77 .27 (.201) .069 (.289) 11.55 .60 4,282 1.27* 5.03* 13.03
</TABLE>
*Annualized.
**Includes distributions in excess of net investment income in the amount of
$0.002 and $0.001 for the Franklin Georgia Tax-Free Income Fund and the Franklin
North Carolina Tax-Free Income Fund, respectively.
***For the six months ended August 31, 1996.
+For the period May 1, 1995 (effective date) to February 29, 1996.
++For the period September 10, 1991 (effective date) to February 29, 1992.
1Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or contingent deferred sales charge and assumes reinvestment of dividends
and capital gains at net asset value. Prior to May 1, 1994, dividends were
reinvested at the maximum offering price, and capital gains at net asset value.
Effective May 1, 1994, with the implementation of the Rule 12b-1 distribution
plan for Class I shares, the sales charge on reinvested dividends were
eliminated.
2The total return may differ from that reported in the Manager's Discussion due
to differences between the net asset values quoted and the net asset values
calculated for financial reporting purposes.
3During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees and to make payments of other expenses incurred by the fund
listed below. Had such action not been taken, the ratio of expenses to average
net assets would have been as follows:
Ratio of Expenses to
Average Net Assets
-------------
Franklin Kentucky Tax-Free Income Fund:
1992++ .......................................... .82*
1993 ............................................ .81
1994 ............................................ .71
1995 ............................................ .80
1996 ............................................ .82
1996***.......................................... .81*
Franklin Tax-Free Trust #2 Semi-Annual Report 8/31/96.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This line graph shows the price fluctuation of the Bond Buyer Municipal Bond
Index over a one-year period from 1/31/93 through 8/31/96.
Period Ending Price
Sep-93 6.04% 5.47%
Oct-93 5.96% 5.48%
Nov-93 6.29% 5.65%
Dec-93 6.35% 5.52%
Jan-94 6.23% 5.45%
Feb-94 6.67% 5.77%
Mar-94 7.10% 6.36%
Apr-94 7.22% 6.37%
May-94 7.39% 6.40%
Jun-94 7.63% 6.47%
Jul-94 7.39% 6.33%
Aug-94 7.46% 6.36%
Sep-94 7.82% 6.58%
Oct-94 7.97% 6.85%
Nov-94 7.99% 7.16%
Dec-94 7.89% 6.92%
Jan-95 7.71% 6.66%
Feb-95 7.46% 6.42%
Mar-95 7.44% 6.37%
Apr-95 7.34% 6.35%
May-95 6.67% 6.10%
Jun-95 6.63% 6.28%
Jul-95 6.86% 6.19%
Aug-95 6.65% 6.11%
Sep-95 6.49% 6.07%
Oct-95 6.34% 5.91%
Nov-95 6.14% 5.74%
Dec-95 5.96% 5.56%
Jan-96 6.03% 5.57%
Feb-96 6.48% 5.71%
Mar-96 6.67% 5.96%
Apr-96 6.89% 6.05%
May-96 7.00% 6.09%
Jun-96 6.90% 6.01%
Jul-96 6.96% 5.98%
Aug-96 7.13% 6.02%
GRAPHIC MATERIAL (2)
This chart shows in pie chart format the income and capital appreciation of the
Lehman Brothers 20-Year Municipal Bond Index for the 10-year period ended
8/31/96.
Income: An Important Component of Total Return
Income 90.83%
Capital Appreciation 9.17%
GRAPHIC MATERIAL (3)
This bar chart compares the dollar amount of new long-term municipal bond
issuance from 1987 ($105 billion), 1988 ($118 billion), 1989 ($125 billion),
1990 ($128 billion), 1991 ($174 billion), 1992 ($235 billion), 1993 ($292
billion), 1994 ($164 billion), 1995 ($156 billion), and 1996 (105 billion).
GRAPHIC MATERIAL (4)
This bar chart shows that 37% insured municipal bonds and 63% non-insured
municipal bonds were issued in 1994, 44% insured municipal bonds and 56%
non-insured municipal bonds issued in 1995, and 48% insured municipal bonds and
52% non-insured municipal bonds issued in 1996.
GRAPHIC MATERIAL (5)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 64.2%
AA 3.5%
A 5.7%
BBB 26.6%
GRAPHIC MATERIAL (6)
This bar chart shows the comparison between the fund's distribution rate of
5.49% and the taxable equivalent distribution rate of 9.57%, for the Class I
shares.
GRAPHIC MATERIAL (7)
This bar chart shows the comparison between the fund's distribution rate of
5.05% and the taxable equivalent distribution rate of 8.80%, for the Class II
shares.
GRAPHIC MATERIAL (8)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 53.4%
AA 6.2%
A 9.8%
BBB 30.6%
GRAPHIC MATERIAL (9)
This bar chart shows the comparison between the fund's distribution rate of
5.72% and the taxable equivalent distribution rate of 9.47%, for the Class I
shares.
GRAPHIC MATERIAL (10)
This bar chart shows the comparison between the fund's distribution rate of
5.24% and the taxable equivalent distribution rate of 8.68%, for the Class II
shares.
GRAPHIC MATERIAL (11)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 62.1%
AA 18.4%
A 9.7%
BBB 9.8%
GRAPHIC MATERIAL (12)
This bar chart shows the comparison between the fund's distribution rate of
5.22% and the taxable equivalent distribution rate of 9.19%, for the Class I
shares.
GRAPHIC MATERIAL (13)
This bar chart shows the comparison between the fund's distribution rate of
4.51% and the taxable equivalent distribution rate of 7.94%, for the Class II
shares.
GRAPHIC MATERIAL (14)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 54.3%
AA 11.7%
A 17.0%
BBB 17.0%
GRAPHIC MATERIAL (15)
This bar chart shows the comparison between the fund's distribution rate of
5.43% and the taxable equivalent distribution rate of 9.56%.
GRAPHIC MATERIAL (16)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 56.0%
AA 2.7%
A 15.4%
BBB 15.1%
Below Investment Grade 10.8%
GRAPHIC MATERIAL (17)
This bar chart shows the comparison between the fund's distribution rate of
5.57% and the taxable equivalent distribution rate of 9.81%, for the Class I
shares.
GRAPHIC MATERIAL (18)
This bar chart shows the comparison between the fund's distribution rate of
5.22% and the taxable equivalent distribution rate of 9.19%, for the Class II
shares.
GRAPHIC MATERIAL (19)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 47.7%
AA 17.1%
A 26.9%
BBB 8.3%
GRAPHIC MATERIAL (20)
This bar chart shows the comparison between the fund's distribution rate of
5.37% and the taxable equivalent distribution rate of 9.66%, for the Class I
shares.
GRAPHIC MATERIAL (21)
This bar chart shows the comparison between the fund's distribution rate of
4.90% and the taxable equivalent distribution rate of 8.82%, for the Class II
shares.
GRAPHIC MATERIAL (22)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 52.5%
AA 13.0%
A 11.0%
BBB 23.4%
Below Investment Grade 0.1%
GRAPHIC MATERIAL (23)
This bar chart shows the comparison between the fund's distribution rate of
5.32% and the taxable equivalent distribution rate of 9.37%, for the Class I
shares.
GRAPHIC MATERIAL (24)
This bar chart shows the comparison between the fund's distribution rate of
4.98% and the taxable equivalent distribution rate of 8.77%, for the Class II
shares.
GRAPHIC MATERIAL (25)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 30.5%
AA 26.5%
A 32.0%
BBB 10.4%
Below Investment Grade 0.6%
GRAPHIC MATERIAL (26)
This bar chart shows the comparison between the fund's distribution rate of
5.18% and the taxable equivalent distribution rate of 9.30%, for the Class I
shares.
GRAPHIC MATERIAL (27)
This bar chart shows the comparison between the fund's distribution rate of
4.82% and the taxable equivalent distribution rate of 8.65%, for the Class II
shares.
GRAPHIC MATERIAL (28)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 69.8%
AA 9.0%
A 7.3%
BBB 13.9%
GRAPHIC MATERIAL (29)
This bar chart shows the comparison between the fund's distribution rate of
5.63% and the taxable equivalent distribution rate of 9.32%, for the Class I
shares.
GRAPHIC MATERIAL (30)
This bar chart shows the comparison between the fund's distribution rate of
5.20% and the taxable equivalent distribution rate of 8.61%, for the Class II
shares.
GRAPHIC MATERIAL (31)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 44.2%
AA 29.3%
A 18.3%
BBB 8.2%
GRAPHIC MATERIAL (32)
This bar chart shows the comparison between the fund's distribution rate of
5.40% and the taxable equivalent distribution rate of 9.49%, for the Class I
shares.
GRAPHIC MATERIAL (33)
This bar chart shows the comparison between the fund's distribution rate of
4.99% and the taxable equivalent distribution rate of 8.77%, for the Class II
shares.
MESSAGE FROM THE CHAIRMAN
Table of Contents Page
Message from the Chairman 1
Special Feature:
Q&A with Tom Kenny 3
Special Feature:
Investment Strategy in Action
Denver Airport Bonds 8
Fund Reports
Franklin Arizona Tax-Free
Income Fund 10
Franklin Colorado Tax-Free
Income Fund 16
Franklin Connecticut Tax-Free
Income Fund 22
Franklin Indiana Tax-Free
Income Fund 28
Franklin Michigan Tax-Free
Income Fund 32
Franklin New Jersey Tax-Free
Income Fund 33
Franklin Oregon Tax-Free
Income Fund 39
Franklin Pennsylvania Tax-Free
Income Fund 45
Franklin Puerto Rico Tax-Free
Income Fund 51
Franklin Federal Intermediate-Term
Tax-Free Income Fund 57
Franklin High Yield Tax-Free
Income Fund 61
Statement of Investments 67
Financial Statements 132
Notes to Financial Statements 143
October 15, 1996
Dear Shareholder:
It's a pleasure to bring you the Franklin Tax-Free Trust's semi-annual report
for the period ended August 31, 1996.
The reporting period might well be described as six months of frequent
interest-rate fluctuations, as the 30-year U.S. Treasury bond bounced between
6.67% and 7.00%.* Some of this movement can be attributed to investors and
economists who have overreacted to anticipated actions by the Federal Reserve
Board (the Fed). Indeed, newspaper headlines in the last six months declared the
economy was overheating one day and stalling the next -- all of which seems to
suggest a slow growth trend.
Our Municipal Bond Department has recently been very active in sales of
pre-refunded bonds. Generally, we look to sell these securities to preserve the
share price of the fund. I encourage you to read the following interview with
Tom Kenny, Director of Franklin Templeton's Municipal Bond Department, which
discusses pre-refunded bonds in more detail.
*Source: Micropal.
We expect that the funds in the Franklin Tax-Free Trust should perform well if
the economy maintains its relatively slow growth pattern. Although the economy
appears stable at the moment, market uncertainties persist.
This uncertainty prompts us to continue to encourage individual investors to
maintain a long-term perspective. It is prudent to periodically consult with
your investment representative to ensure your investments match these goals.
This long-term orientation will help minimize undue concern caused by short-term
market volatility.
As a Franklin Templeton fund shareholder, you receive the benefits of
professional management and dedicated service. Should you have any questions
concerning the funds in the Franklin Tax-Free Trust, we would welcome the
opportunity to answer them.
We appreciate your support, welcome new shareholders and look forward to serving
your investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
Glossary of Investment Terms
Call Protection: the length of time during which a bond cannot be redeemed by
its issuer.
Coupon: the interest rate on a bond the issuer promises to pay to the holder
until the bond matures.
Full Coupon Bond: a bond with a coupon rate that is near or above current market
interest rates.
High Grade Bond/High Quality Bond: a bond rated AAA or AA by Standard &
Poor's(R) or Moody's rating services.
Investment Grade Bond: a bond with a rating of AAA to BBB.
Pre-Refunded Bonds: a second bond is issued to pay off a first bond at the first
call date.
Primary Market: the market for new issues of securities; a market is "primary"
if the issuer of the securities receives the proceeds of the sale.
Secondary Market: a market where previously issued securities are bought and
sold; the selling dealers and investors receive the proceeds, not the issuer.
Tax Loss Carryforward: a tax benefit that allows a company or individual to use
past losses to reduce future tax liability.
Underwriter: an investment banker who agrees to purchase a new issue of
securities from an issuer and distribute it to investors, making a profit on the
underwriting spread.
Underwriting Spread: the difference between the amount paid to an issuer of
securities in a primary distribution and the public offering price.
SPECIAL FEATURE: Q&A WITH TOM KENNY
Tom Kenny, director of Franklin's Municipal Bond Department, discusses several
current topics, including interest rates and his outlook for the municipal bond
market.
(PICTURE OMITTED)
Tom Kenny, Senior Vice President,
Director, Franklin Municipal
Bond Department
Tom, purchasing a municipal bond is considered a pretty safe investment. In the
last few years, however, we've experienced incredible volatility in bond
markets. Is this going to subside in the future, or is this the new way for bond
markets?
It's an interesting observation and -- you're right -- the bond markets didn't
seem to be as volatile a few years back. If you look at the recent bond market,
say since 1992-1993, you'll see that we've had three consecutive years of 200
basis point swings in opposite directions (See Fig. 1). Historically, that level
of volatility is unusual.
I think there are several reasons for the increased volatility. First, we need
to look at the Federal Reserve Board. The Federal Reserve Board has been slow to
adjust short-term rates in response to economic conditions, which has increased
uncertainty and speculation within the fixed-income markets. Thus, market
participants have reacted toward short-term economic data rather than focusing
on the big picture. Since the Fed has not made frequent adjustments to
short-term rates, the increased speculation has created a pendulum effect where
the market tends to overreact in the adjustment of long-term rates.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
So the Federal Reserve Board's restraint has helped to cause some unpredictable
market movement?
Just look at the number of times recently where market expectations of both
growth and inflation have changed dramatically. Earlier this year, nine out of
10 economists said we were going to be in a recession by the end of the first
quarter. Weeks later, they changed their outlook and expected growth at a 4%-5%
annual rate with fears of an overheating economy. Just in the last few weeks,
we've heard, "Well, maybe the economy is not growing that fast after all." So
the market's become very short-term focused -- that's one reason we're seeing
increased volatility.
Second, we are part of a much more global market today than ever before. Funds
tend to flow very freely from market to market.
Third, we have seen an increased use of hedge funds, which often take large
risks with speculative strategies. They've become very popular over the last two
to three years. Hedge fund managers tend to be very short-term focused, trying
to take advantage of undervalued situations. So they're in and out of markets
very quickly.
Last, I think the creation and use of derivatives, where speculators can control
huge amounts of bonds with very little capital at risk, has also caused some of
this volatility.
The increased volatility will probably remain as long as these themes exist.
Have these factors affected your investment strategy?
We try to stay abreast of economic conditions and interest rates in general, but
we don't try to second-guess the market in terms of the direction of rates, or
alter our fundamental philosophy and strategy because of short-term economic
changes.
Our approach is straightforward. With few exceptions, we seek credit safety and
income. I don't think shareholders want the volatility that might be generated
by chasing capital appreciation. If you look at the interest rate chart (Fig. 1)
and think of the number of times you had to be right if you were speculating on
the direction and absolute change in interest rates, you may have called one
swing correctly; but if you missed the other leg of it, you may have given away
everything you gained on the way up or down.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
We have a well-seasoned portfolio management team (the five senior portfolio
managers have over 170 years of collective experience) that manages our funds
for tax-free income. We believe that over the long term, income drives total
return. Total return is important. But, how you achieve total return is even
more important. Income has been responsible for more than 90% of the total
return of municipal bonds over the last 10 years (Fig. 2), as measured by the
unmanaged Lehman Brothers 20-year Municipal Bond Index.
So, by consistently investing for income, you should generate good total-return
performance. We think our shareholders, particularly those in tax-free funds,
are better served by using this consistent, long-term-oriented approach. It is
what distinguishes Franklin from most of its peers.
We have seen more insured bonds, particularly in California. Is this a long-term
industry trend?
I believe so, but it's more pronounced in California.
The national percentage of insured issues now coming to market is in the 54%-55%
range. In California, it's a little bit ahead of that.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Why are there more insured issues now?
It's a function of a couple of things, I think. Supply is still relatively low
when compared with 1992-1993, when we had record volume of long-term bonds
coming to the market. Overall supply dropped more than 45% from 1993, into the
$155-$160 billion range last year. This year, it's probably going to be up
somewhat -- maybe in the 10%-15% range.
Since we haven't seen a heavy supply of bonds coming to market, some insurance
companies have become very aggressive in trying to gain market share. They have
the capital, the capacity, the staffing, and the willingness to price their
premiums aggressively. As a result, it's been comparatively cheap for issuers to
obtain insurance.
How much has pre-refunding influenced your investment strategy recently, and can
you briefly describe what pre-refunding is?
A pre-refunded bond is one that will be paid off at its first call date, using
the proceeds of a second bond carrying a lower interest rate. Let's say a
municipality issues a bond paying 8% interest that will mature in 2025. Some
time later, interest rates drop significantly, as they did in the late 1980s and
in the 1992-1993 period, and comparable bonds are now paying, say, 6%.
Naturally, the issuer would prefer to pay this new, lower rate on its debt, just
as you or I would want to refinance our home mortgage.
One way issuers can reduce their borrowing expense is to refund higher-paying
bonds before they mature. To raise money to refund the higher-rate bonds, they
issue a second bond at the market's now, lower interest rate. The proceeds of
the second bond are invested in U.S. Treasuries, set to mature at the original
bond's first call date, which may be only five or six years away. The bond is
then termed "pre-refunded" to the call date.
When the bond becomes pre-refunded, the price can rise dramatically -- providing
an opportunity to sell it at a premium. Generally, a pre-refunded bond will
maximize its value when there is approximately five years remaining to the call
date.
That first bond sells at a premium now because it's backed by U.S. Treasuries
and it's still paying the higher interest rate?
Yes -- in addition, it is now a bond with a much shorter maturity -- i.e., the
call date versus the original maturity date.
What if you don't sell it?
Well, we know that in five years that bond will be called at 100%-102% of par.
It's currently selling at a premium of, say, 115% of par. If we do nothing right
now, the price of that bond will decline, from 115% of par to the call price,
thereby eroding its value over the next five years. No matter what interest
rates do, that bond price is going down.
Generally, when a bond hits the five-year mark, we look for an opportunity to
sell it, capture the premium, then reinvest the proceeds in the current interest
rate environment.
How does this benefit shareholders?
Shareholders can benefit in a couple of ways. We may purchase a new bond that
can't be called for at least 10 years -- so we've extended our call protection.
Also, if we can capture that premium, we can now buy 115% worth of new bonds at
today's current interest rates. We've protected the fund's share value from
eroding and also helped maintain the earning power of the fund over the long
term.
(PICTURE OMITTED)
What sets your municipal bond department apart from others in the industry?
We use a very consistent, team-oriented approach to portfolio management. All of
our managers are using the same consistent strategy in our efforts to meet the
same overall investment objectives. Many times you'll see some other fund
companies where each manager operates on his/her own strategy.
Also, we're one of the few companies that truly manages for income. We believe
Franklin understands fixed-income and what investors look for.
Many of our competitors have come from an equity-oriented background and then
added a fixed-income side in recent years to round out their product line. This
perspective may not sound important, but we think it is. Some of our competitors
compensate their portfolio managers on a total return-oriented basis each
quarter. We don't.
Why not?
We believe if you're a fixed-income portfolio manager who is being compensated
on quarterly total return, you're probably going to be more inclined to make
short-term bets and take risks that you might not take otherwise. So your
interests may not be clearly aligned with the shareholders' interests. It does
really make a big difference.
Another thing that sets us apart is our research staff. Since we purchase over
95% of our portfolio holdings in the primary market, we spend a lot of time
analyzing credits up front, such as performing site visits, addressing legal
issues, and structuring issues to meet both our credit and portfolio
requirements.
Tom, thanks for your time.
My pleasure.
INVESTMENT STRATEGY IN ACTION: DENVER AIRPORT BONDS
This special feature demonstrates the research efforts made by the Franklin
Templeton Municipal Bond Department in selecting securities for our portfolios.
Please note that we may not currently hold these securities in any portfolio.*
The Denver International Airport -- a massive construction project meant to
replace an outdated Stapleton Airport -- became one of the nation's largest
public works projects, bringing thousands of jobs to the Denver area to build
the first new airport in the U.S. in 20 years. On the whole, we have been a
supporter of this project since the beginning, feeling that it was needed and
well-backed at the federal level. Between 1990 and 1994, we made five trips to
visit the airport site and meet with the Denver Airport Authority.
Bonds for the Denver Airport Credit were originally issued in May of 1990. We
did not purchase any during the initial release as we felt that the risk
outweighed the benefits at that time. Patience worked in our favor: shortly
after the original issue in May 1990, Continental Airlines -- one of the two
main carriers based in Denver -- filed for bankruptcy. As a result, Denver
Airport bonds deteriorated in price. At this point, we began to purchase in
quantity, acquiring various bonds yielding at or above the 9% level --
approximately 2.0% to 2.5% above the high quality bond market. Since 1990, we've
purchased approximately $320 million worth of Denver Airport bonds for several
of our tax-free portfolios.
Demand for Denver Airport bonds cooled somewhat until late 1993, when several
opening delays occurred and baggage system problems became apparent. These
complications, coupled with a general bond market sell-off in early 1994, caused
Denver Airport bond prices to plummet. At that time, the airport was
substantially completed and we had an opportunity once again to purchase bonds
at very attractive rates (yielding approximately 1.75% above high quality
bonds).
*This information is reported to give investors an insight into our portfolio
selection process. It is not intended to provide investment advice and the
opinions expressed herein may change at any time, for example, in response to
economic and market conditions.
In our opinion, August 1994 presented us with the last bargain opportunity for
this project: the authority raised $250 million for additional pre-opening
costs, including a new, standard baggage system. High quality bonds were
yielding around 6.10%, and we were able to purchase Denver Airport bonds
yielding 8.05%.
By the time the airport opened in February 1995, however, perceived credit
quality had improved and yields on these bonds dropped dramatically, leaving an
approximate .5% spread between them and high quality bonds. The last Denver
airport issue came to market in November 1995, consisting of insured bonds
yielding around 5.95%, roughly .20% above high quality bonds. We purchased these
bonds for our Franklin Insured Tax-Free Income Fund.
We employ an investment strategy of buying what we believe are fundamentally
solid investments during times of temporary weakness. This was the case with the
Denver Airport bonds. We purchased these securities when they were out of favor
with the market, based upon the airport's long-term fundamentals, and this
decision has greatly benefited our funds. In fact, these bonds have been one of
the best performers in the Franklin Colorado Tax-Free Income Fund's portfolio.
And, throughout 1995, the Denver Airport bonds were upgraded by most rating
agencies, and insurance companies have provided insurance for these bonds in the
primary and secondary markets -- a strong show of confidence in the airport's
ability to repay its long-term debt.
FRANKLIN ARIZONA TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and Arizona
state personal income taxes through a portfolio consisting primarily of Arizona
municipal bonds.*
State Update Municipal bond supply in Arizona reached $1.33 billion in the first
half of 1996 -- keeping pace with the flow of new issues in 1995. Supply for the
remainder of the year is expected to remain low, making Arizona municipal bonds
attractive investments.
About 45% of the Arizona bonds that came to market so far this year had bond
insurance. Decreased yield spreads between higher quality and lower-rated
municipal securities have made AAA-rated bonds more attractive. This trend
toward high quality bonds is apparent in your fund, where over 55% of the
portfolio was rated AAA on August 31, 1996, and 40% of those were insured.
Portfolio Notes
Over the past two years, we have worked to decrease the portfolio's exposure to
pre-refunded bonds -- which made up as much as 40% of total long-term
investments during 1994.** We invested the proceeds of these sales in full
coupon bonds offering better call protection.
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Please see page 6 of this report for more information on pre-refunded bonds.
During the six-month reporting period, we reached our goal of reducing the
amount of pre-refunded bonds, and feel comfortable with the portfolio's 14.7%
exposure on August 31, 1996.
This strategy, while potentially beneficial in the long run, had a couple of
short-term drawbacks. In mid-1995, we depleted our tax-loss carryforwards and
paid a capital gain of approximately 12 cents ($0.12) per share in December
1995. Further reduction in our pre-refunded exposure has led to another capital
gain distribution of 2.58 cents ($0.0258) per share, payable in August 1996. If
market conditions remain the same, a final capital gain distribution may be
necessary in October 1996.
The fund's earnings have also been impacted by our strategy to reduce our
pre-refunded exposure. When we first started selling pre-refunded bonds in
mid-1994, the average coupon in the portfolio was relatively high -- around
6.80%. That rate has decreased from 6.61% on February 29, 1996, to 6.54% on
August 31, 1996. As a result, the monthly dividend will be reduced from 5.4
cents ($0.054) to 5.2 cents ($0.052) per share for Class I shares and from 4.77
cents ($0.0477) to 4.57 cents ($0.0457) per share for Class II shares, effective
with the September 1996 distribution. We feel this prudent measure now should
benefit the fund over the long term.
Franklin Arizona Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 34.9%
Pre-Refunded 14.7%
Education 10.6%
Hospitals 10.0%
Transportation 7.8%
Other Revenue 7.7%
Housing 5.6%
General Obligations 3.7%
Certificates of Participation 2.8%
Miscellaneous 1.0%
Industrial 0.8%
Sales Tax 0.4%
For a complete list of portfolio holdings, please see page 67 of this report.
Performance Summary
Class I
The Franklin Arizona Tax-Free Income Fund's share price, as measured by net
asset value, declined 26 cents from $11.34 on February 29, 1996, to $11.08 on
August 31, 1996.
In addition to the dividend income distributed during the reporting period, the
fund's shares also distributed a long-term capital gain in the amount of 2.58
cents ($0.0258) per share in August 1996.
At the end of this reporting period, the fund's distribution rate was 5.39%,
based on an annualization of the
Franklin Arizona Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.4 cents
April 5.4 cents
May\ 5.4 cents
June 5.4 cents
July 5.4 cents
August 5.4 cents++
Total 32.4 cents
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
current monthly dividend of 5.2 cents ($0.052) per share and the maximum
offering price of $11.57 on August 31, 1996. This tax-free rate is generally
higher than the after tax return on a comparable taxable investment. For
example, an investor in the maximum combined federal and Arizona personal income
tax bracket of 43.0% would need to earn 9.45% from a taxable investment to match
the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 5.4 cents ($0.054) to 5.2 cents ($0.052) per share on August 22, 1996. The
8/31/96 distribution has been calculated using the new dividend.
Franklin Arizona Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 4.98% 40.91% 96.02%
Average Annual Total Return2 0.54% 6.18% 7.24%
Distribution Rate3 5.39%
Taxable Equivalent Distribution Rate4 9.45%
30-Day Standardized Yield5 4.77%
Taxable Equivalent Yield4 8.37%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.2 cent per share monthly dividend
and the maximum offering price of $11.57 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Arizona personal income tax rate of 43.0%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
The Franklin Arizona Tax-Free Income Fund's Class I shares paid per share
distributions derived from long-term capital gains of 2.58 cents ($0.0258) per
share in August 1996. The fund hereby designates such distributions as capital
gain dividends per Section 852 (b)(3) of the Internal Revenue Code.
Class II
The Franklin Arizona Tax-Free Income Fund's share price, as measured by net
asset value, declined 25 cents from $11.38 on February 29, 1996, to $11.13 on
August 31, 1996.
Due to reduced income earned by the fund, it was necessary to adjust the fund's
monthly dividend to 4.77 cents ($0.0477) from 4.85 cents ($0.0485) per share,
effective with the July distribution. In addition to the dividend income
distributed during the reporting period, the fund's shares also distributed a
long-term capital gain in the amount of 2.58 cents ($0.0258) per share in August
1996.
At the end of this reporting period, the distribution rate was 4.88%, based on
an annualization of the current
Franklin Arizona Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.07 cents++
April 4.85 cents
May 4.85 cents
June 4.85 cents
July 4.77 cents
August 4.77 cents+++
Total 29.16 cents
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
monthly dividend of 4.57 cents ($0.0457) per share and the offering price of
$11.24 on August 31, 1996. This tax-free rate is generally higher than the after
tax return on a comparable taxable investment. For example, an investor in the
maximum combined federal and Arizona personal income tax bracket of 43.0% would
need to earn 8.56% from a taxable investment to match the fund's tax-free
distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.84 cents ($0.0484)
per share, which increased from 4.80 cents, and an adjustment of +.23 cents to
reconcile the 12b-1 fee differential between Class I and Class II shares.
+++Due to reduced income earned by the fund, the monthly dividend was adjusted
from 4.77 cents ($0.0477) to 4.57 cents ($0.0457) per share on August 22, 1996.
The 8/31/96 distribution rate has been calculated using the new dividend.
Franklin Arizona Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.43% 8.09%
Average Annual Total Return2 2.45% 4.48%
Distribution Rate3 4.88%
Taxable Equivalent Distribution Rate4 8.56%
30-Day Standardized Yield5 4.35%
Taxable Equivalent Yield4 7.63%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 4.57 cent per share monthly dividend
and the offering price of $11.24 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Arizona personal income tax rate of 43.0%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
The Franklin Arizona Tax-Free Income Fund's Class II shares paid per share
distributions derived from long-term capital gains of 2.58 cents ($0.0258) per
share in August 1996. The fund hereby designates such distributions as capital
gain dividends per Section 852 (b)(3) of the Internal Revenue Code.
FRANKLIN COLORADO TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and Colorado
state personal income taxes through a portfolio consisting primarily of Colorado
municipal bonds.*
State Update
Municipal supply in Colorado was $1.422 billion for the first half of 1996,
which is 53% of what was issued for all of 1995, and supply for the remainder of
the calendar year is expected to remain low. This should make the state's
municipal bonds attractive investments as demand should exceed supply,
increasing the value of the securities.
Portfolio Notes
In the first six months of 1996, about 48% of Colorado municipal bonds that came
to market were insured. We find insured bonds attractive because of the narrow
yield spreads between them and lower-rated issues. On August 31, 1996, 58% of
the portfolio was invested in AAA-rated bonds, and 42% of those were insured.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
During the six-month reporting period, we participated in several primary market
issues. Some of the more attractive opportunities were smaller deals offered by
regional underwriters such as the Colorado Mountain College Residence Hall
Authority and Pueblo, Colorado general obligation bonds. We also participated in
the largest Colorado issue to come to market in 1996: the Denver International
Airport Refunding, which was insured by the Municipal Bond Insurance Association
(MBIA). These bonds have been some of the best performers in the municipal
market. (For more information on Denver International Airport bond issuance,
please see Investment Strategy in Action on page 8 of this report.)
Franklin Colorado Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Pre-Refunded 16.6%
Hospitals 16.3%
Housing 13.2%
Transportation 11.2%
Education 10.5%
Utilities 8.2%
Health Care 6.5%
Sales Tax 5.2%
General Obligations 4.6%
Certificates of Participation 4.3%
Industrial 2.0%
Tax Allocation 0.8%
Other Revenue 0.6%
For a complete list of portfolio holdings, please see page 74 of this report.
Performance Summary
Class I
The Franklin Colorado Tax-Free Income Fund's share price, as measured by net
asset value, declined 24 cents from $11.84 on February 29, 1996, to $11.60 on
August 31, 1996.
At the end of the reporting period, the fund's distribution rate was 5.45%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $12.11 on August 31, 1996. This
tax-free rate is generally higher
Franklin Colorado Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.5 cents
April 5.5 cents
May 5.5 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents
Total 33.0 cents
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
than the after-tax return on a comparable taxable investment. For example, an
investor in the maximum combined federal and Colorado personal income tax
bracket of 42.6% would need to earn 9.50% from a taxable investment to match the
fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Colorado Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.50% 43.47% 100.97%
Average Annual Total Return2 0.98% 6.56% 7.54%
Distribution Rate3 5.45%
Taxable Equivalent Distribution Rate4 9.50%
30-Day Standardized Yield5 4.84%
Taxable Equivalent Yield4 8.43%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.5 cent per share monthly dividend
and the maximum offering price of $12.11 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Colorado personal income tax rate of 42.6%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Colorado Tax-Free Income Fund's share price, as measured by net
asset value, declined 23 cents from $11.87 on February 29, 1996, to $11.64 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.12%,
based on an annualization of the current monthly dividend of 5.02 cents
($0.0502) per share and the offering price of $11.76 on August 31, 1996. This
tax-free rate is generally higher than the
Franklin Colorado Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 4.94 cents++
April 4.93 cents
May 4.93 cents
June 4.93 cents
July 5.02 cents
August 5.02 cents
Total 29.77 cents
GRAPHIC MATERIAL 10 OMITTED - SEE APPENDIX AT END OF DOCUMENT
after tax return on a comparable taxable investment. For example, an investor in
the maximum combined federal and Colorado personal income tax bracket of 42.6%
would need to earn 8.92% from a taxable investment to match the fund's tax-free
distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.93 cents per share,
which increased from 4.90 cents, and an adjustment of +.01 cents per share to
reconcile the 12b-1 differential between Class I and Class II shares.
Franklin Colorado Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 5.06% 9.07%
Average Annual Total Return2 3.00% 5.14%
Distribution Rate3 5.12%
Taxable Equivalent Distribution Rate4 8.92%
30-Day Standardized Yield5 4.43%
Taxable Equivalent Yield4 7.72%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 5.02 cent per share monthly dividend
and the offering price of $11.76 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Colorado personal income tax rate of 42.6%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and Connecticut
state personal income taxes through a portfolio consisting primarily of
Connecticut municipal bonds.*
State Update
Connecticut's economy continues to improve. Unemployment dipped to 4.7% in
December 1995 -- the first time in six years it has been under 5% -- and the
state produced a $224 million budget surplus where a deficit had been expected.
Personal income tax receipts have also improved.**
Portfolio Notes
Throughout this reporting period, fluctuating interest rates directly affected
the securities in which your fund invests. In fact, Connecticut's municipal
market has followed an erratic path since February 29, 1996, as reflected by
your fund's Class I net asset value share price. It declined approximately 2.6%
from $10.96 on February 29, 1996, to $10.67 in early June 1996.
GRAPHIC MATERIAL 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable. The
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.
**Moody's Recap (8/19/96) State of Connecticut. Fitch: State of
Connecticut, 4/16/96.
Following a few more zigs and zags, the NAV price closed the reporting period at
$10.80.
We used the market's volatility to the fund's advantage. When the market
declined through early June, yield spreads between higher-rated and lower-rated
bonds widened. Accordingly, we sold lower coupon, higher rated bonds and
purchased some "aa" and "a," but mostly "baa" rated bonds with a meaningful
increase in current yield. We felt we could improve our yield without taking on
substantially more risk, and this has worked well.
Franklin Connecticut Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Housing 23.5%
Education 15.5%
General Obligations 15.1%
Pre-Refunded 13.5%
Hospitals 13.0%
Utilities 12.3%
Health Care 3.8%
Transportation 2.0%
Industrial 1.3%
For a complete list of portfolio holdings, please see page 78 of this report.
Performance Summary
Class I
The Franklin Connecticut Tax-Free Income Fund's share price, as measured by net
asset value, declined 16 cents from $10.96 on February 29, 1996, to $10.80 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.53%,
based on an annualization of the current monthly dividend of 5.2 cents ($0.052)
per share and the maximum offering price of $11.28 on August 31, 1996. This
tax-free rate is generally higher
Franklin Connecticut Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.2 cents
April 5.2 cents
May 5.2 cents
June 5.2 cents
July 5.2 cents
August 5.2 cents
Total 31.2 cents
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
than the after tax return on a comparable taxable investment. For example, an
investor in the maximum combined federal and Connecticut personal income tax
bracket of 42.3% would need to earn 9.59% from a taxable investment to match the
fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Connecticut Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (10/3/88)
Cumulative Total Return1 5.73% 39.16% 71.45%
Average Annual Total Return2 1.23% 5.91% 6.47%
Distribution Rate3 5.53%
Taxable Equivalent Distribution Rate4 9.59%
30-Day Standardized Yield5 4.82%
Taxable Equivalent Yield4 8.36%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.2 cent per share monthly dividend
and the maximum offering price of $11.28 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Connecticut personal income tax rate of 42.3%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Connecticut Tax-Free Income Fund's share price, as measured by net
asset value, declined 15 cents from $10.97 on February 29, 1996, to $10.82 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.24%,
based on an annualization of the current monthly dividend of 4.77 cents
($0.0477) per share and the offering price of $10.93 on August 31, 1996. This
tax-free rate is generally higher than the
Franklin Connecticut Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.23 cents++
April 4.67 cents
May 4.67 cents
June 4.67 cents
July 4.77 cents
August 4.77 cents
Total 28.78 cents
GRAPHIC MATERIAL 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
after tax return on a comparable taxable investment. For example, an investor in
the maximum combined federal and Connecticut personal income tax bracket of
42.3% would need to earn 9.08% from a taxable investment to match the fund's
tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.67 cents ($0.0467)
per share and an adjustment of +.56 cents to reconcile the 12b-1 fee
differential between Class I and Class II shares.
Franklin Connecticut Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 5.07% 8.65%
Average Annual Total Return2 3.03% 4.85%
Distribution Rate3 5.24%
Taxable Equivalent Distribution Rate4 9.08%
30-Day Standardized Yield5 4.40%
Taxable Equivalent Yield4 7.63%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 4.77 cent per share monthly dividend
and the offering price of $10.93 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Connecticut personal income tax rate of 42.3%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN INDIANA TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and Indiana
state personal income taxes through a portfolio consisting primarily of Indiana
municipal bonds.*
State Update
Indiana's economy is anticipated to expand steadily through the end of the
century, with riverboat gambling activity expected to boost growth over the next
two years. In addition, compared with its neighboring manufacturing states,
Indiana provides the advantage of low overhead costs for businesses. Coupled
with other generous incentives, this should enable the state to attract
companies on the move.
Portfolio Notes
The structure and make-up of the fund changed very little over the six-month
reporting period. The fund's total net assets increased only 1.6%, from $48.9
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
million on February 29, 1996, to $49.7 million on August 31, 1996. Over 45% of
the portfolio's total long-term investments were rated AAA on August 31, 1996,
and purchases made over the reporting period were concentrated in essential-use
education bonds. This sector increased from 14.7% to 17.2% of the fund's
investments over the six-month period. We participated in issues offered by the
New Prairie School District and the Indiana State Local Improvement Bond Banks.
These purchases were funded by the sale of prerefunded bonds. As a result, the
fund's exposure to pre-refunded securities declined over the reporting period,
from 19.3% to 16.2% of total long-term investments. (Please see page 6 of this
report for more information on pre-refunded bonds.)
Franklin Indiana Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Hospitals 22.1%
Education 17.2%
Pre-Refunded 16.2%
Other Revenue 13.6%
Utilities 11.1%
Industrial 7.7%
Certificates of Participation 5.5%
Housing 3.3%
Transportation 3.2%
Tax Assessment Bonds 0.1%
For a complete list of portfolio holdings, please see page 81 of this report.
Performance Summary
The Franklin Indiana Tax-Free Income Fund's share price, as measured by net
asset value, declined 22 cents from $11.76 on February 29, 1996, to $11.54 on
August 31, 1996.
At the end of this reporting period, the 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 August 31, 1996. This
tax-free rate is generally higher
Franklin Indiana Tax-Free Income Fund
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.5 cents
April 5.5 cents
May 5.5 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents
Total 33.0 cents
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
than the after tax return on a comparable taxable investment. For example, an
investor in the maximum combined federal and Indiana personal income tax bracket
of 41.7% would need to earn 9.39% from a taxable investment to match the fund's
tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Indiana Tax-Free Income Fund
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.24% 41.54% 101.64%
Average Annual Total Return2 0.81% 6.26% 7.57%
Distribution Rate3 5.48%
Taxable Equivalent Distribution Rate4 9.39%
30-Day Standardized Yield5 4.81%
Taxable Equivalent Yield4 8.24%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.5 cent per share monthly dividend
and the maximum offering price of $12.05 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Indiana personal income tax rate of 41.7%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value, and 12b-1 fees from the date of the plan's implementation.
Your investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results. Past expense reductions by the
fund's manager increased the fund's total returns.
FRANKLIN MICHIGAN TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and Michigan
state personal income taxes through a portfolio consisting primarily of Michigan
municipal bonds.*
The Franklin Michigan Tax-Free Income Fund commenced operations on July 1, 1996,
with $2.2 million in total net assets. Since then, we have invested the money
and total assets under management grew approximately 18% by August 31, 1996.
Over the abbreviated two-month reporting period, your fund's share price, as
measured by net asset value, increased from $10.00 at inception to $10.08 on
August 31, 1996.
Some of the most attractive deals in the Michigan primary municipal market since
July came in the form of insured school district bonds. With a plentiful supply
to choose from, we purchased securities in Grosse Isle, Huron Valley, Allegan
and Caledonia school districts. Additionally, we purchased two insured hospital
deals in the primary market: Kalamazoo Hospital Finance Authority (Borgess
Medical Center) and Michigan State Hospital Finance Authority (Sparrow Obligated
Group).
The Michigan secondary market also offered some good deals. We acquired
Gogebic-Iron Wastewater Authority 6.05% (due 1/1/25) and Michigan State Housing
SFMR - AMT 6.20% (due 6/1/27).
The fund is off to a good start. By being fully invested, we are in a good
position to sell our highly liquid insured securities and purchase bonds with
higher yields as they become available.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and New Jersey
state personal income taxes through a portfolio consisting primarily of New
Jersey municipal bonds.*
State Update
Funding the Charity Care Program was a topic that New Jersey had to address in
the first quarter of 1996. The fund had exhausted its assets at the end of
fiscal year 1995, and no provisions were made to replenish it. This lack of
funding created additional pressures on hospitals that are dependent on the
subsidies. The state finally came to a decision in the second quarter of 1996,
allocating assets to fund the program for two more years -- $310 million will be
distributed in 1996 and $300 million in 1997. However, as New Jersey approaches
1997, a new resolution must be sought to prevent a repeat of this problem in
1998.
GRAPHIC MATERIAL 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
The fund seeks to comply with New Jersey requirements for the pass-through of
tax-exempt income dividends.
Portfolio Notes
New Jersey's flow control debate -- an on-going dispute as to where haulers may
dispose of their waste -- is finally resolved. The situation drew to a
conclusion when, on July 15, 1996, the U.S. District Court in Camden ruled the
state-imposed flow control mandate to be unconstitutional. The impact of the
flow control decision on the Franklin New Jersey Tax-Free Income Fund is
minimal. Bonds related to flow control projects had prevously been downgraded by
a national ratings agency and we elected to keep the portfolio's exposure to
these bonds at a minimum. Total portfolio holdings in this area were less than
1.5% on August 31, 1996.
Franklin New Jersey Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 19.5%
Hospitals 16.0%
Transportation 13.8%
Housing 11.7%
Education 10.8%
Pre-Refunded 10.5%
Other Revenue 7.2%
Certificates of Participation 4.1%
Industrial 2.9%
Health Care 2.3%
General Obligations 1.2%
For a complete list of portfolio holdings, please see page 85 of this report.
Performance Summary
Class I
The Franklin New Jersey Tax-Free Income Fund's share price, as measured by net
asset value, declined 26 cents from $11.68 on February 29, 1996, to $11.42 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.43%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $11.93 on August 31, 1996. This
tax-free rate is generally
Franklin New Jersey Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.3 cents
April 5.3 cents
May 5.4 cents
June 5.4 cents
July 5.4 cents
August 5.4 cents
Total 32.2 cents
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
higher than the after-tax return on a comparable taxable investment. For
example, an investor in the maximum combined federal and New Jersey personal
income tax bracket of 43.4% would need to earn 9.60% from a taxable investment
to match the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin New Jersey Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (5/12/88)
Cumulative Total Return1 4.92% 38.71% 89.10%
Average Annual Total Return2 0.46% 5.84% 7.41%
Distribution Rate3 5.43%
Taxable Equivalent Distribution Rate4 9.60%
30-Day Standardized Yield5 4.89%
Taxable Equivalent Yield4 8.65%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.4 cent per share monthly dividend
and the maximum offering price of $11.93 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and New Jersey personal income tax rate of 43.4%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin New Jersey Tax-Free Income Fund's share price, as measured by net
asset value, declined 26 cents from $11.72 on February 29, 1996, to $11.46 on
August 31, 1996.
Due to increased income earned by the fund, we were able to increase the monthly
dividend twice over the six-month reporting period: from 4.73 cents to 4.84
cents per share with the May dividend; and to 4.94 cents per share with the July
dividend. Please remember that past performance is not predictive of future
results.
Franklin New Jersey Tax-Free Income Fund
Class II
Dividend Distributions 3/01/96 - 8/31/96+
Dividend
Month per Share
March 4.90 cents++
April 4.74 cents
May 4.84 cents
June 4.84 cents
July 4.94 cents
August 4.94 cents
Total 29.20 cents
GRAPHIC MATERIAL 18 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of this reporting period, the fund's distribution rate was 5.12%,
based on an annualization of the current monthly dividend of 4.94 cents
($0.0494) per share and the offering price of $11.58 on August 31, 1996. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal and
New Jersey personal income tax bracket of 43.4% would need to earn 9.05% from a
taxable investment to match the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.73 cents, which
increased from 4.70 cents, and an adjustment of +.17 cents to reconcile the
12b-1 fee differential between Class I and Class II shares.
Franklin New Jersey Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.41% 8.19%
Average Annual Total Return2 2.35% 4.56%
Distribution Rate3 5.12%
Taxable Equivalent Distribution Rate4 9.05%
30-Day Standardized Yield5 4.45%
Taxable Equivalent Yield4 7.87%
1. Cumulative total return measures the change in value of an investment over
the period indicated and does not include the 1.0% initial sales charge and 1.0%
contingent deferred sales charge (CDSC), applicable to shares redeemed within
the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the period indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the 4.94 cent per share monthly dividend and the
offering price of $11.58 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and New Jersey personal income tax rate of 43.4%, based on the
federal income tax rate 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN OREGON TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and Oregon
state personal income taxes through a portfolio consisting primarily of Oregon
municipal bonds.*
State Update
With the solid growth of the last few years, Oregon continues to diversify away
from economic dependence on the timber industry. Affordable land, a skilled
labor force and ample water availability have prompted a number of high
technology and computer chip companies to relocate to the state. As a result,
nonagricultural employment increased 4.3% in 1995, with 369,000 jobs in the
service sector accounting for 25.9% of total nonagricultural employment. The
lumber sector is still significant at 4% of total state employment, but it has
been declining (down 2.2% in 1995) and is likely to continue this trend in the
years ahead.
As Oregon's economic base moves toward other employment sectors, income in the
state has increased faster than the national average. Unemployment, below the
national average, was estimated at 4.9% in February 1996. Rural regions such as
south central Oregon have not experienced the growth and economic expansion that
occurred in the state's metropolitan regions and tend to have higher
unemployment rates (roughly 8%).**
GRAPHIC MATERIAL 19 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Standard & Poor's Creditweek Municipal: May 20, 1996.
Portfolio Notes
Throughout the period, we looked for opportunities to sell lower coupon
positions and add issues with higher coupons. While these trades may cause a
slight decrease in credit quality rating, they are usually done at similar
dollar prices. In this way, we are striving to increase the tax-free return to
our investors while remaining mindful of maintaining overall portfolio quality.
We feel this affords our investors high income while maintaining a relatively
stable share value.
Franklin Oregon Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Hospitals 17.4%
Utilities 14.6%
Pre-Refunded 13.8%
Housing 13.6%
General Obligations 10.3%
Education 9.8%
Industrial 8.4%
Transportation 6.7%
Certificates of Participation 2.7%
Other Revenue 1.5%
Health Care 1.2%
For a complete list of portfolio holdings, please see page 90 of this report.
Performance Summary
Class I
The Franklin Oregon Tax-Free Income Fund's share price, as measured by net asset
value, declined 21 cents from $11.60 on February 29, 1996, to $11.39 on August
31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.24%,
based on an annualization of the current monthly dividend of 5.2 cents ($0.052)
per share and the maximum offering price of $11.90 on August 31, 1996. This
tax-free rate is generally higher
Franklin Oregon Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.2 cents
April 5.2 cents
May 5.2 cents
June 5.2 cents
July 5.2 cents
August 5.2 cents
Total 31.2 cents
GRAPHIC MATERIAL 20 OMITTED - SEE APPENDIX AT END OF DOCUMENT
than the after tax return on a comparable taxable investment. For example, an
investor in the maximum combined federal and Oregon personal income tax bracket
of 45.0% would need to earn 9.53% from a taxable investment to match the fund's
tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Oregon Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (9/1/87)
Cumulative Total Return1 5.08% 38.81% 90.16%
Average Annual Total Return2 0.59% 5.86% 6.88%
Distribution Rate3 5.24%
Taxable Equivalent Distribution Rate4 9.53%
30-Day Standardized Yield5 4.75%
Taxable Equivalent Yield4 8.64%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.2 cent per share monthly dividend
and the maximum offering price of $11.90 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Oregon personal income tax rate of 45.0%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Oregon Tax-Free Income Fund's share price, as measured by net asset
value, declined 21 cents from $11.65 on February 29, 1996, to $11.44 on August
31, 1996.
At the end of this reporting period, the fund's distribution rate was 4.86%,
based on an annualization of the current monthly dividend of 4.68 cents
($0.0468) per share and the offering price of $11.56 on August 31, 1996. This
tax-free rate is generally higher than the
Franklin Oregon Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 4.98 cents++
April 4.64 cents
May 4.64 cents
June 4.64 cents
July 4.68 cents
August 4.68 cents
Total 28.26 cents
GRAPHIC MATERIAL 21 OMITTED - SEE APPENDIX AT END OF DOCUMENT
after tax return on a comparable taxable investment. For example, an investor in
the maximum combined federal and Oregon personal income tax bracket of 45.0%
would need to earn 8.84% from a taxable investment to match the fund's tax-free
distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.63 cents ($0.0463)
per share, which increased from 4.60 cents, and an adjustment of +.35 cents to
reconcile the fee differential between Class I and Class II shares.
Franklin Oregon Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.57% 8.44%
Average Annual Total Return2 2.50% 4.74%
Distribution Rate3 4.86%
Taxable Equivalent Distribution Rate4 8.84%
30-Day Standardized Yield5 4.31%
Taxable Equivalent Yield4 7.84%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 4.68 cent per share monthly dividend
and the offering price of $11.56 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Oregon personal income tax rate of 45.0%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and
Pennsylvania state personal income taxes through a portfolio consisting
primarily of Pennsylvania municipal bonds.* The fund's shares are also free from
Pennsylvania personal property taxes. State Update While Pennsylvania issued a
sizable amount of debt in the 1990s, overall debt has remained manageable,
demonstrating an ability to control spending. Fiscal year 1995 revenues were
2.9% above the original budget estimates, while spending was only 5% above
1994's level, which is in line with growth for the previous two years. Spending
in 1996 is expected to increase by 2.7% over 1995, a lower rate of growth than
the last three years. **
Portfolio Notes
The education sector issued the state's largest amount of bonds. We were able to
maintain holdings in this area (8.8% of total long-term investments on August
31, 1996). Many of the purchases in this sector were insured and, therefore,
received AAA ratings by both
GRAPHIC MATERIAL 22 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Source: Moody's Credit Report.
Moody's and Standard & Poor's(R). The two largest additions to the portfolio
came from the Pennsylvania Higher Education Facilities Authority Health Services
(for the University of Pennsylvania) and the Allegheny Delaware Valley Obligated
Group.
At the end of the second quarter of 1996, the fixed-income market improved and
interest rates declined. As a result, some municipal issuers refinanced their
outstanding debt and reduced their carrying costs. This helped your fund as some
of the bonds in the portfolio were pre-refunded by the new issues. (Please see
page 6 of this report for more information on pre-refunding.)
Franklin Pennsylvania Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Pre-Refunded 23.3%
Utilities 22.2%
Hospitals 16.9%
Housing 11.9%
Education 8.8%
Other Revenue 4.1%
General Obligations 3.9%
Industrial 3.8%
Transportation 3.8%
Health Care 1.3%
For a complete list of portfolio holdings, please see page 95 of this report.
Performance Summary
Class I
The Franklin Pennsylvania Tax-Free Income Fund's share price, as measured by net
asset value, declined 21 cents from $10.44 on February 29, 1996, to $10.23 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.62%,
based on an annualization of the current monthly dividend of 5.0 cents ($0.050)
per share and the maximum offering price of $10.68 on August 31, 1996. This
tax-free rate is generally higher
Franklin Pennsylvania Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.2 cents
April 5.2 cents
May 5.2 cents
June 5.0 cents
July 5.0 cents
August 5.0 cents
Total 30.6 cents
GRAPHIC MATERIAL 23 OMITTED - SEE APPENDIX AT END OF DOCUMENT
than the after-tax return on a comparable taxable investment. For example, an
investor in the maximum combined federal and Pennsylvania personal income tax
bracket of 41.3% would need to earn 9.57% from a taxable investment to match the
fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Pennsylvania Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year (12/1/86)
Cumulative Total Return1 5.19% 43.46% 94.30%
Average Annual Total Return2 0.70% 6.56% 6.57%
Distribution Rate3 5.62%
Taxable Equivalent Distribution Rate4 9.57%
30-Day Standardized Yield5 4.93%
Taxable Equivalent Yield4 8.40%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.0 cent per share monthly dividend
and the maximum offering price of $10.68 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Pennsylvania personal income tax rate of 41.3%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of
the fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Pennsylvania Tax-Free Income Fund's share price, as measured by net
asset value, declined 21 cents from $10.47 on February 29, 1996, to $10.26 on
August 31, 1996.
Due to reduced income earned by the fund, we adjusted the fund's monthly
dividend to 4.49 cents ($0.0449) from 4.69 cents ($0.0453) per share, effective
with the June dividend. However, we experienced an increase in earnings near the
end of the reporting period and were able to adjust the monthly dividend upward
to 4.53 cents per share ($0.0453), effective with the July dividend. Past
performance is not predictive of future results.
At the end of this reporting period, the fund's distribution rate was 5.25%,
based on an annualization of the
Franklin Pennsylvania Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 4.68 cents++
April 4.69 cents
May 4.69 cents
June 4.49 cents
July 4.53 cents
August 4.53 cents
Total 27.61 cents
GRAPHIC MATERIAL 24 OMITTED - SEE APPENDIX AT END OF DOCUMENT
current monthly dividend of 4.53 cents ($0.0453) per share and the offering
price of $10.36 on August 31, 1996. This tax-free rate is generally higher than
the after-tax return on a comparable taxable investment. For example, an
investor in the maximum combined federal and Pennsylvania personal income tax
bracket of 41.3% would need to earn 8.94% from a taxable investment to match the
fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.69 cents per share,
which decreased from 4.70 cents per share, and an adjustment of -.01 cents per
share to reconcile the 12b-1 fee differential between Class I and Class II
shares.
Franklin Pennsylvania Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 4.68% 8.26%
Average Annual Total Return2 2.69% 4.61%
Distribution Rate3 5.25%
Taxable Equivalent Distribution Rate4 8.94%
30-Day Standardized Yield5 4.50%
Taxable Equivalent Yield4 7.66%
1. Cumulative total return measures the change in value of an investment over
the period indicated and does not include the 1.0% initial sales charge and 1.0%
contingent deferred sales charge (CDSC), applicable to shares redeemed within
the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the period indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 4.53 cent per share monthly dividend
and the offering price of $10.36 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
combined federal and Pennsylvania personal income tax rate of 41.3%, based on
the federal income tax rate 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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.
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal and many
states' individual income taxes through a portfolio consisting primarily of
Puerto Rico municipal bonds.*
Commonwealth Update
Puerto Rico greatly improved its financial situation over the last two years,
largely because of strong revenue growth. General fund revenues have increased
26% since 1994, totaling more than $1 billion, and the administration
conservatively used the revenue to build its reserves. This eliminated Puerto
Rico's need for cash and increased its emergency reserves.
GRAPHIC MATERIAL 25 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
Portfolio Notes
In the past six months, we've concentrated on diversifying our portfolio and
improving our call protection. Puerto Rico came to market with several municipal
issues this year, including general obligation debt, highway debt, a hospital
issue, a Puerto Rico port issue for American Airlines, and a new issue for a
Teachers Retirement Building, which was rated AAA. We participated in most of
these issues, and also added positions from the secondary market -- most
notably, the AAA-rated University of Puerto Rico issue.
Franklin Puerto Rico Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 23.9%
Transportation 18.3%
General Obligations 10.1%
Pre-Refunded 9.8%
Other Revenue 9.7%
Housing 8.1%
Hospitals 7.5%
Industrial 4.1%
Education 3.6%
Certificates of Participation 3.2%
Sales Tax Revenue 1.7%
For a complete list of portfolio holdings, please see page 101 of this report.
Performance Summary
Class I
The Franklin Puerto Rico Tax-Free Income Fund's share price, as measured by net
asset value, declined 16 cents from $11.59 on February 29, 1996, to $11.43 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.43%,
based on an annualization of the current monthly dividend of 5.4 cents ($0.054)
per share and the maximum offering price of $11.94 on August 31, 1996. This
tax-free rate is generally
Franklin Puerto Rico Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.5 cents
April 5.5 cents
May 5.5 cents
June 5.4 cents
July 5.4 cents
August 5.4 cents
Total 32.7 cents
GRAPHIC MATERIAL 26 OMITTED - SEE APPENDIX AT END OF DOCUMENT
higher than the after tax return on a comparable taxable investment. For
example, an investor in the maximum federal income tax bracket of 39.6% would
need to earn 8.99% from a taxable investment to match the fund's tax-free
distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Puerto Rico Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
Cumulative Total Return1 5.55% 40.03% 97.32% 138.30%
Average Annual Total Return2 1.06% 6.04% 6.57% 7.49%
Distribution Rate3 5.43%
Taxable Equivalent Distribution Rate4 8.99%
30-Day Standardized Yield5 4.89%
Taxable Equivalent Yield4 8.10%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 5.4 cent per share monthly dividend
and the maximum offering price of $11.94 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Puerto Rico Tax-Free Income Fund's share price, as measured by net
asset value, declined 16 cents from $11.62 on February 29, 1996, to $11.46 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 5.09%,
based on an annualization of the current monthly dividend of 4.91 cents
($0.0491) per share and the offering price of $11.58 on August 31, 1996. This
tax-free rate is generally higher than the
Franklin Puerto Rico Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.00 cents++
April 4.94 cents
May 4.94 cents
June 4.84 cents
July 4.91 cents
August 4.91 cents
Total 29.54 cents
GRAPHIC MATERIAL 27 OMITTED - SEE APPENDIX AT END OF DOCUMENT
after tax return on a comparable taxable investment. For example, an investor in
the maximum federal income tax bracket of 39.6% would need to earn 8.43% from a
taxable investment to match the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 4.93 cents ($0.0493)
per share, which increased from 4.90 cents, and an adjustment of +.07 cents to
reconcile the 12b-1 fee differential between Class I and Class II shares.
Franklin Puerto Rico Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 5.03% 8.34%
Average Annual Total Return2 2.96% 4.67%
Distribution Rate3 5.09%
Taxable Equivalent Distribution Rate4 8.43%
30-Day Standardized Yield5 4.47%
Taxable Equivalent Yield4 7.40%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 4.91 cent per share monthly dividend
and the offering price of $11.58 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal personal income
taxes 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.*
Portfolio Notes
Assets for the Franklin Federal Intermediate-Term Tax-Free Income Fund were up
over the six-month reporting period, to $91 million on August 31, 1996, from
approximately $86 million on February 29, 1996. We added new purchases from the
primary and secondary municipal bond markets; in general, we purchased higher
coupon issues (which have greater income potential) with slightly longer
maturities, and sold bonds with lower coupons and shorter maturities.
GRAPHIC MATERIAL 28 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
The 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.
This benefited the fund in a number of ways:
o improved the fund's income.
o lengthened the portfolio's average maturity.
o extended our average call protection (the time in which a bond cannot be
called back by its issuer) of the bonds.
Diligent research can help us make smart buying decisions. We tend to purchase
bonds at a slight discount. On the whole, we try to avoid bonds that are selling
at either a premium or a deep discount. We believe this affords our shareholders
maximum income while maintaining a relatively steady share value.
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Portfolio Breakdown on August 31, 1996
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Hospitals 13.7%
Utilities 12.0%
Industrial 11.5%
Certificates of Participation 10.5%
Housing 10.0%
Other Revenue 9.7%
Special Assessment Bonds 8.1%
General Obligations 7.8%
Education 7.0%
Transportation 5.3%
Marks-Roos Bonds 3.4%
Health Care 1.0%
For a complete list of portfolio holdings, please see page 104 of this report.
Performance Summary
The Franklin Federal Intermediate-Term Tax-Free Income Fund's share price, as
measured by net asset value, declined 20 cents from $10.95 on February 29, 1996,
to $10.75 on August 31, 1996.
At the end of the reporting period, the fund's distribution rate was 5.02%,
based on an annualization of the current monthly dividend of 4.6 cents ($0.046)
per share and the maximum offering price of $11.00 on August 31, 1996. This
tax-free rate is generally higher
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 4.6 cents
April 4.6 cents
May 4.6 cents
June 4.6 cents
July 4.6 cents
August 4.6 cents
Total 27.6 cents
GRAPHIC MATERIAL 29 OMITTED - SEE APPENDIX AT END OF DOCUMENT
that the after-tax return on a comparable taxable investment. For example, an
investor in the maximum federal income tax bracket of 39.6% would need to earn
8.31% from a taxable investment to match the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin Federal Intermediate-Term Tax-Free Income Fund
Periods ended August 31, 1996
Since
Inception
1-Year 3-Year (9/23/92)
Cumulative Total Return1 4.90% 15.84% 29.54%
Average Annual Total Return2 2.53% 4.23% 6.17%
Distribution Rate3 5.02%
Taxable Equivalent Distribution Rate4 8.31%
30-Day Standardized Yield5 4.98%
Taxable Equivalent Yield4 8.25%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 2.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 2.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 4.6 cent per share monthly dividend
and the maximum offering price of $11.00 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
The fund's manager agreed in advance to waive a portion of management expenses,
which reduces operating expenses and increases yield, distribution rate and
total return to shareholders. Without these reductions, the fund's distribution
rate would have been lower and yield for the period would have been 4.83%. The
fee waiver may be discontinued at any time upon notification to the fund's Board
of Trustees.
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
Your Fund's Objective
Seeks to provide high current income exempt from regular federal income taxes
through a portfolio consisting primarily of higher yielding, medium- to
lower-rated and non-rated municipal securities.* As discussed in the fund's
prospectus, these securities entail greater risk than higher-rated municipal
securities.
Portfolio Notes
The credit quality of the Franklin High Yield Tax-Free Income Fund's portfolio
improved over the six-month reporting period. We take a value-oriented approach
in managing the fund's portfolio. This means that when we make investment
decisions, we take into consideration quality spreads, yield curves and other
technical factors of the market.
Currently, quality spreads in the rated market are narrow. As a result, most
purchases have been high quality bonds. On August 31, 1996, approximately 22% of
the fund's securities were rated AAA compared with
GRAPHIC MATERIAL 30 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*The fund's dividends are generally subject to state and local income taxes, if
any. For investors subject to the federal alternative minimum tax, a small
portion of this income may be subject to such tax. Distributions of capital
gains and of ordinary income from accrued market discount, if any, are generally
taxable.
17.1% on February 29, 1996. Investment quality bonds made up more than 70% of
the portfolio at the end of the reporting period.
Throughout the fund's 1995-96 fiscal year, we explored new investment
opportunities in the non-rated bond markets. Non-rated securities give us the
ability to work with a bond issuer to structure an issue's security features,
coupon, maturity, and call dates to help us meet the specific needs of the
portfolio. So far, this recent fiscal year presents a slightly different story:
the supply of non-rated bonds was somewhat limited in the first six months of
1996. As a result, the percent of non-rated securities held in the portfolio
declined from 42.9% to 39.9% of total long-term investments on August 31, 1996.
Franklin High Yield Tax-Free Income Fund
Portfolio Breakdown on 8/31/96
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 21.4%
Transportation 13.4%
Hospitals 9.6%
Pre-Refunded 9.5%
Special Assessment Bonds 9.0%
General Obligations 8.7%
Industrial 6.0%
Housing 4.8%
Health Care 4.8%
Other Revenue 4.3%
Mello-Roos Bonds 2.7%
Certificates of Participation 2.4%
Tax Allocation Bonds 1.4%
Education 0.9%
Sales Tax 0.9%
Marks-Roos Bonds 0.2%
For a complete list of portfolio holdings, please see page 109 of this report.
Performance Summary
Class I
The Franklin High Yield Tax-Free Income Fund's share price, as measured by net
asset value, declined 21 cents from $11.19 on February 29, 1996, to $10.98 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 6.38%,
based on an annualization of the current monthly dividend of 6.1 cents ($0.061)
per share and the maximum offering price of $11.47 on August 31, 1996. This
tax-free rate is generally higher
Franklin High Yield Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 6.1 cents
April 6.1 cents
May 6.1 cents
June 6.1 cents
July 6.1 cents
August 6.1 cents
Total 36.6 cents
GRAPHIC MATERIAL 31 OMITTED - SEE APPENDIX AT END OF DOCUMENT
than the after tax return on a comparable taxable investment. For example, an
investor in the maximum federal income tax bracket of 39.6% would need to earn
10.56% from a taxable investment to match the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
Franklin High Yield Tax-Free Income Fund - Class I
Periods ended August 31, 1996
Since
Inception
1-Year 5-Year 10-Year (3/18/86)
Cumulative Total Return1 6.40% 49.15% 129.17% 133.75%
Average Annual Total Return2 1.87% 7.40% 8.18% 8.01%
Distribution Rate3 6.38%
Taxable Equivalent Distribution Rate4 10.56%
30-Day Standardized Yield5 5.76%
Taxable Equivalent Yield4 9.54%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the maximum 4.25% initial
sales charge. See Note below.
3. Based on an annualization of the current 6.1 cent per share monthly dividend
and the maximum offering price of $11.47 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
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 somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin High Yield Tax-Free Income Fund's share price, as measured by net
asset value, declined 21 cents from $11.24 on February 29, 1996, to $11.03 on
August 31, 1996.
At the end of this reporting period, the fund's distribution rate was 6.03%,
based on an annualization of the current monthly dividend of 5.60 cents
($0.0560) per share and the offering price of $11.14 on August 31, 1996. This
tax-free rate is generally higher than the
Franklin High Yield Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 8/31/96+
Dividend
Month per Share
March 5.70 cents++
April 5.56 cents
May 5.56 cents
June 5.56 cents
July 5.60 cents
August 5.60 cents
Total 33.58 cents
GRAPHIC MATERIAL 32 OMITTED - SEE APPENDIX AT END OF DOCUMENT
after tax return on a comparable taxable investment. For example, an investor in
the maximum federal personal income tax bracket of 39.6% would need to earn
9.98% from a taxable investment to match the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
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.
++The March dividend includes both a regular dividend of 5.56 cents ($0.0556)
per share and an adjustment of +.14 cents to reconcile the 12b-1 fee
differential between Class I and Class II shares.
Franklin High Yield Tax-Free Income Fund - Class II
Periods ended August 31, 1996
Since
Inception
1-Year (5/1/95)
Cumulative Total Return1 5.85% 10.36%
Average Annual Total Return2 3.82% 6.10%
Distribution Rate3 6.03%
Taxable Equivalent Distribution Rate4 9.98%
30-Day Standardized Yield5 5.38%
Taxable Equivalent Yield4 8.91%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the 1.0% initial sales charge and the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% CDSC, applicable to shares redeemed within the first 18 months
of investment.
3. Based on an annualization of the current 5.60 cent per share monthly dividend
and the offering price of $11.14 on August 31, 1996.
4. Taxable equivalent distribution rate and yield assume the 1996 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended August 31, 1996.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Arizona Tax-Free Income Fund (Note 1)
Long Term Investments 98.8%
<S> <C> <C>
Arizona Educational Loan Marketing Corp. Revenue,
$10,000,000 Senior Series, 6.375%, 09/01/05 ........................................................... $ 10,396,200
1,000,000 Series B, 7.00%, 03/01/03 ................................................................. 1,064,470
1,000,000 Series B, 7.00%, 03/01/05 ................................................................. 1,064,470
1,000,000 Series B, MBIA Insured, 7.35%, 09/01/04 ................................................... 1,073,650
775,000 Series B, MBIA Insured, 7.375%, 09/01/05 .................................................. 830,382
1,000,000 Sub-Series, 6.625%, 09/01/05 .............................................................. 1,043,340
2,000,000 Arizona Health Facilities Authority, Hospital System Revenue, Phoenix Baptist Hospital,
MBIA Insured, 6.25%, 09/01/11................................................................. 2,101,420
Arizona Health Facilities Authority Revenue, Arizona Voluntary Hospital, Series B, FGIC Insured,
770,000 Hospital Federal Pooled Loan Revenue, 7.75%, 10/01/07 ..................................... 836,413
5,000,000 7.25%, 10/01/13 ........................................................................... 5,344,650
5,000,000 Arizona State COP, Refunding, Series B, AMBAC Insured, 6.25%, 09/01/10 ........................ 5,276,100
5,000,000 Arizona State Department of Administration, COP, FSA Insured, 6.625%, 09/01/08 ................ 5,377,750
Arizona State Municipal Financing Program, COP, BIG Insured,
1,350,000 Dysart School, Series 22, ETM, 7.875%, 08/01/05 ........................................... 1,626,116
85,000 Flagstaff School, Series 15, 8.75%, 08/01/07 .............................................. 88,026
500,000 Peoria School, Series 19, 7.75%, 08/01/04 ................................................. 589,920
825,000 Phoenix Water, Series 10, Pre-Refunded, 7.90%, 08/01/17 ................................... 862,983
3,250,000 Series 20, ETM, 7.625%, 08/01/06 .......................................................... 3,744,910
500,000 Series 25, 7.875%, 08/01/14 ............................................................... 622,300
2,500,000 Series 29, Pre-Refunded, 7.125%, 08/01/14 ................................................. 2,707,925
1,750,000 Arizona State Transportation Board, Excise Tax Revenue, Maricopa County Regional Area Road
Fund, Series A, Pre-Refunded, 7.60%, 07/01/05 ................................................ 1,889,808
Arizona State Wastewater Management Authority, Wastewater Financial Assistance Revenue,
4,000,000 6.80%, 07/01/11 ........................................................................... 4,339,000
1,000,000 Series A, AMBAC Insured, 5.625%, 07/01/15 ................................................. 972,210
700,000 Avondale Municipal Development Corp. Facilities Revenue, Series 1992, MBIA Insured,
Pre-Refunded, 6.625%, 07/01/11 ............................................................... 765,604
930,000 Casa Grande Excise Tax Revenue, Series 1995, 6.20%, 04/01/15 .................................. 959,230
Casa Grande IDA, PCR, Frito Lay/PepsiCo,
1,800,000 6.60%, 12/01/10 ........................................................................... 1,924,236
500,000 6.65%, 12/01/14 ........................................................................... 532,215
3,000,000 Central Arizona Water Conservation District Contract Revenue, Central Project, Series 1990-A,
Pre-Refunded, 7.65%, 11/01/09 ................................................................ 3,389,460
Chandler GO, FGIC Insured,
1,625,000 6.85%, 07/01/14 ........................................................................... 1,748,711
1,000,000 Refunding, Series 1991, 7.00%, 07/01/12 ................................................... 1,097,040
1,750,000 Series 1994, 6.80%, 07/01/13 .............................................................. 1,896,178
4,055,000 Chandler IDA, MFHR, Refunding, Hacienda Apartments, Project A, 6.05%, 07/20/30 ................ 4,037,239
Chandler Street and Highway Revenue, Series 1994, MBIA Insured,
1,250,000 6.85%, 07/01/13 ........................................................................... 1,353,375
2,200,000 6.90%, 07/01/14 ........................................................................... 2,388,826
Chandler Water and Sewer Revenue, Refunding, FGIC Insured,
6,715,000 Series 1991, 7.00%, 07/01/12 .............................................................. 7,173,164
2,165,000 Series 1992, 6.25%, 07/01/13 .............................................................. 2,266,885
City of Bullhead, Municipal Property Corp., Facilities Revenue,
2,125,000 Series 1990, MBIA Insured, 7.20%, 07/01/09 ................................................ 2,270,116
4,000,000 Series 1991, FGIC Insured, 7.20%, 07/01/10 ................................................ 4,344,160
Cochise County, Palominas Elementary School District No. 49, School Improvement, GO,
Series A, Pre-Refunded,
155,000 7.70%, 07/01/00 ........................................................................... 162,814
165,000 7.80%, 07/01/01 ........................................................................... 173,450
175,000 7.85%, 07/01/02 ........................................................................... 184,034
$ 5,000,000 Cochise County USD No. 68, Sierra Vista, Series B, FGIC Insured, Pre-Refunded, 7.625%, 07/01/10 $ 5,571,700
1,095,000 Coconino County, Flagstaff USD No. 1, AMBAC Insured, 6.20%, 07/01/06 .......................... 1,142,961
5,275,000 Coconino County Pollution Control Corp. Revenue, Refunding, Arizona Public Service Co.,
Series A, MBIA Insured, 5.875%, 08/15/28 ..................................................... 5,188,859
Coconino County USD No. 8, Page Elementary School Improvement Project, GO, Pre-Refunded,
1,250,000 7.125%, 07/01/07 .......................................................................... 1,338,400
725,000 Series D, AMBAC Insured, 7.05%, 07/01/07 .................................................. 769,254
1,475,000 Eloy Municipal Property Corp., Facilities Revenue, Series 1989, 7.80%, 07/01/09 ............... 1,582,837
3,320,000 Gila County IDA, PCR, Refunding, ASARCO, Inc. Project, 8.90%, 07/01/06 ........................ 3,512,958
1,500,000 Gilbert Improvement District No. 11, FGIC Insured, 7.60%, 01/01/05 ............................ 1,559,085
Gilbert Water and Sewer Revenue, Refunding, FGIC Insured,
1,500,000 6.50%, 07/01/12 ........................................................................... 1,603,980
3,250,000 6.50%, 07/01/22 ........................................................................... 3,443,408
Glendale IDA, Educational Facilities Revenue, Refunding, American Graduate School International,
Connie Lee Insured,
2,200,000 5.875%, 07/01/15 .......................................................................... 2,183,698
750,000 Pre-Refunded, 6.75%, 07/01/09 ............................................................. 843,488
1,000,000 Pre-Refunded, 7.00%, 07/01/14 ............................................................. 1,142,250
1,250,000 Pre-Refunded, 7.125%, 07/01/20 ............................................................ 1,438,813
Glendale IDAR, Midwestern University, Series A, Connie Lee Insured,
1,940,000 6.00%, 05/15/16 ........................................................................... 1,941,397
2,000,000 6.00%, 05/15/26 ........................................................................... 1,988,800
2,400,000 Glendale Municipal Property Corp., Series 1991, MBIA Insured, 7.00%, 07/01/09 ................. 2,542,272
Guam Power Authority Revenue, Series A,
3,630,000 6.30%, 10/01/12 ........................................................................... 3,652,542
4,000,000 6.30%, 10/01/22 ........................................................................... 3,999,720
2,700,000 Lake Havasu City, Wastewater COP, FGIC Insured, 7.00%, 06/01/05 ............................... 2,935,710
570,000 La Paz County School District No. 4, Quartzsite Elementary School Improvement,
MBIA Insured, 5.70%, 07/01/16 ................................................................. 554,775
8,000,000 Maricopa County COP, 6.00%, 06/01/04 .......................................................... 8,147,600
50,000 Maricopa County Hospital District No. 1, Facilities Revenue, East Valley Behavioral Health Facility,
FGIC Insured, Pre-Refunded, 7.80%, 06/01/14 .................................................. 52,423
1,050,000 Maricopa County IDA, SFMR, GNMA Secured, 8.00%, 09/01/09 ...................................... 1,094,331
5,000,000 Maricopa County IDAR, Citizens Utilities Co. Project, 6.20%, 05/01/30 ......................... 5,089,550
Maricopa County IDAR, Hospital Facility Revenues, Refunding,
2,750,000 John C. Lincoln Hospital, FSA Insured, 7.50%, 12/01/13 .................................... 3,024,038
17,800,000 Samaritan Hospital Health Services, Series A, MBIA Insured, 7.00%, 12/01/13 ............... 19,162,234
1,890,000 Samaritan Hospital Health Services, Series A, MBIA Insured, 7.00%, 12/01/16 ............... 2,165,241
Maricopa County IDAR, Mercy Health System, MBIA Insured, Pre-Refunded,
1,730,000 Series A, 7.125%, 07/01/07 ................................................................ 1,883,313
750,000 Series C, 7.15%, 07/01/15 ................................................................. 818,003
Maricopa County School District No. 4, Mesa Unified, FGIC Insured,
1,500,000 5.65%, 07/01/11 ........................................................................... 1,495,395
2,000,000 5.70%, 07/01/12 ........................................................................... 2,017,500
2,000,000 Maricopa County School District No. 28, Kyrene Elementary, Series B, FGIC Insured,
6.00%, 07/01/14 .............................................................................. 2,044,840
3,000,000 Maricopa County Stadium District Revenue, MBIA Insured, 5.75%, 07/01/16 ....................... 2,957,850
500,000 Maricopa County UHSD No. 210, Phoenix, Series A, 5.70%, 07/01/15 .............................. 492,580
600,000 Maricopa County UHSD No. 216, Series A, Pre-Refunded, 7.80%, 07/01/07 ......................... 630,726
Maricopa County USD No. 8, Osborn School Improvement Project,
3,500,000 Series A, FGIC Insured, 5.875%, 07/01/14 .................................................. 3,554,810
500,000 Series B, Pre-Refunded, 7.10%, 07/01/05 ................................................... 539,565
1,075,000 Series B, Pre-Refunded, 7.15%, 07/01/07 ................................................... 1,161,473
1,885,000 Series B, Pre-Refunded, 7.20%, 07/01/09 ................................................... 2,039,099
Maricopa County USD No. 11, Peoria, Refunding,
$ 6,300,000 AMBAC Insured, 6.10%, 07/01/10 ............................................................ $ 6,623,379
2,800,000 MBIA Insured, 7.00%, 07/01/10 ............................................................. 3,040,324
Maricopa County USD No. 41, Gilbert,
2,000,000 6.25%, 07/01/15 ........................................................................... 1,984,480
850,000 Series C, FGIC Insured, Pre-Refunded, 7.125%, 07/01/01 .................................... 902,989
1,175,000 Maricopa County USD No. 65, Littleton School Improvement, Series B, FGIC Insured,
6.40%, 07/01/14............................................................................... 1,249,812
4,000,000 Maricopa County USD No. 68, Alhambra, Refunding and Improvement, AMBAC Insured,
5.625%, 07/01/13 ............................................................................. 4,010,440
Maricopa County USD No. 69, GO, Paradise Valley,
1,250,000 Refunding, 5.40%, 07/01/14 ................................................................ 1,209,613
1,000,000 Series A, 7.10%, 07/01/05 ................................................................. 1,120,980
1,600,000 Maricopa County USD No. 80, Chandler, FGIC Insured, 6.00%, 07/01/13 ........................... 1,652,576
Maricopa County USD No. 89, Dysart, Refunding and Improvement, FGIC Insured,
240,000 6.70%, 07/01/05 ........................................................................... 256,517
1,760,000 6.75%, 07/01/06 ........................................................................... 1,877,832
1,300,000 Maricopa County USD No. 98, Fountain Hills School, Improvement Bond, Refunding, FGIC Insured,
6.625%, 07/01/10 ............................................................................. 1,382,992
Maricopa County USD No. 214, Tolleson GO,
1,000,000 FGIC Insured, 5.75%, 07/01/14 ............................................................. 1,004,700
500,000 Pre-Refunded, 7.30%, 07/01/03 ............................................................. 523,605
2,000,000 Pre-Refunded, 7.35%, 07/01/04 ............................................................. 2,095,220
Mesa IDA, Health Care Facilities Revenue, Western Health Network, BIG Insured,
750,000 Refunding, Series B-2, 7.50%, 01/01/08 .................................................... 800,505
5,250,000 Series A-2, 7.625%, 01/01/13 .............................................................. 5,694,833
250,000 Series A-3, 7.625%, 01/01/13 .............................................................. 271,183
2,300,000 Series A-4, 7.625%, 01/01/09 .............................................................. 2,487,956
Mesa Utility Systems Revenue, FGIC Insured,
1,000,000 5.375%, 07/01/14 .......................................................................... 950,950
8,500,000 5.125%, 07/01/15 .......................................................................... 7,829,010
Mohave County, Hospital District No. 1, GO, Kingman Regional Medical Center Project,
1,500,000 FGIC Insured, 6.50%, 06/01/15 ............................................................. 1,583,790
6,350,000 Pre-Refunded, 8.375%, 06/01/15 ............................................................ 7,219,442
Mohave County, IDA, Citizens Utilities Project,
4,100,000 Series 1994, 6.60%, 05/01/29 .............................................................. 4,259,080
10,000,000 Series A, 7.15%, 02/01/26 ................................................................. 10,655,700
5,000,000 Series B, 7.15%, 02/01/26 ................................................................. 5,327,850
1,585,000 Mohave County, IDA, Health Care Revenue, Chris Ridge and Silver Insured, Refunding
6.375%, 11/01/31 ............................................................................. 1,615,987
Mohave County, IDA, Hospital Systems Revenue,
1,500,000 Baptist Hospital, MBIA Insured, 5.50%, 09/01/21 ........................................... 1,410,885
2,000,000 Baptist Hospital, MBIA Insured, 5.75%, 09/01/26 ........................................... 1,930,800
1,595,000 Medical Environments, Inc., Phoenix Hospital and Medical Center, ETM, 5.80%, 07/01/99...... 1,654,828
1,700,000 Medical Environments, Inc., Phoenix Hospital and Medical Center, Pre-Refunded, 7.00%, 07/01/16 1,932,373
54,500,000 Navajo County PCR, Refunding, Arizona Public Service Co., Series A, 5.875%, 08/15/28 .......... 51,901,440
Nogales Municipal Development Authority, Inc., Municipal Facilities Revenue, Refunding, MBIA Insured,
6,350,000 7.20%, 06/01/08 ........................................................................... 6,881,940
500,000 Pre-Refunded, 8.00%, 06/01/08 ............................................................. 536,840
Northern Arizona University System Revenue,
3,700,000 Pre-Refunded, 7.50%, 06/01/06 ............................................................. 3,990,561
2,750,000 Refunding, FGIC Insured, 6.40%, 06/01/07 .................................................. 2,919,483
Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Series A, Port Saipan
Harbor Improvement,
$ 310,000 5.35%, 10/01/98 ........................................................................... $ 309,625
330,000 5.45%, 10/01/99 ........................................................................... 329,429
345,000 5.55%, 10/01/00 ........................................................................... 344,238
365,000 5.65%, 10/01/01 ........................................................................... 363,076
385,000 5.75%, 10/01/02 ........................................................................... 382,648
7,150,000 6.85%, 10/01/25 ........................................................................... 7,176,956
Oro Valley Municipal Property Corp. Revenue, Municipal Water Systems, MBIA Insured,
1,650,000 5.55%, 07/01/17 ........................................................................... 1,592,613
1,000,000 5.375%, 07/01/26 .......................................................................... 927,950
1,000,000 Peoria Municipal Development Authority, Water and Sewer Revenue, Refunding, FGIC Insured,
6.625%, 07/01/06 ............................................................................. 1,054,810
Phoenix Airport Revenue, MBIA Insured,
700,000 Refunding, Series B, 6.20%, 07/01/10 ...................................................... 730,254
1,680,000 Refunding, Series C, 6.30%, 07/01/10 ...................................................... 1,765,159
1,785,000 Refunding, Series C, 6.40%, 07/01/11 ...................................................... 1,875,053
570,000 Refunding, Series C, 6.40%, 07/01/12 ...................................................... 598,323
1,800,000 Series D, 6.30%, 07/01/10 ................................................................. 1,891,242
3,825,000 Series D, 6.40%, 07/01/11 ................................................................. 4,032,698
820,000 Series D, 6.40%, 07/01/12 ................................................................. 860,746
Phoenix Civic Improvement Corp.,
5,000,000 Airport Terminal Excise Tax Revenue, 7.80%, 07/01/11 ...................................... 5,194,450
3,500,000 Airport Terminal Excise Tax Revenue, 7.875%, 07/01/14 ..................................... 3,642,555
275,000 Airport Terminal Excise Tax Revenue, Refunding, Pre-Refunded, 8.375%, 07/01/09 ............ 296,854
1,000,000 Municipal Facilities Excise Tax Revenue, MBIA Insured, 6.90%, 07/01/21 .................... 1,085,670
4,210,000 Parking Facilities, Series B, FGIC Insured, Pre-Refunded, 7.50%, 07/01/09 ................. 4,417,258
3,090,000 Water Systems Revenue, 5.95%, 07/01/15 .................................................... 3,117,130
3,665,000 Water Systems Revenue, 5.95%, 07/01/16 .................................................... 3,697,179
3,000,000 Water Systems Revenue, 6.00%, 07/01/19 .................................................... 3,030,720
4,300,000 Phoenix Civic Plaza Building Corp., 6.00%, 07/01/14 ........................................... 4,360,071
Phoenix GO,
5,000,000 Refunding, 6.375%, 07/01/13 ............................................................... 5,258,350
1,000,000 Refunding, Pre-Refunded, 7.375%, 07/01/11 ................................................. 1,047,810
5,000,000 Refunding, Series A, 5.50%, 07/01/15 ...................................................... 4,856,950
3,525,000 Series B, 5.25%, 07/01/14 ................................................................. 3,348,609
2,775,000 Series B, 5.25%, 07/01/15 ................................................................. 2,616,464
Phoenix HFC, Mortgage Revenue, Refunding,
2,750,000 Project A, MBIA Insured, 6.50%, 07/01/24 .................................................. 2,788,913
1,750,000 Section 8 Project, Series A, MBIA Insured, 6.90%, 01/01/23 ................................ 1,802,395
2,260,000 Section 8 Project, Series A, MBIA Insured, 7.25%, 01/01/23 ................................ 2,279,323
1,000,000 Phoenix IDA, SFMR, FNMA Insured, 6.30%, 12/01/12 .............................................. 1,018,620
1,705,000 Phoenix IDAR, Home Purchase Mortgage, GNMA Secured, Series B, 8.20%, 04/01/22 ................. 1,770,915
1,500,000 Phoenix Municipal Housing Revenue, Refunding, Fillmore Gardens Project, 6.30%, 06/01/09 ....... 1,531,500
Phoenix Street and Highway Revenue,
5,000,000 Refunding, Series 1992, 6.60%, 07/01/07 ................................................... 5,376,950
1,000,000 Series 1987, 6.80%, 07/01/03 .............................................................. 1,107,740
1,000,000 Series 1989, Pre-Refunded, 7.375%, 07/01/05 ............................................... 1,047,810
3,310,000 Series 1989, Pre-Refunded, 7.375%, 07/01/06 ............................................... 3,468,251
Pima County IDA, Health Care Revenue, Carondelet St. Joseph's and St. Mary's,
65,000 8.00%, 07/01/13 ........................................................................... 70,070
2,250,000 MBIA Insured, 6.75%, 07/01/10 ............................................................. 2,426,963
535,000 Pre-Refunded, 8.00%, 07/01/13 ............................................................. 580,967
Pima County IDA, SFMR,
$ 1,350,000 GNMA Secured, 6.40%, 11/01/09 ............................................................. $ 1,401,017
1,545,000 GNMA Secured, 8.125%, 09/01/20 ............................................................ 1,599,678
6,050,000 GNMA Secured, 6.750%, 11/01/27 ............................................................ 6,230,774
5,310,000 Refunding, Series A, 7.625%, 02/01/12 ..................................................... 5,514,435
910,000 Refunding, Series A, 6.50%, 02/01/17 ...................................................... 919,127
1,410,000 Pima County Sewer Revenue, Series 1991, FGIC Insured, 6.75%, 07/01/15 ......................... 1,516,765
21,000,000 Pima County USD No. 1, Tucson Project, FGIC Insured, 5.875%, 07/01/14 ......................... 21,145,740
500,000 Pima County USD No. 10, Amphitheater School, Refunding and Improvement, Pre-Refunded,
7.70%, 07/01/03 ............................................................................ 520,360
Pinal County USD No. 43, Apache Junction, Refunding and Improvement, FGIC Insured,
500,000 7.15%, 07/01/05 ........................................................................... 531,455
700,000 Pre-Refunded, 7.20%, 07/01/07 ............................................................. 758,198
2,500,000 Series A, 5.85%, 07/01/15 ................................................................. 2,518,850
6,405,000 Price Elliott Resh Park, Inc. Revenue, Refunding, Arizona State University Research Park,
MBIA Insured, Pre-Refunded, 7.00%, 07/01/21 .................................................. 7,159,445
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
75,000 Refunding, Series 1985-A, FSA Insured, Pre-Refunded, 9.00%, 07/01/09 ...................... 94,647
6,000,000 Series 1988-A, Pre-Refunded, 7.875%, 07/01/17 ............................................. 6,513,540
Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue,
9,500,000 Series Y, 6.00%, 07/01/22 ................................................................ 9,506,935
9,000,000 Series Y, 5.00%, 07/01/36 ................................................................ 7,665,480
750,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue, Pre-Refunded, Series P,
8.125%, 07/01/13.............................................................................. 816,758
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
9,215,000 7.75%, 07/01/08 ........................................................................... 9,853,692
2,000,000 7.50%, 07/01/09 ........................................................................... 2,130,000
Puerto Rico Electric Power Authority, Power Revenue,
125,000 Refunding, Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 ................................... 132,003
3,000,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 ................................... 3,260,520
2,205,000 Refunding, Series 1989-N, 7.125%, 07/01/14 ................................................ 2,355,469
3,745,000 Refunding, Series 1980-R, 6.25%, 07/01/17 ................................................. 3,779,117
745,000 Refunding, Series N, 7.00%, 07/01/07 ...................................................... 793,410
5,000,000 Refunding, Series U, 6.00%, 07/01/14 ...................................................... 4,972,450
1,510,000 Series 1989-O, 7.125%, 07/01/14 ........................................................... 1,613,042
600,000 Series 1991-P, Pre-Refunded, 7.00%, 07/01/11 .............................................. 670,674
25,720,000 Series X, 6.125%, 07/01/21 ................................................................ 25,635,896
4,850,000 Puerto Rico GO, 6.50%, 07/01/23 ............................................................... 5,119,563
Puerto Rico HFC Revenue,
40,000 FHA Mortgage Insured, Section 8 Assisted, Sixth Portfolio, Pre-Refunded, 7.75%, 12/01/26 .. 47,580
1,445,000 MF, Portfolio A, Series I, 7.50%, 04/01/22 ................................................ 1,512,915
1,155,000 Puerto Rico HFC Revenue, SFMR, Portfolio No. 1, Series 1988-B, GNMA Secured, 7.65%, 10/15/22 .. 1,212,715
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities, Financing
Authority, Hospital Revenue,
1,950,000 Hospital Auxilio Mutuo Obligation Group, Series A, MBIA Insured, 6.25%, 07/01/24 .......... 2,006,550
5,225,000 Refunding, Dr. Pila Hospital, Series A, FHA Insured, 5.875%, 08/01/12 ..................... 5,243,392
1,000,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
7.875%, 07/01/16 ............................................................................. 1,052,647
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
2,435,000 Refunding, Series A, 5.75%, 01/01/13 ...................................................... 2,424,554
4,750,000 Refunding, Series D, 5.50%, 01/01/25 ...................................................... 4,433,983
6,000,000 Refunding, Series D, 6.25%, 01/01/27 ...................................................... 6,144,240
2,000,000 Series A, 6.50%, 01/01/22 ................................................................. 2,088,040
4,600,000 Series A, 6.00%, 01/01/31 ................................................................. 4,566,420
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue, (cont.)
$ 1,845,000 Series A, MBIA Insured, 6.00%, 01/01/31 ................................................... $ 1,855,941
2,500,000 Series A, Pre-Refunded, 7.875%, 01/01/28 .................................................. 2,670,100
9,975,000 Series B, 6.25%, 01/01/19 ................................................................. 10,262,579
5,925,000 Series C, 6.20%, 01/01/12 ................................................................. 6,078,339
5,760,000 Series C, 5.50%, 01/01/28 ................................................................. 5,354,784
110,000 Series E, Pre-Refunded, 8.25%, 01/01/13 ................................................... 115,850
625,000 Series E, Pre-Refunded, 8.25%, 01/01/28 ................................................... 658,238
3,220,000 San Luis Municipal Property Corp., Municipal Facilities Revenue, 8.125%, 07/01/19 ............. 3,372,274
8,000,000 Santa Cruz County IDAR, Citizens Utilities Co. Project, 6.60%, 05/01/29 ...................... 8,269,200
50,000 Scottsdale, City of, Municipal Property Corp., Refunding, Series 1987, Pre-Refunded, 7.75%, 07/01/05 52,562
Scottsdale IDA, Hospital Revenue, Scottsdale Memorial Hospital, AMBAC Insured,
180,000 Refunding, Series 1987-A, Pre-Refunded, 8.50%, 09/01/17 ................................... 190,420
7,000,000 Refunding, Series A, 5.625%, 09/01/12 ..................................................... 6,823,600
1,250,000 Refunding, Series A, 5.70%, 09/01/15 ...................................................... 1,214,713
4,045,000 Refunding, Series A, 5.70%, 09/01/18 ...................................................... 3,921,789
1,660,000 Series A, Pre-Refunded, 7.05%, 09/01/18 ................................................... 1,768,896
2,750,000 Series B, Pre-Refunded, 7.00%, 09/01/08 ................................................... 2,927,815
Sedona Sewer Sales Tax Revenue,
3,800,000 Refunding, Series 1992, 6.75%, 07/01/07 ................................................... 4,103,012
5,000,000 Refunding, Series 1992, 7.00%, 07/01/12 ................................................... 5,275,350
6,500,000 Series A, Pre-Refunded, 7.50%, 07/01/20 ................................................... 7,269,730
2,300,000 Tucson, Series A, 5.375%, 07/01/20 ............................................................ 2,168,762
Tucson Airport Authority Revenue, MBIA Insured,
6,700,000 Refunding, 5.70%, 06/01/13 ................................................................ 6,635,211
1,090,000 Series A, 6.875%, 06/01/20 ................................................................ 1,152,010
1,175,000 Series B, 7.125%, 06/01/15 ................................................................ 1,272,725
1,125,000 Series B, 7.25%, 06/01/20 ................................................................. 1,223,291
1,900,000 Tucson IDA, MFHR, La Entrada, Refunding, 7.40%, 07/01/26 ...................................... 1,973,834
900,000 Tucson Local Development Corp., Leasehold Revenue, Series F, FGIC Insured, Pre-Refunded,
7.30%, 07/01/10 ............................................................................... 954,648
Tucson Water Revenue,
2,250,000 Refunding, MBIA Insured, 7.00%, 07/01/10 .................................................. 2,375,393
14,650,000 Series 1994-A, MBIA Insured, 6.00%, 07/01/21 .............................................. 14,784,341
6,750,000 Series D, Pre-Refunded, 7.10%, 07/01/18 ................................................... 7,542,788
1,500,000 University of Arizona COP, Telecommunications System, Pre-Refunded, 7.60%, 07/15/03 ........... 1,576,515
University of Arizona Medical Center Corp., Hospital Revenue, Pre-Refunded, 8.10%, 07/01/16
225,000 Series 1986 ............................................................................... 236,970
250,000 Series 1987 ............................................................................... 263,300
University of Arizona System Revenue,
1,700,000 Series 1988, Pre-Refunded, 7.625%, 06/01/11 ............................................... 1,830,509
1,000,000 Series 1994, 6.25%, 06/01/11 .............................................................. 1,044,370
1,300,000 Series 1994, 6.35%, 06/01/14 .............................................................. 1,342,718
2,650,000 Williams Municipal Development Authority, Inc., Municipal Facilities Revenue, 7.625%, 07/01/05. 2,722,928
Yavapai County, USD No. 22, Humboldt,
1,500,000 Series A, FGIC Insured, 5.95%, 07/01/14 ................................................... 1,515,345
1,825,000 Series B, MBIA Insured, 5.60%, 07/01/14 ................................................... 1,800,545
1,500,000 Yuma County Elementary School District No. 1, Series A, MBIA Insured, 5.75%, 07/01/14 ......... 1,516,530
Yuma IDA, MFHR, Alexandrite Sands Apartments Project, FHA Insured,
1,000,000 7.60%, 12/01/15 ........................................................................... 1,047,590
2,000,000 7.70%, 12/01/29 ........................................................................... 2,055,260
--------------
Total Long Term Investments (Cost $706,377,962).......................................... 736,775,311
--------------
$ 300,000 Maricopa County IDA, Hospital Facilities Revenue, Samaritan Health Service Hospital, Series B-2,
MBIA Insured, Daily VRDN and Put, 3.45%, 12/01/08 (Cost $300,000).............................. $ 300,000
--------------
Total Investments (Cost $706,677,962) 98.8%......................................... 737,075,311
Other Assets and Liabilities, Net 1.2%............................................. 8,694,658
--------------
Net Assets 100.0%................................................................... $745,769,969
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments for
income tax purposes of $706,681,744 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 32,549,297
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (2,155,730)
--------------
Net unrealized appreciation.................................................................. $ 30,393,567
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
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.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
UHSD - Unified High School District
USD - Unified School District
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Colorado Tax-Free Income Fund (Note 1)
Long Term Investments 97.8%
<S> <C> <C>
$ 770,000 Adams County PCR, Refunding, Public Service Co. of Colorado Project, Series A, 7.375%, 11/01/09 $ 787,810
8,000,000 Arapahoe County Capital Improvements Transportation Fund Highway Revenue, Vehicle Registration,
Series A, MBIA Insured, 6.15%, 08/31/26 ...................................................... 8,183,840
400,000 Arapahoe County COP, Building Finance Corp., CGIC Insured, Pre-Refunded, 7.50%, 12/01/10 ...... 443,844
805,000 Arapahoe County COP, Refunding, CGIC Insured, 6.625%, 12/01/16 ................................ 864,538
Arapahoe County School District No. 5, Cherry Creek,
500,000 7.125%, 12/15/10 .......................................................................... 544,660
3,650,000 5.15%, 12/15/15 ........................................................................... 3,348,693
5,000,000 Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 06/01/11 ....................... 5,561,150
1,000,000 Arvada MFHR, Refunding, Springwood Community Project, 6.35%, 08/20/16 ......................... 1,013,580
Auraria Higher Education Center, Refunding,
2,500,000 Parking Facilities Revenue, Pre-Refunded, 7.875%, 04/01/12 ................................ 2,756,375
1,040,000 Student Fee Revenue, AMBAC Insured, 5.25%, 05/01/15 ....................................... 969,623
2,850,000 Aurora COP, Refunding, 6.25%, 12/01/09 ........................................................ 2,979,105
150,000 Aurora MFHR, Dayton Place Project, GNMA Secured, Series 1988-A, 8.25%, 01/20/29 ............... 155,057
750,000 Aurora Urban Renewal Authority, Tax Increment Revenue, Pre-Refunded, 7.50%, 11/15/07 .......... 807,000
1,000,000 Bayfield School District No. 10, MBIA Insured, 6.65%, 06/01/15 ................................ 1,065,970
Boulder County Hospital Revenue, Longmont United Hospital Project,
2,000,000 5.80%, 12/01/13 ........................................................................... 1,881,520
1,285,000 5.875%, 12/01/20 .......................................................................... 1,186,029
3,000,000 Pre-Refunded, 8.20%, 12/01/20 ............................................................. 3,414,900
1,250,000 Boulder GO, Refunding, 7.20%, 08/15/13 ........................................................ 1,334,825
2,900,000 Castle Pines Metropolitan District, Refunding and Improvement, CGIC Insured, 7.625%, 12/01/15 . 3,195,597
750,000 Colorado Association of School Boards, COP, Pueblo School District No. 60, Project A,
MBIA Insured, Pre-Refunded, 7.25%, 12/01/09 .................................................. 816,278
Colorado Health Facilities Authority Revenue,
1,615,000 Birchwood Manor Project, Series A, GNMA Secured, 7.625%, 04/01/26 ......................... 1,664,952
1,500,000 Boulder Community Hospital, Refunding, Series B, MBIA Insured, 5.875%, 10/01/23 ........... 1,478,910
1,000,000 Children's Hospital Association Project, MBIA Insured, 5.25%, 10/01/26 .................... 899,910
954,000 Community Provider Pooled, CGIC Insured, 6.75%, 07/15/17 .................................. 1,011,688
6,570,000 Community Provider Pooled, Series A, CGIC Insured, 7.25%, 07/15/17 ........................ 7,081,869
1,750,000 Covenant Retirement Communities, 6.75%, 12/01/15 .......................................... 1,774,518
4,950,000 Covenant Retirement Communities, 6.75%, 12/01/25 .......................................... 4,980,245
1,250,000 Mercy Medical Center Durango, 6.20%, 11/15/15 ............................................. 1,254,625
410,000 Oakbrook I Manor, Series A, GNMA Secured, 7.25%, 04/01/11 ................................. 421,476
885,000 Oakbrook I Manor, Series A, GNMA Secured, 7.625%, 04/01/26 ................................ 918,108
6,000,000 PSL Health System Project, Series B, Pre-Refunded, 8.50%, 02/15/21 ........................ 6,970,740
775,000 Refunding, Porter Memorial Hospital Project, Series A, Pre-Refunded, 7.40%, 02/01/16 ...... 840,852
1,000,000 Sisters of Charity Health Care System, 5.25%, 05/15/14 .................................... 927,040
Colorado HFA, GO,
3,740,000 MF, Series A, 6.80%, 08/01/14 ............................................................. 3,854,743
6,070,000 MF, Series A, 6.85%, 08/01/24 ............................................................. 6,255,863
2,405,000 MF, Series A, 6.875%, 08/01/30 ............................................................ 2,477,823
100,000 Series A, Pre-Refunded, 8.375%, 01/01/30 .................................................. 107,239
1,000,000 SF, Series A, 7.50%, 05/01/29 ............................................................. 1,041,170
280,000 SF Program, Series A-1, 8.00%, 08/01/17 ................................................... 291,889
960,000 SF Program, Series A-2, 7.70%, 02/01/23 ................................................... 998,122
410,000 SF Program, Series A-3, 7.90%, 08/01/21 ................................................... 426,662
1,795,000 SF Program, Series C-2, 7.375%, 08/01/10 .................................................. 1,861,954
250,000 SF Program, Series C-2, 7.85%, 02/01/21 ................................................... 258,773
15,000 SFMR, Series C, 8.75%, 09/01/17 ........................................................... 15,500
3,000,000 Colorado Mountain College Residence Hall, MBIA Insured, 5.75%, 06/01/23 ....................... 2,939,520
Colorado Post Secondary Educational Facilities Authority Revenue,
$ 1,000,000 Auraria Foundation Project, CGIC Insured, 6.00%, 09/01/15 ................................. $ 1,014,540
3,250,000 University of Denver Project, Connie Lee Insured, 6.625%, 06/01/13 ........................ 3,398,883
300,000 University of Denver Project, Series B, Pre-Refunded, 9.00%, 12/01/07 ..................... 323,556
Colorado Springs Hospital Revenue,
75,000 Memorial Hospital, Pre-Refunded, 8.75%, 12/15/07 .......................................... 80,744
5,575,000 Refunding, MBIA Insured, 6.00%, 12/15/15 .................................................. 5,638,109
10,955,000 Refunding, MBIA Insured, 6.00%, 12/15/24 .................................................. 10,989,399
Colorado Springs Utilities System Revenue,
295,000 Series 1988-A, Pre-Refunded, 8.00%, 11/15/20 .............................................. 303,139
9,000,000 Series A, 6.10%, 11/15/24 ................................................................. 9,074,520
1,090,000 Colorado State, Board Community Colleges and Occupational Educational Revenue, Red Rocks
Community College Project, AMBAC Insured, 6.00%, 11/01/19 .................................... 1,102,895
Colorado Water Resources and Power Development Authority Revenue,
1,765,000 Clean Water Revenue, Series A, 6.15%, 09/01/11 ............................................ 1,837,189
1,000,000 Clean Water Revenue, Series A, 6.30%, 09/01/14 ............................................ 1,043,930
750,000 Small Water Resources, Series A, FGIC Insured, 6.70%, 11/01/12 ............................ 799,605
65,000 Stagecoach Project, Pre-Refunded, 8.00%, 11/01/17 ......................................... 71,377
Denver City and County Airport System Revenue,
4,000,000 Series A, 7.50%, 11/15/23 ................................................................. 4,324,400
4,000,000 Series A, 8.50%, 11/15/23 ................................................................. 4,550,840
2,000,000 Series A, 5.50%, 11/15/25 ................................................................. 1,873,220
7,500,000 Series A, Pre-Refunded, 7.50%, 11/15/12 ................................................... 8,610,900
1,000,000 Series D, 7.75%, 11/15/13 ................................................................. 1,155,400
100,000 Denver City and County Excise Tax Revenue, BIG Insured, Pre-Refunded, 8.30%, 09/01/14 ......... 105,169
1,880,000 Denver City and County IDR, University of Denver Project, 7.50%, 03/01/11 ..................... 2,018,406
Denver City and County Revenue,
3,150,000 Children's Hospital Association Project, FGIC Insured, 6.00%, 10/01/15 .................... 3,200,432
150,000 Refunding, St. Anthony's Hospital, Sisters of Charity Health Care System, Series A, MBIA Insured,
Pre-Refunded, 7.75%, 05/01/14 ............................................................ 163,709
290,000 Denver City and County SFMR, Series A, GNMA Secured, 8.125%, 12/01/20 ......................... 299,492
2,000,000 Denver City and County Special Facilities Airport Revenue, United Airlines Project, Series A,
6.875%, 10/01/32 ............................................................................. 2,028,860
1,000,000 Donala Colorado Water and Sanitary District, Improvement Series B, 6.50%, 12/01/14 ............ 1,033,630
4,100,000 Douglas County, School District No. 1, Douglas and Elvert Counties, Improvement Series A,
MBIA Insured, 6.50%, 12/15/16 ................................................................ 4,406,721
El Paso County,
155,000 HMR, Series A, GNMA Secured, 8.00%, 03/01/21 .............................................. 161,053
125,000 HMR, Series B, GNMA Secured, 8.125%, 11/01/13 ............................................. 130,585
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 .................................... 107,529
El Paso County, School District No. 20, GO, Series B,
20,000 8.00%, 12/01/06 ........................................................................... 20,727
30,000 Pre-Refunded, 8.00%, 12/01/06 ............................................................. 31,407
1,500,000 Estes Park Urban Renewal Authority, Tax Increment Revenue, Pre-Refunded, 7.625%, 05/15/08 ..... 1,630,050
1,035,000 Foothill Metropolitan Recreational and Park District, Golf Course Revenue, Series A, Pre-Refunded,
8.00%, 11/15/04 ........................................................................... 1,091,718
190,000 Fort Collins IDR, Vipont Pharmaceutical, Inc. Project, Pre-Refunded, 9.25%, 08/01/13 .......... 210,077
500,000 Fort Collins PCR, Anheuser-Busch Co. Project, Series 1984, 7.375%, 12/01/14 ................... 514,730
250,000 Frisco Fire Protection District, Refunding and Improvement, 7.20%, 12/01/05 ................... 264,243
Guam Airport Authority Revenue, Refunding, Series A,
400,000 6.375%, 10/01/10 .......................................................................... 406,160
800,000 6.50%, 10/01/23 ........................................................................... 805,384
$ 1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08....................................... $ 1,023,650
Jefferson County, District Wide Sales Tax Revenue, Local Improvement District,
7,450,000 MBIA Insured, 6.30%, 06/01/22 ............................................................. 7,681,099
200,000 Pre-Refunded, 8.20%, 12/01/13 ............................................................. 216,370
1,000,000 Jefferson County School District No. R-001, AMBAC Insured, 6.25%, 12/15/12 .................... 1,044,740
595,000 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 .................... 628,564
750,000 La Plata County School District No. 9-R, Durango COP, FGIC Insured, 7.40%, 11/15/07 ........... 794,573
Lakewood MFHR Mortgage, FHA Insured Mortgage,
1,235,000 6.65%, 10/01/25 ........................................................................... 1,261,108
3,025,000 6.70%, 10/01/36 ........................................................................... 3,076,788
250,000 Larimer County Health Care Facilities Revenue, Refunding, Western Health Network, Inc.,
BIG Insured, 7.625%, 01/01/12 ................................................................ 265,868
Las Animas County School District No. 1, Refunding,
1,000,000 6.15%, 12/01/08 ........................................................................... 987,210
935,000 6.20%, 12/01/10 ........................................................................... 923,584
Left Hand Water District, Water Revenue Bonds, MBIA Insured,
1,400,000 5.70%, 11/15/15 ........................................................................... 1,390,172
735,000 Boulder and Weld Counties, Pre-Refunded, 7.40%, 11/15/09 .................................. 816,614
575,000 Logan County, SFMR, Refunding, Series A, 8.50%, 11/01/11 ...................................... 591,531
910,000 Louisville Water District GO, Refunding, FGIC Insured, 7.20%, 12/01/09 ........................ 951,350
350,000 Mesa County Sales Tax Revenue, Refunding, MBIA Insured, 7.75%, 12/01/13 ....................... 372,474
575,000 Metropolitan of Denver Revenue, Sewer Disposal District No. 1, Series A, MBIA Insured,
Pre-Refunded, 7.60%, 04/01/14 ................................................................ 613,146
1,850,000 Montrose County COP, 6.35%, 06/15/06 .......................................................... 1,911,300
450,000 Northern Colorado Water Conservancy District Revenue, Municipal Sub-District, Series D,
7.75%,12/01/12 ............................................................................. 462,060
540,000 Pueblo County COP, Public Parking, 6.90%, 07/01/15 ............................................ 543,996
4,395,000 Pueblo County, MBIA Insured, 6.00%, 06/01/16 .................................................. 4,439,697
1,000,000 Pueblo County School District No. 70, Pueblo Rural, GO, AMBAC Insured, 6.40%, 12/01/14 ........ 1,053,460
1,000,000 Pueblo Urban Renewal Authority Tax Increment Revenue, Refunding, AMBAC Insured,
6.10%, 12/01/15 ............................................................................ 1,032,530
55,000 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue, Refunding, Series 1985-A,
FSA Insured, Pre-Refunded, 9.00%, 07/01/09 ................................................... 69,408
1,275,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series X,
5.50%, 07/01/19............................................................................. 1,197,697
1,000,000 Puerto Rico Commonwealth Highway Authority, Highway Revenue, Pre-Refunded, Series Q,
8.00%, 07/01/18 .............................................................................. 1,135,770
Puerto Rico Electric Power Authority, Power Revenue,
155,000 Refunding, Series 1989-N, 7.125%, 07/01/14 ................................................ 165,577
50,000 Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 .............................................. 52,801
20,000 Puerto Rico HFC Revenue, SFMR, Portfolio No. 1, Series 1988-A, GNMA Secured, 7.80%, 10/15/21 .. 20,816
600,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA, Baxter Travenol Labs,
Series A, 8.00%, 09/01/12 .................................................................... 651,780
1,335,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities, Financing
Authority, Industrial Revenue, Guaynabo Municipal Government Center, Series A, 5.625%, 07/01/15 1,206,533
145,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 157,070
Regional Transportation District, Sales Tax Revenue,
1,080,000 Refunding, FGIC Insured, 6.25%, 11/01/12 .................................................. 1,125,425
100,000 Series 1988, Pre-Refunded, 8.00%, 11/01/08 ................................................ 107,488
695,000 Southwestern SFMR, Refunding, Series A, 7.375%, 09/01/11 ...................................... 719,818
210,000 Summit County SFMR, Series A, 7.50%, 12/01/11 ................................................. 218,402
2,750,000 Summit County Sports Facilities Revenue, Refunding, Keystone Resorts Project, Ralston Purina Co.,
7.875%, 09/01/08 ............................................................................. 3,186,288
$ 7,000,000 University of Colorado, Hospital Authority Revenue, Series A, AMBAC Insured, 6.40%, 11/15/22 .. $ 7,260,820
2,000,000 Westminster City Sales and Use Tax Revenue, Refunding & Improvement, FGIC Insured,
7.00%, 12/01/08 ........................................................................... 2,141,800
--------------
Total Long Term Investments (Cost 207,935,237)........................................... 218,386,690
--------------
a Short Term Investments 1.5%
Colorado Health Facilities Authority Revenue,
400,000 Boulder Community Hospital Project, MBIA Insured, Weekly VRDN and Put, 3.40%, 10/01/14 .... 400,000
1,500,000 Sisters of Charity Health, Weekly VRDN and Put, 3.40%, 05/15/22 ........................... 1,500,000
1,400,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.10%, 12/01/15 .............................................................................. 1,400,000
--------------
Total Short Term Investments (Cost $3,300,000) .......................................... 3,300,000
--------------
Total Investments (Cost $211,235,237) 99.3% ........................................ 221,686,690
Other Assets and Liabilities, Net .7%............................................... 1,512,136
--------------
Net Assets 100.0%................................................................... $223,198,826
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments for
income tax purposes of $211,236,125 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of valver tax cost .................................................................... $ 11,080,587
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (630,022)
--------------
Net unrealized appreciation ................................................................. $ 10,450,565
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
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
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SF - Single Family
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Connecticut Tax-Free Income Fund (Note 1)
Long Term Investments 97.9%
Bridgeport GO,
<S> <C> <C>
$ 300,000 Series A, 7.25%, 06/01/00 ................................................................. $ 317,592
600,000 Series A, Pre-Refunded, 7.625%, 01/15/09 .................................................. 656,244
1,375,000 Series B, 7.55%, 11/15/00 ................................................................. 1,479,679
3,750,000 Series B, Pre-Refunded, 7.75%, 11/15/10 ................................................... 4,246,763
425,000 Series B, State Guaranteed, Pre-Refunded, 7.30%, 01/15/09 ................................. 461,040
750,000 Unlimited Tax, Series A, ETM, 7.30%, 03/01/99 ............................................. 799,463
Connecticut HFA, Housing Mortgage Finance, State Program,
75,000 Series A, 7.60%, 11/15/05 ................................................................. 77,576
1,135,000 Series A, Sub-Series 2, 7.20%, 11/15/08 ................................................... 1,196,562
245,000 Series B, 7.20%, 11/15/09 ................................................................. 252,749
17,485,000 Series B, 6.75%, 11/15/23 ................................................................. 18,241,576
1,250,000 Series B, Sub-Series 1, 6.05%, 05/15/18 ................................................... 1,240,913
270,000 Series B-1, 7.55%, 11/15/08 ............................................................... 276,097
1,615,000 Series C, 7.625%, 11/15/17 ................................................................ 1,665,824
500,000 Series C-1, 6.60%, 11/15/23 ............................................................... 516,850
1,500,000 Series C-2, 6.25%, 11/15/18 ............................................................... 1,503,525
5,720,000 Series C-2, 6.70%, 11/15/22 ............................................................... 5,823,704
3,900,000 Series E, 6.30%, 05/15/17 ................................................................. 3,943,368
1,250,000 Sub-Series A-1, 6.10%, 05/15/17 ........................................................... 1,255,700
640,000 Sub-Series B-1, 6.50%, 05/15/18 ........................................................... 653,286
700,000 Sub-Series B-1, 6.30%, 05/15/25 ........................................................... 708,603
475,000 Sub-Series B-2, 6.75%, 05/15/22 ........................................................... 489,578
1,380,000 Sub-Series G-1, 6.20%, 11/15/16 ........................................................... 1,387,756
410,000 Sub-Series H-1, 6.00%, 05/15/14 ........................................................... 410,242
Connecticut Higher Education Supplemental Loan Authority, Series A,
870,000 7.00%, 11/15/05 ........................................................................... 918,041
250,000 7.20%, 11/15/10 ........................................................................... 263,708
425,000 7.50%, 11/15/10 ........................................................................... 445,872
5,800,000 Connecticut State Development Authority, Health Care Revenue, Masonic Charity of Connecticut,
6.50%, 08/01/20............................................................................... 6,016,862
750,000 Connecticut State Development Authority, PCR, New England Power Co., 7.25%, 10/15/15 .......... 801,225
2,000,000 Connecticut State Development Authority, Solid Waste Disposal Facilities Revenue,
Pfizer, Inc. Project, 7.00%, 07/01/25 ........................................................ 2,192,200
1,000,000 Connecticut State Development Authority, Water Facility Revenue, Refunding, Bridgeport
Hydraulic Co. Project, 7.25%, 06/01/20 ....................................................... 1,076,380
Connecticut State Health and Educational Facilities Authority Revenue,
2,000,000 Abbot Terrace Health Center Project, Series A, 6.00%, 11/01/14 ............................ 2,034,360
635,000 Capital Assets, Series B, 7.00%, 01/01/00 ................................................. 669,792
1,995,000 Capital Assets, Series C, 7.00%, 01/01/20 ................................................. 2,150,470
5,600,000 Choate Rosemary Hall, Series A, 7.00%, 07/01/25 ........................................... 6,126,848
1,375,000 Hartford University, Series C, Pre-Refunded, 8.00%, 07/01/18 .............................. 1,576,850
5,000,000 Hartford University, Series D, 6.80%, 07/01/22 ............................................ 5,011,350
1,250,000 Hebrew Home and Hospital, Series A, 7.00%, 08/01/30 ....................................... 1,294,788
1,000,000 Lawrence Memorial Hospital, Series B, MBIA Insured, Pre-Refunded, 7.00%, 07/01/20 ......... 1,099,220
500,000 Lutheran General Health Care System, ETM, 7.375%, 07/01/19 ................................ 582,710
1,000,000 New Britain Memorial Hospital, Series A, 7.75%, 07/01/22 .................................. 1,051,190
2,905,000 New Horizons Village Project, 7.30%, 11/01/16 ............................................. 3,257,435
975,000 Quinnipiac College, Series C, Pre-Refunded, 7.75%, 07/01/20 ............................... 1,095,257
615,000 Sacred Heart University, Series A, Pre-Refunded, 6.85%, 07/01/22 .......................... 683,665
1,000,000 Sacred Heart University, Refunding, Series C, 6.50%, 07/01/16 ............................. 1,001,510
7,000,000 Sacred Heart University, Series C, 6.625%, 07/01/26 ....................................... 7,024,710
275,000 San Raphael Hospital, Series C, AMBAC Insured, Pre-Refunded, 7.50%, 07/01/14 .............. 296,238
Connecticut State Health and Educational Facilities Authority Revenue, (cont.)
$ 100,000 St. Mary's Hospital, Series B, 7.50%, 07/01/02 ............................................ $ 104,631
1,000,000 St. Mary's Hospital, Series C, Pre-Refunded, 7.375%, 07/01/20 ............................. 1,034,390
1,000,000 Taft School, Series A, 7.375%, 07/01/20 ................................................... 1,110,360
2,500,000 Taft School, Series C, 6.00%, 07/01/16 .................................................... 2,457,100
2,200,000 Trinity College, Series E, MBIA Insured, 5.875%, 07/01/26 ................................. 2,164,800
12,350,000 Yale New Haven Hospital, Series F, MBIA Insured, Pre-Refunded, 7.10%, 07/01/25 ............ 13,618,222
Connecticut State Resource Recovery Authority Revenue,
200,000 American Refunding, Series A, 7.70%, 11/15/01 ............................................. 215,060
200,000 American Refunding, Series A, 8.10%, 11/15/15 ............................................. 216,694
835,000 Bridgeport Resco, Ltd. Partnership Project, Series A, 7.625%, 01/01/09 .................... 864,476
1,850,000 Connecticut System Bonds, Series B, MBIA Insured, Pre-Refunded, 7.30%, 11/15/12 ........... 1,918,709
205,000 Wallingford Recovery Project, Series A, 7.125%, 11/15/08 .................................. 212,552
Connecticut State Special Tax Obligation Revenue, Transportation Infrastructure Purpose, Series A,
Pre-Refunded,
900,000 7.30%, 02/15/08 ........................................................................... 957,330
2,000,000 7.20%, 02/01/09 ........................................................................... 2,163,840
200,000 East Haven, Utah Bank Qualified GO, 7.00%, 09/15/07 ........................................... 213,500
200,000 Griswold GO, AMBAC Insured, 7.50%, 04/01/06 ................................................... 234,166
Guam Airport Authority Revenue, Series B
250,000 6.60%, 10/01/10 ........................................................................... 255,105
1,300,000 6.70%, 10/01/23 ........................................................................... 1,313,091
5,500,000 Guam Power Authority Revenue, Series A, 6.75%, 10/01/24 ....................................... 5,661,480
210,000 Montville Town GO, Pre-Refunded, 7.35%, 12/01/10 .............................................. 227,707
New Haven GO,
2,250,000 Series A, 7.10%, 03/01/97 ................................................................. 2,281,095
4,545,000 Series A, 7.40%, 03/01/12 ................................................................. 4,831,426
2,000,000 Series B, 6.75%, 12/01/05 ................................................................. 2,118,780
Plainfield GO,
150,000 Series 1988, 7.30%, 09/01/10 .............................................................. 162,627
335,000 Series 1991, 7.25%, 09/01/05 .............................................................. 365,843
335,000 Series 1991, 7.30%, 09/01/07 .............................................................. 365,338
335,000 Series 1991, 7.30%, 09/01/09 .............................................................. 362,895
100,000 Plainville GO, 7.20%, 06/15/08 ................................................................ 103,587
1,500,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A,
Pre-Refunded, 7.00%, 07/01/19 ................................................................ 1,605,570
1,000,000 Puerto Rico Commonwealth Highway Authority and Transportation Revenue, Series S,
Pre-Refunded, 6.625%, 07/01/18 ............................................................... 1,107,340
1,800,000 Puerto Rico Commonwealth Highway Authority Revenue, Pre-Refunded, Series R, 6.75%, 07/01/05 ... 1,963,008
Puerto Rico Electric Power Authority, Power Revenue,
700,000 Series 1991-P, Pre-Refunded, 7.00%, 07/01/11 .............................................. 782,453
2,950,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ................................................... 3,297,481
5,000,000 Series T, 6.375%, 07/01/24 ................................................................ 5,118,450
800,000 Puerto Rico HFC, SFMR, Series C, GNMA Insured, 6.85%, 10/15/23 ................................ 834,592
5,000,000 Puerto Rico Municipal Finance Agency, Series 1994-A, 6.50%, 07/01/19 .......................... 5,262,550
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Pre-Refunded,
700,000 Series H, 7.25%, 07/01/17 ................................................................. 749,049
1,000,000 Series J, 7.25%, 07/01/17 ................................................................. 1,070,070
1,130,000 Stratford GO, Unlimited Tax, Pre-Refunded, 7.30%, 03/01/12 .................................... 1,262,583
6,550,000 Virgin Islands Water and Power Authority, Electric System Revenue, Series A, 7.40%, 07/01/11 .. 6,895,578
Waterbury GO, Pre-Refunded,
$ 785,000 7.25%, 03/01/03 ........................................................................... $ 875,534
785,000 7.25%, 03/01/04 ........................................................................... 875,534
780,000 7.50%, 03/01/07 ........................................................................... 877,750
--------------
Total Long Term Investments (Cost $162,856,956) ......................................... 172,387,717
--------------
a Short Term Investments .4%
800,000 Connecticut State Development Authority, PCR, Refunding, Connecticut Light & Power Co. Project,
Series A, Weekly VRDN and Put, 3.40%, 09/01/28 (Cost $800,000)............................... 800,000
--------------
Total Investments (Cost $163,656,956) 98.3%......................................... 173,187,717
Other Assets and Liabilities, Net 1.7% ............................................. 2,958,430
--------------
Net Assets 100.0% ................................................................. $176,146,147
==============
At August 31, 1996 the net unrealized appreciation based on the cost of investments for
income tax purposes of $163,682,666 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 9,521,297
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (16,246)
--------------
Net unrealized appreciation ................................................................. $ 9,505,051
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
ETM - Escrow to Maturity
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Indiana Tax-Free Income Fund (Note 1)
Long Term Investments 96.3%
<S> <C> <C>
$ 75,000 Allen County COP, Fort Wayne Memorial Coliseum, Pre-Refunded, 8.125%, 11/01/17 ................... $ 78,452
50,000 Beech Grove EDR, Westvaco Corp., 8.75%, 07/01/10 ................................................. 50,597
1,000,000 Carmel EDR, Refunding, Cool Creek Association, 6.50%, 09/01/15 ................................... 1,016,980
75,000 Center Grove Central Elementary School Building Corp., First Mortgage, Pre-Refunded, 7.375%,
07/01/09 ........................................................................................ 79,475
50,000 Chesterton Sewer Revenue, Pre-Refunded, 8.10%, 08/01/07 .......................................... 53,561
250,000 Clarke County Hospital Association, Refunding, First Mortgage, MBIA Insured, 7.50%, 09/01/07 ..... 267,780
Columbus Sewage Works Revenue,
710,000 MBIA Insured, 6.50%, 02/15/13 .................................................................. 744,684
260,000 Series 1990, 7.25%, 02/15/09 ................................................................... 276,211
500,000 Crawfordsville School Building Corp., First Mortgage, Pre-Refunded, 7.70%, 07/15/11 .............. 560,340
50,000 Crown Point Redevelopment District, Lake County Tax Increment, 8.10%, 02/01/07 ................... 50,649
1,000,000 Eastern Hancock Middle School Building Corp., Indianapolis First Mortgage, Refunding, 6.00%,
01/15/21 ........................................................................................ 972,490
1,750,000 Elkhart County, Hospital Authority Revenue, Goshen Hospital Association, Inc. Project, 7.35%,
07/01/12 ........................................................................................ 1,805,265
500,000 Elwood Middle School Building Corp., Refunding, First Mortgage, 7.30%, 01/01/08 .................. 539,450
55,000 Flat Rock-Hawcreek Elementary School Building Corp., First Mortgage, Pre-Refunded, 8.30%,
01/01/09 ........................................................................................ 59,859
1,000,000 Fort Wayne Hospital Authority Revenue, Parkview Memorial Hospital Project, Series A, FGIC
Insured, 6.50%, 11/15/12 ........................................................................ 1,028,190
150,000 Franklin Community Elementary School Building Corp., First Mortgage, Pre-Refunded, 7.80%,
01/01/09 ........................................................................................ 157,556
200,000 Franklin Township of Marion County, Multi-School Building Corp., First Mortgage, Pre-Refunded,
7.50%, 01/15/12 ................................................................................. 217,258
50,000 Frankton-Lapel School Building Corp., First Mortgage, Pre-Refunded, 7.90%, 01/01/09 .............. 52,559
500,000 Hamilton Heights High School Building Corp., First Mortgage, Pre-Refunded, 7.375%, 07/15/10 ...... 557,790
125,000 Hamilton Southeastern Building Corp., Consolidated School Building Corp., First Mortgage,
Pre-Refunded, 8.40%, 01/01/15 ................................................................... 136,260
3,000,000 Hammond Industrial Sewer and Solid Waste Disposal Revenue, American Maize-Products Co.
Project, Series A, 8.00%, 12/01/24 .............................................................. 3,292,260
1,500,000 Hammond Multi-School Building Corp., Refunding, First Mortgage, Series A, 6.20%, 07/10/15 ........ 1,508,565
300,000 Hammond PCR, Stauffer Chemical Project, Guaranteed Imperial 82, 8.00%, 11/01/12 .................. 334,017
Indiana Bond Bank, Special Program,
35,000 Series 1986-C, 8.00%, 08/01/11 ................................................................. 36,150
300,000 Series 1988-A, Pre-Refunded, 8.375%, 02/01/18 .................................................. 310,122
250,000 Series 1990-A, 7.50%, 02/01/20 ................................................................. 267,860
Indiana Health Facility Financing Authority, Hospital Revenue,
500,000 Bartholomew Indiana County Hospital, CGIC Insured, Pre-Refunded, 7.75%, 08/15/20 ............... 563,205
750,000 Community Hospitals of Indiana, MBIA Insured, Pre-Refunded, 7.00%, 07/01/21 .................... 834,893
1,250,000 Hancock Memorial Hospital Project, Series 1990, 8.30%, 08/15/20 ................................ 1,332,150
1,835,000 Jackson County Schneck Memorial Hospital, 7.50%, 02/15/22 ...................................... 1,924,218
1,280,000 Methodist Hospital, Inc., 6.75%, 09/15/09 ...................................................... 1,332,160
1,000,000 Refunding and Improvement, Community Hospitals Projects, MBIA Insured, 5.70%, 05/15/22 ......... 954,550
55,000 St. Anthony's Medical Center/Home, Inc., Pre-Refunded, 9.25%, 10/01/17 ......................... 59,010
1,000,000 St. Anthony's Medical Center/Home, Inc., Series A, 7.00%, 10/01/17 ............................. 1,039,740
50,000 Welborn Memorial Baptist Hospital Project, Pre-Refunded, 8.00%, 07/01/02 ....................... 52,578
Indiana Municipal Power Agency, Power Supply System Revenue, Refunding, Series A,
65,000 5.75%, 01/01/18 ................................................................................ 61,266
2,250,000 5.50%, 01/01/23 ................................................................................ 2,087,843
Indiana State Educational Facilities Authority Revenue,
$ 175,000 Anderson University Project, 8.40%, 10/01/08 ................................................... $ 188,871
175,000 Butler University Project No. 2, Series B, FGIC Insured, Pre-Refunded, 8.00%, 11/01/09 ......... 191,485
100,000 Refunding, Valparaiso University Project, BIG Insured, Pre-Refunded, 7.80%, 10/01/08 ........... 108,861
500,000 University of Evansville, 8.125%, 11/01/10 ..................................................... 571,750
Indiana State HFA, SFMR,
20,000 Series A, 7.875%, 01/01/17 ..................................................................... 20,756
55,000 Series A, GNMA Secured, 8.125%, 07/01/06 ....................................................... 57,482
460,000 Series F-2, GNMA Secured, 7.75%, 07/01/22 ...................................................... 482,568
1,000,000 Indiana State Office Building Commission, Correctional Facilities Program Revenue, 6.375%,
07/01/16 ........................................................................................ 1,008,800
95,000 Indiana State Vocational Technical College Building Facilities, Student Fee, Series B, MBIA
Insured, Pre-Refunded, 7.90%, 07/01/07 .......................................................... 101,366
100,000 Indiana Transportation Finance Authority, Highway Revenue, Series A, Pre-Refunded, 8.125%,
06/01/11 ........................................................................................ 108,242
200,000 Indiana University, Hospital Facilities Revenue, 7.30%, 01/01/03 ................................. 214,072
Indianapolis Airport Authority, Indianapolis International Airport Revenue,
1,460,000 6.50%, 11/15/31 ................................................................................ 1,430,172
85,000 BIG Insured, 8.30%, 07/01/18 ................................................................... 91,232
Indianapolis Local Public Improvement Bond Bank,
2,300,000 Refunding, Series D, 6.75%, 02/01/20 ........................................................... 2,365,044
2,540,000 Refunding, Series D, 6.50%, 02/01/22 ........................................................... 2,574,061
225,000 Series D, Pre-Refunded, 8.50%, 02/01/18 ........................................................ 241,754
Indianapolis Resource Recovery Revenue, Ogden Martin System, Inc., 7.90%, 12/01/08,
100,000 Series A ...................................................................................... 103,772
150,000 Series B ....................................................................................... 155,658
500,000 Jasper County PCR, Refunding, Collateralized, Northern Indiana Public Service Co., MBIA Insured,
7.10%, 07/01/17 ................................................................................. 536,720
300,000 Jefferson County Hospital Authority Facility Revenue, Refunding, King's Daughters' Hospital,
8.50%, 08/15/13.................................................................................. 321,420
50,000 Kendallville Sewage Works Revenue, GO, Pre-Refunded, 7.60%, 07/01/07 ............................. 53,127
Kokomo Hospital Authority Revenue, Refunding, St. Joseph's Hospital and Health Center of Kokomo,
Pre-Refunded, 8.75%, 02/15/13,
300,000 Series A ....................................................................................... 330,336
225,000 Series B ....................................................................................... 247,752
2,100,000 Lake Central Industrial Multi-School Building, First Mortgage, MBIA Insured, 6.50%, 01/15/14 ..... 2,203,698
95,000 Madison County Authority, Anderson Hospital Revenue, Refunding, Series A, BIG Insured, 8.00%,
01/01/14......................................................................................... 100,485
100,000 Manchester Community, Elementary School Building Corp., First Mortgage, Pre-Refunded,
7.80%, 01/01/12 ................................................................................. 108,060
250,000 Marion County Convention and Recreational Facilities Authority, Excise Tax Revenue, Lease Rental,
Series A, AMBAC Insured, 7.00%, 06/01/21 ........................................................ 270,930
1,000,000 Merrillville Multi-School Building Corp., First Mortgage, Pre-Refunded, 7.50%, 07/15/09 .......... 1,115,580
300,000 Monroe County, Hospital Authority Revenue, Bloomington Hospital Project, MBIA Insured,
6.70%, 05/01/12 ................................................................................. 320,226
2,000,000 Muncies Edit Building Corp., Industrial First Mortgage, Series A, AMBAC Insured, 6.60%, 12/01/17 . 2,094,800
2,220,000 New Prairie Unified School Building Corp., Revenue, Refunding, First Mortgage, 5.80%, 07/05/11 ... 2,233,986
85,000 North Lawrence Community School, COP, Multi-School Building Corp., Pre-Refunded, 8.10%,
01/01/10 ........................................................................................ 90,799
60,000 North Montgomery Elementary School Building Corp., COP, Pre-Refunded, 8.375%, 07/01/08 ........... 64,303
125,000 Northridge High School Additions, Building Corp., Middlebury, First Mortgage, Pre-Refunded, 8.00%,
12/30/08......................................................................................... 135,381
100,000 Perry Township Multi-School Building Corp. Revenue, First Mortgage, Pre-Refunded, 7.80%, 01/01/03 106,507
Peru Community School Building Corp., First Mortgage, Pre-Refunded,
$ 150,000 Series 1988, 7.90%, 07/01/08 ................................................................... $ 163,922
100,000 Series 1989, 7.80%, 01/01/11 ................................................................... 109,063
Princeton PCR, Refunding, Public Service Co. of Indiana Project, Series C,
300,000 BIG Insured, 7.60%, 03/15/12 ................................................................... 310,026
250,000 MBIA Insured, 7.375%, 03/15/12 ................................................................. 268,635
150,000 South Bend Redevelopment Authority Lease Revenue, Rental Parking Facility Project, Pre-Refunded,
7.90%, 02/01/07 ................................................................................. 157,551
225,000 Southern Hancock County Community School Corp., COP, AMBAC Insured, Pre-Refunded, 7.10%,
07/01/11......................................................................................... 244,478
500,000 Steuben County Metropolitan School District, COP, 6.90%, 01/01/08 ................................ 528,335
750,000 Sullivan Industrial PCR, Refunding, Hoosier Energy, Meron Project, 7.10%, 04/01/19 ............... 797,678
250,000 Twin Lakes School Building Improvement Corp., First Mortgage, Pre-Refunded, 7.50%, 01/15/08 ...... 271,280
50,000 Warsaw High School Building Corp., First Mortgage, Pre-Refunded, 8.10%, 01/01/09 ................. 54,290
--------------
Total Long Term Investments (Cost $45,579,482) ............................................. $47,951,307
--------------
a Short Term Investments 1.6%
500,000 Fort Wayne Indiana Hospital Authority Revenue, Parkview Memorial Hospital, Series B, Weekly
VRDN and Put, 3.45%, 01/01/16 ................................................................... 500,000
300,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put, 3.10%,
12/01/15 ........................................................................................ 300,000
--------------
Total Short Term Investments (Cost $800,000)................................................ 800,000
--------------
Total Investments (Cost $46,379,482) 97.9% ............................................ 48,751,307
Other Assets and Liabilities, Net 2.1%................................................. 1,039,810
--------------
Net Assets 100.0% .................................................................... $49,791,117
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments for
income tax purposes of $46,379,482 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................................... $ 2,440,858
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................................... (69,033)
--------------
Net unrealized appreciation..................................................................... $ 2,371,825
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
GNMA - Government National Mortgage Association
GO - General Obilgation
HFA - Housing Finance Authority/Agency
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Michigan Tax-Free Income Fund (Note 1)
Long Term Investments 91.8%
<S> <C> <C>
$100,000 Allegan Public School District, AMBAC Insured, 5.75%, 05/01/22 ...................................... $ 96,992
125,000 Big Rapids Public School District, Building and Site, FGIC Insured, 5.625%, 05/01/25 ................ 118,611
100,000 Brandon School District, FGIC Insured, 5.75%, 05/01/20 .............................................. 98,341
100,000 Caledonia Community Schools, MBIA Insured, 5.85%, 05/01/22 .......................................... 99,073
100,000 Dearborn EDC Hospital Revenue, Oakwood Obligation Group, Series A, FGIC Insured, 5.75%, 11/15/15..... 97,719
200,000 Detroit City School District, Series A, AMBAC Insured, 5.70%, 05/01/25 .............................. 194,214
100,000 Farmington Hills EDC Revenue, Botsford Continuing Care, Series A, MBIA Insured, 5.75%, 02/15/25 ..... 96,078
500,000 Gogebic-Iron Wastewater Authority, Wastewater Treatment System Revenue, Refunding, MBIA Insured,
6.05%, 01/01/25 .................................................................................... 502,215
150,000 Grosse Ile Township School District, Refunding, FGIC Insured, 6.00%, 05/01/22 ....................... 150,219
100,000 Huron Valley School District, FGIC Insured, 5.875%, 05/01/16 ........................................ 100,030
120,000 Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Borgess Medical Center, Series A,
AMBAC Insured, 5.625%, 06/01/14 .................................................................... 115,622
100,000 Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding and Improvement,
Bronson Methodist, MBIA Insured, 5.875%, 05/15/26 .................................................. 97,994
220,000 Lincoln Consolidated School District, Refunding, FGIC Insured, 5.85%, 05/01/21 ...................... 218,277
100,000 Michigan State HDA, SFMR, Refunding, Series B, 6.20%, 06/01/27 ...................................... 97,707
100,000 Michigan State Hospital Finance Authority Revenue, Sparrow Obligated Group, MBIA Insured, 5.9%, 11/15/26 98,056
100,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Refunding, Series M, 5.75%, 07/01/15 96,756
100,000 Zeeland Public Schools, Refunding, Series B, MBIA Insured, 6.05%, 05/01/19 ......................... 101,082
--------------
Total Long Term Investments (Cost $2,375,077)................................................. 2,378,986
--------------
a Short Term Investments 3.9%
100,000 Bruce Township, Hospital Finance Authority, Health Care System Revenue, Sisters Charity St. Joseph-B,
MBIA Insured, Weekly VRDN and Put, 3.30%, 05/01/18 (Cost $100,000)................................. 100,000
--------------
Total Investments (Cost $2,475,077) 95.7% ................................................ 2,478,986
Other Assets and Liabilities, Net 4.3% .................................................. 110,915
--------------
Net Assets 100.0%......................................................................... $2,589,901
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments for
income tax purposes of $2,475,077 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost....................................................................... $ 14,330
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................................... (10,421)
--------------
Net unrealized appreciation........................................................................ $ 3,909
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
EDC - Economic Development Corp.
FGIC - Financial Guaranty Insurance Co.
HDA - Housing Development Authority/Agency
MBIA - Municipal Bond Investors Assurance Corp.
PBA - Public Building Authority
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin New Jersey Tax-Free Income Fund (Note 1)
Long Term Investments 98.0%
<S> <C> <C>
$ 1,000,000 Allamuchy Town Board of Education, COP, MBIA Insured, 6.00%, 11/01/14 ......................... $ 1,011,260
2,000,000 Atlantic City Municipal Utilities Authority Revenue, Water System, Pre-Refunded, 7.75%, 05/01/17 2,238,420
9,500,000 Atlantic County Improvement Authority, Luxury Tax Revenue, Convention Center Project, MBIA
Insured, ETM, 7.40%, 07/01/16 ................................................................ 11,028,740
Atlantic County Utilities Authority, Solid Waste Revenue, Series 1992,
2,000,000 7.00%, 03/01/08 ........................................................................... 1,953,840
6,600,000 7.125%, 03/01/16 .......................................................................... 6,447,342
2,000,000 Bedminister Township Board of Education, COP, 7.125%, 09/01/10 ................................ 2,197,720
Bergen County Utility Authority, Solid Waste System Revenue, Series A, FGIC Insured,
1,325,000 6.25%, 06/15/11 ........................................................................... 1,376,861
100,000 Pre-Refunded, 7.75%, 03/15/13 ............................................................. 105,395
100,000 Bridgeview Manor Housing Corp. Revenue, Series A, Pre-Refunded, 8.20%, 12/01/08 ............... 106,896
5,400,000 Cape May County, IPC, Financing Authority Revenue, Refunding, Atlantic City Electric Co., Series A,
MBIA Insured, 6.80%, 03/01/21................................................................. 6,132,240
2,750,000 Carteret Board of Education, COP, MBIA Insured, 6.25%, 04/15/19 ............................... 2,832,830
1,890,000 Church Street Corp., Keansburg Elderly Housing Mortgage Revenue, Refunding, 5.625%, 03/01/11 .. 1,825,551
200,000 Delaware River, Joint Toll Bridge System Commission Revenue, Series I-78, Pre-Refunded, 7.875%,
07/01/18 ........................................................................................216,380
4,200,000 Delaware River and Bay Authority, Delaware Authority Revenue, FGIC Insured, 5.25%, 01/01/26 ... 3,820,992
1,000,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue,
AMBAC Insured, 7.375%, 01/01/07 .............................................................. 1,072,680
24,000,000 Delaware River Port Authority Revenue, Pennsylvania and New Jersey, Series 1995, FGIC Insured,
5.50%, 01/01/26............................................................................. 22,730,160
2,510,000 Essex County Improvement Authority GO, Lease Revenue, MBIA Insured, 6.00%, 12/01/17 ........... 2,538,087
3,000,000 Evesham Municipal Utilities Authority Revenue, Series B, MBIA Insured, 7.00%, 07/01/10 ........ 3,200,730
3,675,000 Evesham Township Board of Education, COP, FGIC Insured, 6.875%, 09/01/11 ...................... 3,999,319
Gloucester County Improvement Authority Revenue,
1,000,000 Justice Complex Lease Project, Pre-Refunded, 7.50%, 12/15/10 .............................. 1,098,380
275,000 Solid Waste Resource Recovery, SES Gloucester Co., Limited Partnership Project, Series B,
8.375%, 07/01/10 ......................................................................... 286,019
2,000,000 Gloucester County, Industrial Refunding, Mobil Oil Refinance Corp. Project, 5.625%, 12/01/28 .. 1,909,800
4,670,000 Hamilton Township Board of Education, COP, Series B, FSA Insured, 7.00%, 12/15/15 ............. 5,036,455
1,750,000 Howell Township, GO, Refunding, FGIC Insured, 6.80%, 01/01/14 ................................. 1,882,300
100,000 Howell Township Municipal Utilities Authority Revenue, Monmouth County, BIG Insured,
Pre-Refunded, 7.375%, 01/01/14 ............................................................... 107,506
2,550,000 Hudson County Correctional Facility, COP, BIG Insured, Pre-Refunded, 7.60%, 12/01/21 .......... 2,781,362
2,000,000 Hudson County Improvement Authorities Facilities Lease Revenue, Hudson County Lease Project,
FGIC Insured, 6.00%, 12/01/25 ................................................................ 2,015,260
1,000,000 Jersey City Sewer Authority Revenue, Refunding, FGIC Insured, Pre-Refunded, 7.00%, 01/01/19 ... 1,024,950
Lacey Municipal Utilities Authority, Water Revenue, MBIA Insured,
1,225,000 6.125%, 12/01/14 .......................................................................... 1,266,748
2,500,000 6.10%, 12/01/23 ........................................................................... 2,558,150
2,500,000 Mercer County Improvement Authority Revenue, Library Systems, Series A, 6.00%, 12/01/14 ....... 2,520,875
Middlesex County COP, MBIA Insured,
1,500,000 6.00%, 08/15/14 ........................................................................... 1,533,540
2,300,000 6.125%, 02/15/19 .......................................................................... 2,363,756
2,000,000 Middlesex County Improvement Authority Revenue, Guaranteed Educational Services, Commission
Project, 6.00%, 09/15/14 ..................................................................... 2,043,760
2,100,000 Middlesex County Utilities Authority, Sewer Revenue, Refunding, Series A, FGIC Insured,
5.375%, 09/15/15.............................................................................. 2,002,560
100,000 Monmouth County Improvement Authority Revenue, Wall and Keyport Projects, BIG Insured,
Pre-Refunded, 7.90%, 07/15/13 ................................................................ 108,645
New Jersey EDA,
$ 5,000,000 Clara Maas Health Systems, FSA Insured, 5.00%, 07/01/25 ................................... $ 4,348,550
575,000 First Mortgage Gross Revenue, Mega Care, Inc. Project, Pre-Refunded, 8.625%, 08/01/07 ..... 609,903
6,370,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series A, 6.20%, 12/01/10 ............ 6,239,670
3,375,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.10%, 12/01/04 ............ 3,355,661
2,720,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.20%, 12/01/07 ............ 2,680,805
550,000 Jersey Central Power and Light, 7.10%, 07/01/15 ........................................... 588,308
3,000,000 Market Transition Facilities Revenue, Senior Lien, Series A, MBIA Insured, 5.875%, 07/01/11 3,054,570
6,000,000 Middlesex Water Co. Project, Water Facilities Revenue, 7.25%, 07/01/21 .................... 6,446,520
8,200,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series A, AMBAC Insured,
6.25%, 08/01/24........................................................................... 8,407,952
7,810,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series B, 7.25%, 03/01/21 8,147,939
1,625,000 Performing Arts Center Site Revenue, Pre-Refunded, 6.75%, 06/15/12 ........................ 1,712,165
1,640,000 School Revenue, Blair Academy, 1995 Project, Series A, 5.85%, 09/01/16 .................... 1,605,954
385,000 Series M, 7.90%, 12/01/08 ................................................................. 400,596
4,010,000 Series N, 6.90%, 12/01/11 ................................................................. 4,250,239
450,000 Series P, 6.90%, 12/01/11 ................................................................. 476,960
2,500,000 State Lease Revenue Refunding, Liberty State Park Lease Rental, AMBAC Insured, 5.75%,
03/15/20 ................................................................................. 2,461,925
3,315,000 State Lease Revenue Refunding, Liberty State Park Lease Rental, AMBAC Insured, 5.75%,
03/15/22 ................................................................................. 3,266,933
7,440,000 Terminal GATX Corp. Project, 6.65%, 09/01/22 .............................................. 7,728,970
1,000,000 Water Facilities Revenue Refunding, Hackensack Water Co., Series A, MBIA Insured, 5.80%,
03/01/24 ................................................................................. 987,800
New Jersey Health Care Facilities Financing Authority Revenue,
2,500,000 Atlantic City Medical Center, Series C, 6.80%, 07/01/11 ................................... 2,632,675
1,000,000 Berkeley Heights Convalescent Hospital, AMBAC Insured, 5.00%, 07/01/26 .................... 866,790
3,380,000 Beth Israel Hospital Association Passaic, 7.80%, 07/01/04 ................................. 3,596,185
1,000,000 Beth Israel Hospital Association Passaic, Refunding, 7.875%, 07/01/07 ..................... 1,065,880
9,490,000 Cathedral Health, Series A, FHA Insured, 7.25%, 02/15/10 .................................. 10,165,214
2,020,000 Cathedral Health, Series A, FHA Insured, 7.25%, 02/15/21 .................................. 2,158,794
1,000,000 Clara Maas Medical Center, Series B, Pre-Refunded, 7.30%, 07/01/09 ........................ 1,091,820
2,435,000 Clara Maas Medical Center, Series B, Pre-Refunded, 7.25%, 07/01/19 ........................ 2,655,392
100,000 Community Memorial Hospital Association, Series C, 8.00%, 07/01/14 ........................ 106,762
5,445,000 East Orange General Hospital, Series B, 7.75%, 07/01/20 ................................... 5,758,469
4,890,000 Elizabeth General Medical Center, Series C, 7.375%, 07/01/15 .............................. 5,065,307
3,150,000 Franciscan St. Mary's Hospital, 5.875%, 07/01/12 .......................................... 3,007,715
2,400,000 Hackensack Medical Center, FGIC Insured, 6.25%, 07/01/21 .................................. 2,438,568
4,000,000 Holy Name Hospital, Series B, AMBAC Insured, 7.00%, 07/01/08 .............................. 4,333,760
2,500,000 Jersey Shore Medical Center, Revenue Refunding, AMBAC Insured, 5.875%, 07/01/24 ........... 2,491,250
5,000,000 John F. Kennedy Health Systems, Obligation Group Revenue, FGIC Insured, 5.70%, 07/01/25 ... 4,875,250
230,000 Kennedy Memorial Hospitals-University Medical Center, Inc., Series D, 7.875%, 07/01/09 .... 245,226
4,900,000 Monmouth Medical Center, Series C, CGIC Insured, 6.25%, 07/01/16 .......................... 5,048,029
8,250,000 Monmouth Medical Center, Series C, CGIC Insured, 6.25%, 07/01/24 .......................... 8,468,213
1,800,000 Morristown Memorial Hospital, Series C, 7.125%, 07/01/08 .................................. 1,907,154
125,000 New Jersey Geriatric Center of Workmen's Circle, Inc., Series A, FHA Mortgage Insured,
8.00%, 02/01/28 .......................................................................... 133,270
3,630,000 Newcomb Medical Center, Series A, 7.875%, 07/01/03 ........................................ 3,887,875
8,500,000 Overlook Hospital Association, Series E, FGIC Insured, 6.70%, 07/01/13 .................... 8,826,485
3,565,000 Pascack Valley Hospital, 6.90%, 07/01/21 .................................................. 3,604,999
10,000,000 Riverview Medical Center, 5.875%, 07/01/16 ................................................ 9,981,600
100,000 St. Claire's Riverside Medical Center, Series D, BIG Insured, Pre-Refunded, 7.75%, 07/01/14 105,081
2,050,000 St. Joseph's Hospital and Medical Center, Revenue Refunding, 5.75%, 07/01/16 .............. 1,995,470
New Jersey Health Care Facilities Financing Authority Revenue, (cont.)
$ 1,000,000 St. Joseph's Hospital and Medical Center, Revenue Refunding, 6.00%, 07/01/26 .............. $ 991,660
1,865,000 Wayne General Hospital, Series B, 5.75%, 08/01/11 ......................................... 1,850,155
1,000,000 Wayne General Hospital, Series B, 5.875%, 08/01/18 ........................................ 972,930
475,000 Zurbrugg Memorial Hospital Issue, Series C, 8.50%, 07/01/12 ............................... 494,855
1,850,000 New Jersey State Building Authority Revenue, Refunding, 7.20%, 06/15/13 ....................... 1,964,312
New Jersey State Educational Facilities Authority Revenue,
4,000,000 Institute of Technology, Series A, MBIA Insured, 6.00%, 07/01/15 .......................... 4,064,840
2,000,000 Jersey State College, Series D, MBIA Insured, 6.125%, 07/01/22 ............................ 2,032,660
1,455,000 New Jersey Institute of Technology Revenue, Refunding, Series A, MBIA Insured, 6.00%, 07/01/24 1,469,899
2,500,000 New Jersey Institute of Technology, Series 95-E, MBIA Insured, 5.375%, 07/01/25 ........... 2,305,975
2,000,000 Princeton University, Series A, 5.875%, 07/01/18 .......................................... 2,005,380
2,760,000 Princeton University, Series C, 5.25%, 07/01/25 ........................................... 2,519,687
500,000 Ramapo College, Series C, BIG Insured, Pre-Refunded, 7.70%, 07/01/13 ...................... 539,890
3,000,000 Rider College, Series D, AMBAC Insured, 6.20%, 07/01/17 ................................... 3,099,030
9,810,000 Rowan College, Series E, AMBAC Insured, 6.00%, 07/01/26 ................................... 9,916,635
1,000,000 Seton Hall University Project, Series C, BIG Insured, 6.85%, 07/01/19 ..................... 1,068,440
4,400,000 Seton Hall University Project, Series D, 7.00%, 07/01/21 .................................. 4,575,604
4,780,000 Trenton State College, Series B, AMBAC Insured, 6.125%, 07/01/19 .......................... 4,887,407
7,845,000 Trenton State College, Series B, AMBAC Insured, 6.125%, 07/01/24 .......................... 7,991,937
New Jersey State Highway Authority, Garden State Parkway, Senior Parkway Revenue,
5,000,000 6.20%, 01/01/10 ........................................................................... 5,317,250
2,500,000 6.25%, 01/01/14 ........................................................................... 2,573,575
2,900,000 6.00%, 01/01/16 ........................................................................... 2,925,926
1,000,000 5.75%, 01/01/19 ........................................................................... 987,530
New Jersey State Housing and Mortgage Finance Agency,
740,000 Home Buyer Revenue, Series B, MBIA Insured, 7.90%, 10/01/22 ............................... 770,577
4,260,000 Home Buyer Revenue, Series D, MBIA Insured, 7.70%, 10/01/29 ............................... 4,444,032
5,000,000 Home Buyer Revenue, Series J, MBIA Insured, 6.20%, 10/01/25 ............................... 5,024,750
4,000,000 Home Buyer Revenue, Series N, MBIA Insured, 6.35%, 10/01/27 ............................... 4,015,520
40,000 Home Mortgage Purchase Revenue, Series A, MBIA Insured, 7.875%, 10/01/17 .................. 41,678
2,205,000 MFHR, Montclarion Project, Series J, FHA Insured, 7.70%, 11/01/29 ......................... 2,291,943
5,000,000 MFHR, Refunding, Series A, AMBAC Insured, 6.00%, 11/01/14 ................................. 5,034,700
12,500,000 MFHR, Refunding, Series A, AMBAC Insured, 6.05%, 11/01/20 ................................. 12,537,625
450,000 MFHR, Regency Park Project, Series H, 7.70%, 11/01/30 ..................................... 465,332
5,000,000 Section 8, Refunding, Series 1, 6.70%, 11/01/28 ........................................... 5,144,700
12,400,000 Section 8, Refunding, Series A, 6.95%, 11/01/13 ........................................... 12,935,556
4,670,000 Wastewater Treatment Trust Revenue, Series B, 7.00%, 07/01/11 ............................. 4,967,059
New Jersey State Sports and Expo Authority, State Contract,
6,800,000 Refunding, Series A, MBIA Insured, 6.25%, 07/01/20 ........................................ 6,980,948
8,000,000 Series A, MBIA Insured, 6.60%, 07/01/15 ................................................... 8,545,040
3,250,000 Newark Board of Education, MBIA Insured, 5.875%, 12/15/14 ..................................... 3,278,340
1,000,000 North Bergen Township Municipal Utility Authority Sewer Revenue, FGIC Insured, Pre-Refunded,
7.625%, 12/15/19 ............................................................................. 1,064,680
2,000,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Series A, Port Saipan
Harbor Improvement, 6.85%, 10/01/25 .......................................................... 2,007,540
100,000 Ocean Township Municipal Utilities Authority Revenue, Refunding, MBIA Insured, Pre-Refunded,
7.875%, 08/01/15 ............................................................................. 108,658
Passaic Valley Sewerage Commissioners, Sewer System, Series D, AMBAC Insured,
7,400,000 5.80%, 12/01/18 ........................................................................... 7,362,630
5,000,000 5.875%, 12/01/22 .......................................................................... 4,989,500
1,000,000 Pine Hill Borough School District COP, Fiscal Funding of New Jersey, Inc., BIG Insured,
Pre-Refunded, 7.60%, 12/30/09 ................................................................ 1,039,820
$ 1,000,000 Piscataway Township School District COP, MBIA Insured, Pre-Refunded, 7.50%, 06/15/09 .......... $ 1,079,580
Port Authority of New York and New Jersey,
5,000,000 Delta Airlines, Inc., Special Project, Series 1R, 6.95%, 06/01/08 ......................... 5,277,350
500,000 Consolidated 62nd Series, Pre-Refunded, 8.00%, 12/01/23 ................................... 510,575
3,875,000 Consolidated 65th Series, 7.00%, 09/01/24 ................................................. 3,961,374
2,500,000 Consolidated 67th Series, AMBAC Insured, 6.875%, 01/01/25 ................................. 2,645,525
750,000 Consolidated 67th Series, AMBAC Insured, 6.875%, 01/01/25 ................................. 789,203
2,500,000 Consolidated 71st Series, 6.50%, 01/15/26 ................................................. 2,571,250
12,000,000 Consolidated 72nd Series, Pre-Refunded, 7.35%, 10/01/27 ................................... 13,603,320
1,000,000 Consolidated 74th Series, 6.75%, 08/01/26 ................................................. 1,054,090
1,125,000 Consolidated 84th Series, 6.00%, 01/15/28 ................................................. 1,109,250
2,000,000 Consolidated 94th Series, 6.00%, 12/01/16 ................................................. 2,004,320
5,000,000 Consolidated 94th Series, 6.00%, 06/01/17 ................................................. 4,987,650
5,000,000 Consolidated 102nd Series, MBIA Insured, 5.75%, 10/15/23 .................................. 4,912,050
6,500,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
7.90%, 07/01/07 .............................................................................. 7,059,195
5,000,000 Puerto Rico Commonwealth GO, 6.45%, 07/01/17 .................................................. 5,259,350
Puerto Rico Commonwealth Highway Authority, Highway Revenue, Pre-Refunded,
275,000 Series P, 8.125%, 07/01/13 ................................................................ 299,478
8,000,000 Series Q, 8.00%, 07/01/18 ................................................................. 9,086,160
2,360,000 Series R, 7.25%, 07/01/02 ................................................................. 2,614,620
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
350,000 7.90%, 07/01/07 ........................................................................... 375,162
5,500,000 7.75%, 07/01/08 ........................................................................... 5,881,205
250,000 7.50%, 07/01/09 ........................................................................... 266,250
1,000,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 ......... 1,098,970
Puerto Rico Electric Power Authority, Power Revenue,
2,355,000 Refunding, Series 1989-N, 7.125%, 07/01/14 ................................................ 2,515,705
10,535,000 Refunding, Series T, 6.00%, 07/01/16 ...................................................... 10,354,219
4,500,000 Refunding, Series U, 6.00%, 07/01/14 ...................................................... 4,475,205
5,000,000 Series X, 6.125%, 07/01/21 ................................................................ 4,983,650
Puerto Rico HFC Revenue,
125,000 FHA Mortgage Insured, Section 8 Assisted, Sixth Portfolio, Pre-Refunded, 7.75%, 12/01/26 .. 148,686
5,000,000 MF, Portfolio A, Series I, 7.50%, 04/01/22 ................................................ 5,235,000
295,000 SFMR, Portfolio 1, Series 1988-A, GNMA Secured, 7.80%, 10/15/21 ........................... 307,042
1,305,000 SFMR, Portfolio 1, Series 1988-B, GNMA Secured, 7.65%, 10/15/22 ........................... 1,370,211
2,000,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA, Baxter Travenol Labs, Series A,
8.00%, 09/01/12 .............................................................................. 2,172,600
100,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 108,324
4,250,000 Rutgers State University, Series A, 6.50%, 05/01/18 ........................................... 4,452,810
Salem County IPC, Financing Authority Revenue, Refunding, Public Services, Electric and Gas Co.,
4,050,000 Series A, MBIA Insured, 5.70%, 05/01/28 ................................................... 3,856,289
5,000,000 Series D, MBIA Insured, 6.55%, 10/01/29 ................................................... 5,306,250
1,960,000 Sayreville HDC, Mortgage Revenue, Refunding, Lakeview, Section 8, FHA Insured, 7.75%, 08/01/24 1,987,009
1,000,000 Stony Brook Regional Sewerage Authority Revenue, Series 1989-A, Pre-Refunded, 7.40%, 12/01/09 . 1,103,070
100,000 Sussex County Municipal Utilities Authority, Solid Waste Revenue, Series A, BIG Insured,
Pre-Refunded, 7.875%, 12/01/13 ............................................................... 109,655
University of Medicine and Dentistry Revenue, Series C, Pre-Refunded,
750,000 7.20%, 12/01/09 ........................................................................... 821,640
725,000 7.20%, 12/01/19 ........................................................................... 794,252
1,200,000 Warren Hills Regional School District COP, BIG Insured, Pre-Refunded, 7.375%, 12/15/09 ........ 1,291,620
100,000 Winslow Township GO, Camden County, Refunding, AMBAC Insured, Pre-Refunded, 7.80%, 07/01/18 ... 107,316
--------------
Total Long Term Investments (Cost $534,101,684).......................................... 554,212,847
--------------
$ 1,700,000 New Jersey EDA, EDR, Dow Chemical, El Dorado Terminals, Series 1984-A, Refunding, Daily VRDN
and Put, 3.55%, 05/01/01...................................................................... $ 1,700,000
1,800,000 New Jersey EDA, EDR, El Dorado Terminals, Series 1984-B, Daily VRDN and Put, 3.55%, 05/01/03 .. 1,800,000
50,000 New Jersey Sports and Exposition Authority, State Contract, Series C, MBIA Insured, Weekly VRDN
and Put, 3.15%, 09/01/24...................................................................... 50,000
--------------
Total Short Term Investments (Cost $3,550,000) .......................................... 3,550,000
--------------
Total Investments (Cost $537,651,684) 98.6% ........................................ 557,762,847
Other Assets and Liabilities, Net 1.4% ............................................. 8,114,848
--------------
Net Assets 100.0% ................................................................. $565,877,695
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $ 537,651,684 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 22,651,514
Aggregate gross unrealized depreciation for all investments in which there was an
excess tax cost over value.................................................................... (2,540,351)
--------------
Net unrealized appreciation ................................................................. $ 20,111,163
==============
</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
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFC - Housing Finance Corp.
IPC - Industrial Pollution Control
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
PCFA - Pollution Control Financing Authority
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Oregon Tax-Free Income Fund (Note 1)
Long Term Investments 96.7%
<S> <C> <C>
$ 750,000 Albany Sewer Revenue, Series A, Pre-Refunded, 7.00%, 02/01/12 .................................. $ 817,253
1,000,000 Albany Water Revenue, Second Lien, Pre-Refunded, 7.25%, 08/01/09 ............................... 1,076,310
2,000,000 Bay Area Health District Hospital Facility Authority, Health Facilities Revenue, Evergreen Court
Project, 7.25%, 10/01/14 ...................................................................... 2,121,940
Bear Creek Valley Sanitary Authority GO,
50,000 Series 1987, 7.70%, 05/01/07 ............................................................... 51,454
100,000 Series 1988, 7.30%, 06/01/05 ............................................................... 104,879
105,000 Series 1988, 7.35%, 06/01/06 ............................................................... 110,209
115,000 Series 1988, 7.40%, 06/01/07 ............................................................... 120,879
125,000 Series 1988, 7.40%, 06/01/08 ............................................................... 131,390
1,125,000 Benton County, Oregon Hospital Facilities Authority, Good Samaritan Hospital, Corvallis,
6.25%, 10/01/09 ............................................................................... 1,136,993
1,000,000 Central Lincoln Utility District Electric Revenue, Pre-Refunded, 6.75%, 01/01/11 ............... 1,078,440
1,000,000 Chemeketa Community College District, FGIC, 5.80%, 06/01/12 .................................... 1,008,780
City of Bend, Urban Renewal Agency Tax Revenue, Series A,
600,000 6.85%, 09/01/06 ............................................................................ 612,906
750,000 7.00%, 09/01/11 ............................................................................ 767,370
4,000,000 City of Oregon, Sewer Revenue, Series 1994, 6.875%, 10/01/19 ................................... 4,053,800
4,945,000 Clackamas County, Health Facilities Authority Hospital Revenue, Refunding, Adventist Health,
Series A, MBIA Insured, 6.35%, 03/01/09 ....................................................... 5,218,706
Clackamas County, Hospital Facilities Authority Revenue,
1,250,000 Elderly Housing, 7.00%, 11/15/11 ........................................................... 1,283,350
2,990,000 GNMA Secured, Jennings Lodge Project, 7.50%, 10/20/31 ...................................... 3,223,728
1,635,000 Kaiser Permanente, Series A, 6.50%, 04/01/11 ............................................... 1,701,234
4,950,000 Kaiser Permanente, Series A, 6.25%, 04/01/21 ............................................... 5,143,892
2,250,000 Refunding, Gross Willamette Falls, 5.75%, 04/01/15 ......................................... 2,110,838
110,000 Sisters of Providence Project, 8.125%, 10/01/07 ............................................ 114,894
4,000,000 Clackamas County USD No. 115, AMBAC Insured, 6.15%, 06/01/14 ................................... 4,150,840
1,125,000 Clairmont Water District Revenue, 6.50%, 02/01/12 .............................................. 1,152,079
50,000 Coos Bay Waste Water GO, MBIA Insured, Pre-Refunded, 7.50%, 09/01/06 ........................... 51,793
Deschutes County Hospital Facilities Authority, Hospital Revenue, St. Charles Medical Center,
3,000,000 6.00%, 01/01/13 ............................................................................ 3,034,200
390,000 Pre-Refunded, 7.50%, 01/01/08 .............................................................. 406,060
125,000 Pre-Refunded, 7.60%, 01/01/13 .............................................................. 130,188
1,950,000 Douglas County, Hospital Facilities Authority Revenue, Catholic Health Facilities, Series B,
MBIA Insured, 6.00%, 11/15/15 ................................................................. 1,999,101
Emerald People's Utility District, Electric System Revenue, Refunding, AMBAC Insured,
100,000 Series A, Pre-Refunded, 7.20%, 11/01/06 .................................................... 100,448
55,000 Series A, Pre-Refunded, 7.35%, 11/01/13 .................................................... 55,327
195,000 Series B, 7.35%, 11/01/13 .................................................................. 195,823
500,000 Series B, Pre-Refunded, 7.30%, 11/01/11 .................................................... 541,935
Eugene Electric Utility System Revenue, Series 1991,
1,145,000 6.65%, 08/01/08 ............................................................................ 1,202,868
615,000 6.65%, 08/01/09 ............................................................................ 643,395
655,000 6.65%, 08/01/10 ............................................................................ 682,962
700,000 6.70%, 08/01/11 ............................................................................ 728,329
840,000 Eugene Trojan Nuclear Project Revenue, Refunding, 5.90%, 09/01/09 .............................. 828,022
70,000 Florence Improvement GO, Lane County, Pre-Refunded, 8.50%, 10/01/07 ............................ 73,293
Guam Airport Authority Revenue, Series B,
750,000 6.60%, 10/01/10 ............................................................................ 765,315
1,900,000 6.70%, 10/01/23 ............................................................................ 1,919,133
825,000 Guam Power Authority Revenue, Series A, 6.30%, 10/01/12 ........................................ 830,123
1,000,000 Hermiston GO, AMBAC Insured, 6.00%, 08/01/15 ................................................... 1,026,490
$ 1,280,000 Hillsboro Hospital Facility Authority, First Mortgage Revenue, Refunding, First Mortgage-Tuality
Community, Pre-Refunded, 7.60%, 10/01/12 ...................................................... $ 1,309,235
Klamath Falls Intercommunity Hospital Revenue, Merle West Medical Center Project,
1,500,000 7.00%, 06/01/02 ............................................................................ 1,587,360
2,310,000 7.25%, 06/01/06 ............................................................................ 2,447,306
1,000,000 Lane County COP, Fairground Project, 7.00%, 08/01/04 ........................................... 1,049,270
11,575,000 Lane County PCR, Refunding, Weyerhaeuser Co. Project, 6.50%, 07/01/09 .......................... 12,233,502
2,425,000 Lebanon Wastewater Revenue, Refunding, 5.875%, 06/01/20 ........................................ 2,284,447
1,250,000 Marion County Housing Authority Revenue, Elliott Residence Project, GNMA Secured, 7.50%, 10/20/25 1,364,013
1,000,000 Marion County Union High School District No. 7J, 6.00%, 06/01/13 ............................... 1,041,490
4,475,000 Medford Hospital Facilities Authority Revenue, Gross Rogue Valley Health Services, MBIA
Insured, 6.75%, 12/01/20 ...................................................................... 4,775,586
Metropolitan Service District, Convention Center GO,
4,865,000 Series A, 6.25%, 01/01/13 .................................................................. 5,024,086
115,000 Unlimited Tax, Pre-Refunded, 7.60%, 12/01/10 ............................................... 120,129
80,000 Unlimited Tax, Pre-Refunded, 7.65%, 12/01/11 ............................................... 83,616
85,000 Unlimited Tax, Pre-Refunded, 7.65%, 12/01/12 ............................................... 88,842
2,000,000 Waste Disposal System, Revenue Bonds, Pre-Refunded, 7.30%, 01/01/11 ........................ 2,200,760
175,000 Multnomah County School District COP, Series A, Pre-Refunded, 6.90%, 08/01/09 .................. 183,983
3,500,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Series A, Port Saipan
Harbor Improvement, 6.85%, 10/01/25 ........................................................... 3,513,195
Oak Lodge Water District GO, AMBAC Insured,
215,000 7.40%, 12/01/08 ............................................................................ 245,880
215,000 7.50%, 12/01/09 ............................................................................ 245,756
Ontario Hospital Facility Authority-Catholic Health Corp., Facilities Revenue, Dominican Sisters
of Ontario, Inc., Holy Rosary Hospital Project,
1,500,000 6.10%, 11/15/17 ............................................................................ 1,500,780
1,675,000 GNMA Secured, 7.00%, 06/01/12 .............................................................. 1,718,249
1,610,000 Oregon State Bond Bank Revenue, EDR, Series 1991-B, Pre-Refunded, 6.80%, 01/01/11 .............. 1,726,339
Oregon State Department of General Services, COP,
750,000 Real Property Financing Program, Series A, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/15 .... 841,823
4,110,000 Real Property Financing Program, Series A, MBIA Insured, Pre-Refunded, 7.20%, 01/15/15 ..... 4,513,520
1,000,000 Refunding, Series D, MBIA Insured, 5.80%, 03/01/15 ......................................... 992,150
150,000 Series B, MBIA Insured, Pre-Refunded, 7.20%, 01/15/15 ...................................... 164,727
3,150,000 Series F, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/15 ..................................... 3,535,655
750,000 Series G, AMBAC Insured, 6.25%, 09/01/15 ................................................... 779,895
16,500,000 Oregon State EDR, Georgia-Pacific Corp., Series CLVII, 6.35%, 08/01/25 ......................... 16,455,285
Oregon State Elderly and Disabled Housing Authority,
1,000,000 Series A, 6.00%, 08/01/15 .................................................................. 1,011,900
500,000 Series A, 6.00%, 08/01/21 .................................................................. 501,950
1,470,000 Series B, 6.10%, 08/01/17 .................................................................. 1,491,712
2,100,000 Series B, 6.25%, 08/01/23 .................................................................. 2,159,136
1,155,000 Series B, 6.375%, 08/01/24 ................................................................. 1,209,966
6,000,000 Series C, 6.50%, 08/01/22 .................................................................. 6,372,180
635,000 Oregon State Elderly Housing GO, Series A, 7.125%, 08/01/30 .................................... 681,495
Oregon State GO, Board of Higher Education,
750,000 Series 1991, 6.50%, 10/01/17 ............................................................... 785,798
60,000 Series A, Pre-Refunded, 8.125%, 10/01/17 ................................................... 62,621
300,000 Series A, Pre-Refunded, 7.50%, 05/01/18 .................................................... 316,041
400,000 Oregon State GO, Department of Energy, Series B, 6.80%, 01/01/17 ............................... 416,720
Oregon State GO, Department of Transportation Revenue, Regional Light Rail, Federal Westside
Project, MBIA Insured,
$ 2,000,000 6.10%, 06/01/07 ............................................................................ $ 2,131,260
2,500,000 6.20%, 06/01/08 ............................................................................ 2,657,450
1,750,000 6.25%, 06/01/09 ............................................................................ 1,866,795
1,000,000 Oregon State GO, Series B, 6.875%, 12/01/13 .................................................... 1,067,610
4,830,000 Oregon State HFA, SFMR Program, Series 1991-A, 7.20%, 07/01/15 ................................. 5,053,822
1,445,000 Oregon State Higher Education GO, Series C, Pre-Refunded, 7.25%, 10/15/18 ...................... 1,533,954
Oregon State Housing and Community Service Department, Finance Housing Revenue,
6,710,000 Multi-Unit, Series A, 6.80%, 07/01/13 ...................................................... 6,975,716
180,000 Multi-Unit, Series C, 6.85%, 07/01/22 ...................................................... 186,610
850,000 SFM, Series A, 5.75%, 07/01/12 ............................................................. 849,040
3,190,000 SFM, Series A, 6.35%, 07/01/14 ............................................................. 3,259,733
1,470,000 SFM, Series A, 6.40%, 07/01/18 ............................................................. 1,485,832
3,100,000 SFM, Series A, 6.45%, 07/01/26 ............................................................. 3,123,622
12,000,000 SFM, Series B, 6.875%, 07/01/28 ............................................................ 12,456,960
2,500,000 SFM, Series C, 6.20%, 07/01/15 ............................................................. 2,472,375
1,200,000 SFM, Series C, 6.40%, 07/01/26 ............................................................. 1,204,500
1,750,000 SFM, Series D, 6.80%, 07/01/27 ............................................................. 1,802,588
260,000 SFM, Series E, 7.00%, 07/01/09 ............................................................. 271,406
800,000 SFM, Series E, 5.80%, 07/01/16 ............................................................. 761,936
2,860,000 SFM, Series E, 6.75%, 07/01/16 ............................................................. 2,930,127
1,025,000 SFM, Series E, 7.15%, 07/01/25 ............................................................. 1,076,476
2,710,000 SFM, Series F, 7.00%, 07/01/22 ............................................................. 2,805,961
645,000 SFM, Series G, 6.80%, 07/01/22 ............................................................. 663,176
Oregon State Housing, Educational and Cultural Facility Authority,
10,500,000 Lewis and Clark College Project, Series A, 6.125%,10/01/24 ................................. 10,781,085
2,100,000 Lewis and Clark College Project, Series A, MBIA Insured, Pre-Refunded, 7.125%, 07/01/20 .... 2,321,361
700,000 Reed College Project, Pre-Refunded, 6.75%, 07/01/11 ........................................ 770,168
1,250,000 Reed College Project, Series A, Pre-Refunded, 6.75%, 07/01/21 .............................. 1,378,150
Oregon State Veteran's Welfare GO,
2,500,000 Series 73-A, 7.00%, 12/01/11 ............................................................... 2,673,375
875,000 Series 75, 5.85%, 10/01/15 ................................................................. 872,961
500,000 Series 75, 5.875%, 10/01/18 ................................................................ 505,040
3,050,000 Series 75, 6.00%, 04/01/27 ................................................................. 3,079,311
750,000 Port of Astoria, GO, MBIA Insured, Pre-Refunded, 6.60%, 09/01/11 ............................... 815,490
2,200,000 Port of Morrow PCR, Idaho Power Co., Boardman Project, 7.25%, 08/01/08 ......................... 2,222,044
500,000 Port of Morrow Revenue, Refunding, Pre-Refunded, 8.00%, 12/01/11 ............................... 539,920
4,000,000 Port of Portland Special Obligation Revenue, Delta Airlines, Inc. Project, 6.20%, 09/01/22 ..... 3,909,160
1,500,000 Port of St. Helens PCR, Refunding, Boise Cascade Corp. Project, 7.375%, 11/01/04 ............... 1,548,750
320,000 Port of Umpqua PCR, International Paper Co. Project, Series A, 6.60%, 03/15/05 ................. 328,474
2,000,000 Portland COP, Refunding, PBA, Series A, Pre-Refunded, 7.25%, 04/01/08 .......................... 2,136,100
85,000 Portland EDR, Public Broadcasting, Series A, 7.20%, 06/01/09 ................................... 85,211
Portland Hospital Facilities Authority Hospital Revenue, Legacy Health System, AMBAC Insured,
6.70%, 05/01/21,
10,500,000 Series A ................................................................................... 11,321,835
10,475,000 Series B ................................................................................... 11,294,878
1,000,000 Portland Housing Authority Revenue, Series 1990, 7.10%, 07/01/15 ............................... 1,053,140
635,000 Portland Hydroelectric Power Revenue, Bull Run Project, Series C, 7.00%, 10/01/16 .............. 635,419
Portland International Airport,
1,500,000 Series 7-A, MBIA Insured, 6.75%, 07/01/09 .................................................. 1,628,295
3,000,000 Series 7-B, MBIA Insured, 7.10%, 07/01/21 .................................................. 3,256,800
300,000 Series 10, 5.75%, 07/01/25 ................................................................. 292,554
$ 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 .............................................. $ 3,100,579
170,000 Portland Parking Revenue, Pre-Refunded, 8.625%, 10/01/12 ....................................... 181,477
Portland Sewer System Revenue,
5,000,000 Series 1990, Pre-Refunded, 7.125%, 03/01/10 ................................................ 5,222,150
14,100,000 Series A, 6.25%, 06/01/15 .................................................................. 14,597,307
950,000 Series A, FGIC Insured, 6.00%, 10/01/12 .................................................... 979,327
Portland Urban Renewal and Redevelopment, Downtown Waterfront,
5,555,000 Refunding, Series A, 6.40%, 06/01/08 ....................................................... 5,881,523
125,000 Series H, Pre-Refunded, 8.25%, 12/01/07 .................................................... 131,470
75,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Refunding, Series 1985-A,
FSA Insured, Pre-Refunded, 9.00%, 07/01/09 .................................................... 94,647
1,000,000 Puerto Rico Commonwealth GO, 6.45%, 07/01/17 ................................................... 1,051,870
4,000,000 Puerto Rico Commonwealth Highway Authority Revenue, Series Q, Pre-Refunded, 8.00%, 07/01/18 .... 4,543,080
30,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ......................... 30,122
2,400,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
7.75%, 07/01/08 ............................................................................... 2,566,344
Puerto Rico Commonwealth Public Improvement GO, Pre-Refunded, Series A, 7.75%,
250,000 07/01/06 ................................................................................... 270,855
280,000 07/01/13 ................................................................................... 303,358
Puerto Rico Electric Power Authority, Power Revenue, Refunding, Pre-Refunded,
2,070,000 Series 1980-R, 6.25%, 07/01/17 ............................................................. 2,088,858
1,500,000 Series 1980-X, 6.00%, 07/01/15 ............................................................. 1,483,185
190,000 Series 1987-L, 8.40%, 07/01/15 ............................................................. 200,644
600,000 Series 1988-M, 8.00%, 07/01/08 ............................................................. 652,104
2,000,000 Series 1989-O, 7.125%, 07/01/14 ............................................................ 2,154,002
Puerto Rico HFC Revenue,
395,000 FHA Mortgage Insured, Section 8 Assisted, Sixth Portfolio, Pre-Refunded, 7.75%, 12/01/26 ... 469,849
95,000 SFMR, Portfolio No. 1, Series 1988-A, GNMA Secured, 7.80%, 10/15/21 ........................ 98,878
620,000 SFMR, Portfolio No. 1, Series 1988-B, GNMA Secured, 7.65%, 10/15/22 ........................ 650,981
500,000 Puerto Rico Housing Bank and Finance Agency, SFMR, Homeowner's Development Program,
Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15 ................................................ 547,975
205,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ........................... 222,064
90,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Refunding, Series G,
Pre-Refunded, 7.875%, 07/01/07 ................................................................ 94,739
1,100,000 Puerto Rico Telephone Authority Revenue, Series 1992-L, 6.125%, 01/01/22 ....................... 1,105,995
50,000 Redmond Improvement GO, Pre-Refunded, 7.80%, 05/01/17 .......................................... 51,272
Roseburg Urban Sanitary Authority, Improvement GO, Unlimited Tax, Douglas County,
60,000 7.40%, 01/01/06 ............................................................................ 62,447
230,000 7.50%, 01/01/08 ............................................................................ 240,382
1,000,000 Salem Educational Facilities Revenue, Refunding, Williamette University, 6.10%, 04/01/14 ....... 1,006,420
1,250,000 Salem GO, Series A, 5.875%, 01/01/07 ........................................................... 1,278,638
Salem-Keizer School District No. 24J, FGIC Insured, 6.00%,
4,345,000 06/01/13 ................................................................................... 4,485,517
4,395,000 06/01/14 ................................................................................... 4,509,270
2,765,000 Tillamook People Utilities District, 5.75%, 01/01/28 ........................................... 2,533,321
1,235,000 Tri-County, Metro Transportation District, COP, 7.50%, 12/15/02 ................................ 1,244,077
2,500,000 Tri-County, Metro Transportation District, Light Rail Extended, Series A, 6.00%, 07/01/12 ...... 2,567,200
1,375,000 Umatilla County Hospital Facility Authority, Hospital Revenue, Refunding, Good Shepherd
Community Hospital, 7.50%, 01/01/10 ........................................................... 1,395,158
5,300,000 Umatilla County USD No. 16R, Pendletron Project, AMBAC Insured, 6.00%, 07/01/14 ................ 5,510,781
2,000,000 Wasco County Hospital Facility Authority Hospital Revenue, Pre-Refunded, 7.375%, 07/01/00 ...... 2,056,760
100,000 Washington County Building GO, Pre-Refunded, 7.75%, 12/01/06 ................................... 104,578
Washington County Unified Sewerage Agency, Sewer Revenue,
$ 50,000 Pre-Refunded, 7.90%, 07/01/07 .............................................................. $ 51,652
2,700,000 Pre-Refunded, 7.00%, 11/01/09 .............................................................. 2,902,851
4,000,000 Refunding, Series A, 6.20%, 10/01/10 ....................................................... 4,196,280
1,000,000 Refunding, Series A, 6.125%, 10/01/12 ...................................................... 1,040,250
7,500,000 Sub Lien-Series One, AMBAC Insured, 6.125%, 10/01/12 ....................................... 7,801,875
1,000,000 Washington County USD No. 88J, 6.10%, 06/01/12 ................................................. 1,046,020
Western Lane Hospital District, Hospital Facilities Authority Revenue, Sister/St. Joseph Peace,
Health and Hospital Services, MBIA Insured,
4,400,000 5.875%, 08/01/12 ........................................................................... 4,434,188
2,700,000 Pre-Refunded, 7.125%, 08/01/17 ............................................................. 2,948,373
5,000,000 Yamhill County USD No. 29J, 6.10%, 06/01/11 .................................................... 5,228,988
--------------
Total Long Term Investments (Cost 348,278,315)............................................ 365,049,518
--------------
a Short Term Investments 1.6%
1,000,000 Medford Oregon Hospital Facilities Authority Revenue, Rogue Valley Health Services, Daily VRDN
and Put, 3.90%, 10/01/16 ...................................................................... 1,000,000
1,300,000 Oregon State Health, Housing, Educational, and Cultural Facilities Authority, Weekly VRDN and Put,
3.45%, 07/01/25 ............................................................................... 1,300,000
3,750,000 Portland St. Helens Pollution Control Revenue, General Electric Company, Series A, Daily VRDN and
Put, 3.80%, 04/01/10 .......................................................................... 3,750,000
100,000 Puerto Rico Commonwealth Government Developement Bank, Refunding, Weekly VRDN and Put
3.10%, 12/01/15 ............................................................................... 100,000
--------------
Total Short Term Investments (Cost $6,150,000)............................................ 6,150,000
--------------
Total Investments (Cost $354,428,315) 98.3% ......................................... 371,199,518
Other Assets and Liabilities, Net 1.7% .............................................. 6,177,870
--------------
Net Assets 100.0%.................................................................... $377,377,388
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $354,428,315 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 17,365,629
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................................. (594,426)
--------------
Net unrealized appreciation................................................................... $ 16,771,203
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corp.
IDC - Industrial Development Corp.
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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Pennsylvania Tax-Free Income Fund (Note 1)
Long Term Investments 98.5%
<S> <C> <C>
$ 2,000,000 Abington Pennsylvania School District, FGIC Insured, 6.00%, 05/15/26 .......................... $ 2,018,800
2,000,000 Allegheny County Higher Educational Building Authority University Revenue, Duquesne University
Project, AMBAC Insured, 5.00%, 03/01/21 ...................................................... 1,740,400
Allegheny County Hospital Development Authority Revenue, Refunding,
10,000,000 Allegheny General Hospital, Series A, MBIA Insured, 6.25%, 09/01/20 ....................... 10,231,200
500,000 Divine Providence Hospital, Series 1988-B, 8.75%, 01/01/14 ................................ 530,965
5,500,000 eMercy Hospital, Pittsburgh, Health System, AMBAC Insured, 5.625%, 08/15/26 ............... 5,199,975
5,250,000 Southside Hospital, Pittsburgh, Series 1987, 8.75%, 06/01/10 .............................. 5,434,275
1,000,000 Allegheny County IDA, Presbyterian University Hospital, Kaufmann Medical Project, Refunding,
Series A, MBIA Insured, 6.80%, 03/01/15 ...................................................... 1,064,400
3,270,000 Allegheny County RDAR, Refunding, Home Improvement, Series A, 5.90%, 02/01/11 ................. 3,238,510
Allegheny County Residential Finance Authority,
2,000,000 Ladies Grand Army Republic Health Facilities, Series G, FHA Secured, 6.35%, 10/01/36 ...... 2,019,060
3,845,000 Lemington Home, Series E, 7.125%, 02/01/27 ................................................ 3,940,433
1,400,000 Series D, MFMR, FHA Secured, 7.50%, 06/01/33 .............................................. 1,445,584
15,000 Series D, SFMR, FGIC Insured, 8.90%, 12/01/10 ............................................. 15,707
1,395,000 Series H, SFMR, GNMA Secured, 8.00%, 06/01/17 ............................................. 1,440,059
2,470,000 Series J, GNMA Secured, 7.50%, 06/01/17 ................................................... 2,533,652
2,325,000 Series K, GNMA Secured, 7.75%, 12/01/22 ................................................... 2,408,072
1,455,000 Series M, SFMR, GNMA Secured, 7.90%, 06/01/11 ............................................. 1,517,798
810,000 Series T, SFMR, GNMA Secured, 6.95%, 05/01/17 ............................................. 846,758
1,200,000 Allegheny County Sanitary Authority, Sewer Revenue, Series A, FGIC Insured, Pre-Refunded,
7.45%, 12/01/09 .............................................................................. 1,291,104
5,000,000 Beaver County Hospital Authority Revenue, Refunding, Medical Center Beaver County, Inc.,
AMBAC Insured, 6.625%, 07/01/10 .............................................................. 5,336,600
Beaver County IDA, PCR, Refunding, Series A,
4,400,000 Beaver Co., Ohio Edison/Pennsylvania Power Project, 7.15%, 09/01/21 ....................... 4,609,000
6,475,000 Ohio Edison/Pennsylvania Power Project, 7.75%, 09/01/24 ................................... 6,829,247
3,000,000 Bensalem TWP Refunding, FGIC Insured, 5.75%,12/01/16 .......................................... 2,953,860
Berks County, IDA, PCR, Refunding,
4,000,000 FGIC Insured, Pre-Refunded, 7.00%, 05/15/18 ............................................... 4,499,960
1,000,000 Highlands Wyomissing Project, Series 1989-A, Pre-Refunded, 7.25%, 10/01/19 ................ 1,075,960
4,000,000 Bethlehem Area School District, MBIA Insured, 6.00%, 03/01/16 ................................. 4,063,520
2,500,000 Bradford County IDA, Solid Waste Disposal Revenue, International Paper Co., 6.60%, 03/01/19 ... 2,545,375
2,890,000 Burrell School District, FGIC Insured, 5.60%, 11/15/15 ........................................ 2,846,303
2,000,000 Butler County IDA, PCR, Refunding, Witco Corp. Project, 5.85%, 12/01/23 ....................... 1,928,620
Cambria County Hospital Development Authority Revenue, Refunding, Conemaugh Valley
Memorial Hospital, Series B,
3,500,000 6.375%, 07/01/18 .......................................................................... 3,589,390
1,000,000 Pre-Refunded, 8.875%, 07/01/18 ............................................................ 1,098,320
Cambria County IDA, Resource Recovery Revenue, Cambria Cogen Project, 7.75%
4,000,000 Series F-1, 09/01/19 ...................................................................... 4,109,280
2,715,000 Series F-2, 09/01/19 ...................................................................... 2,789,174
1,000,000 Charleroi Area School Authority Revenue, MBIA Insured, Pre-Refunded, 7.35%, 02/01/14 .......... 1,066,110
Chartiers Valley Industrial and Commercial Development Authority Revenue, Refunding,
4,295,000 First Mortgage, Asbury Place Project, 6.50%, 02/01/36 ..................................... 4,367,285
1,000,000 First Mortgage, United Methodist Health Center, Series A, Pre-Refunded, 9.25%, 12/01/08 ... 1,122,190
4,500,000 Hapsco-Western Hospital Project, Series A, MBIA Insured, 6.50%, 07/01/12 .................. 4,735,755
5,000,000 Hapsco-Western Hospital Project, Series B, MBIA Insured, 6.25%, 07/01/16 .................. 5,136,200
1,000,000 Northeast Bradford School, 7.50%, 06/01/26 ................................................ 1,034,920
2,000,000 Delaware County Authority Revenue Bond 1990, Elwyn, Inc. Project, 8.35%, 06/01/15 ............. 2,148,780
5,000,000 Delaware County IDAR, PCR, Philadelphia Electric Co. Project, 7.375%, 04/01/21 ................ 5,320,500
Delaware County IDAR, Resources Recovery Project, Refunding, Series A,
$ 1,000,000 7.90%, 12/01/05 ........................................................................... $ 1,037,010
6,000,000 8.10%, 12/01/13 ........................................................................... 6,224,880
450,000 Delaware River Joint Toll Bridge System Commission Revenue, Series I-78, Pre-Refunded,
7.875%, 07/01/18 ............................................................................. 486,855
7,350,000 Delaware River Port Authority, Pennsylvania and New Jersey Revenue, FGIC Insured, 5.50%, 01/01/26 6,961,112
1,000,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue, Refunding,
AMBAC Insured, 7.375%, 01/01/07 .............................................................. 1,072,680
400,000 Dubois Hospital Authority Revenue, Refunding, Dubois Regional Medical Center Project, Series
1987-A, Pre-Refunded, 8.75%, 07/01/11 ........................................................ 418,692
250,000 Edinboro Municipal Authority Sewer Revenue, Guaranteed, Series 1987, Pre-Refunded, 8.25%, 08/01/07 259,410
7,000,000 Erie County Hospital Authority Revenue, St. Vincent Health Center Project, Series A, AMBAC
Insured, 6.375%, 07/01/22 .................................................................... 7,253,960
2,110,000 Erie County IDAR, Nursing Home-Sarah Reed Center Project, 8.625%, 07/01/14 .................... 2,221,957
3,000,000 Erie Higher Educational Building Authority, Gannon University, Series A, Pre-Refunded, 8.50%,
06/01/15 ..................................................................................... 3,357,090
920,000 Erie Western Pennsylvania Port Authority General Revenue, 6.875%, 06/15/16 .................... 921,702
1,850,000 Erie Western Pennsylvania Port Authority GO, 8.625%, 06/15/10 ................................. 2,055,905
1,250,000 Fayette County Hospital Authority Revenue, Refunding, Uniontown Hospital Project, Pre-Refunding,
7.625%, 07/01/15 ............................................................................. 1,280,075
4,000,000 Harrisburg Authority Water Revenue, FGIC Insured, Pre-Refunded, 7.00%, 07/15/15 ............... 4,382,600
800,000 Harrisburg RDAR, Capital Improvement, Series A, FGIC Insured, 7.875%, 11/02/16 ................ 819,496
4,000,000 Jeannette County Health Service Authority Hospital Revenue, Jeannette District Memorial Hospital,
8.625%, 01/01/18 ............................................................................. 4,350,640
1,250,000 Jeannette County Municipal Authority Sewer Revenue, 7.00%, 07/01/17 ........................... 1,321,625
1,600,000 Lancaster County Hospital Authority Revenue, Refunding, Health Center, Masonic Homes PJ,
AMBAC Insured, 5.00%, 11/15/20 ............................................................... 1,395,136
1,000,000 Lancaster County Hospital Authority Revenue, Willow Valley Lakes Manor, Series B, Pre-Refunded,
9.00%, 06/01/12 .............................................................................. 1,077,470
1,000,000 Lancaster County Solid Waste Management Authority, Resource Recovery System Revenue,
Series A, 8.50%, 12/15/10 .................................................................... 1,059,060
5,595,000 Lawrence County IDA, PCR, Refunding, Ohio Edison/Pennsylvania Power Co., 7.15%, 03/01/17 ...... 5,855,895
2,500,000 Lebanon County Good Samaritan Hospital Authority Revenue, Good Samaritan Hospital Project,
Refunding, 6.00%, 11/15/18 ................................................................... 2,272,250
Lehigh County General Purpose Authority Revenue,
1,000,000 Exempt Facility, FGIC Insured, Pre-Refunded, 7.25%, 01/01/10 .............................. 1,058,740
3,000,000 Good Shepherd Rehabilitation Hospital, 7.50%, 11/15/21 .................................... 3,105,420
1,100,000 Horizon Health Systems, Inc., Pre-Refunded, 8.25%, 07/01/13 ............................... 1,148,257
1,000,000 Lehigh Valley Hospital, Inc., Series A, MBIA Insured, Refunding, 5.875%, 07/01/15 ......... 985,910
5,800,000 Muhlenburg Hospital, Series A, 6.60%, 07/15/22 ............................................ 5,809,918
1,400,000 Muhlenburg Hospital, Series A, Pre-Refunded, 8.00%, 07/15/01 .............................. 1,549,912
1,500,000 Muhlenburg Hospital, Series B, 8.00%, 07/15/01 ............................................ 1,629,375
Lehigh County IDA, PCR, Pennsylvania Power & Light Co. Project, MBIA Insured,
5,000,000 Series A, 6.40%, 11/01/21 ................................................................. 5,192,250
5,550,000 Series A, 6.15%, 08/01/29 ................................................................. 5,682,423
10,000,000 Series B, 6.40%, 09/01/29 ................................................................. 10,411,500
2,000,000 Lower Providence TWP, Pennsylvania Sewer Authority, Sewer Revenue, Guaranteed Refunding
Sewer Revenue, MBIA Insured, 5.25%, 05/01/14 ................................................. 1,881,400
Luzerne County IDA, Exempt Facility Revenue Refunding, Gas and Water Co. Project, Series A,
4,750,000 6.05%, 01/01/19 ........................................................................... 4,483,478
5,000,000 AMBAC Insured, 7.00%, 12/01/17 ............................................................ 5,533,800
2,285,000 Meadville GO, Series A, AMBAC Insured, 5.25%, 10/01/25 ........................................ 2,082,526
5,000,000 Montgomery County GO, Series A, 6.10%, 10/15/25 ............................................... 5,061,050
Montgomery County Higher Education and Health Authority Revenue,
$ 2,500,000 Bryn Mawr Hospital Project, Pre-Refunded, 7.375%, 12/01/19 ................................ $ 2,755,825
500,000 Bryn Mawr Hospital Project, Pre-Refunded, 9.375%, 12/01/19 ................................ 541,505
2,375,000 Holy Redeemer Hospital, Series A, AMBAC Insured, 7.625%, 02/01/20 ......................... 2,518,284
610,000 Jeanes Health System Project, Series 1987, 7.625%, 07/01/17 ............................... 614,014
10,000,000 Jeanes Health System Project, Series 1990, Pre-Refunded, 8.75%, 07/01/20 .................. 11,541,500
1,315,000 Pottstown Memorial Medical Center Project, 7.35%, 11/15/05 ................................ 1,413,007
1,750,000 St. Joseph's University, Series 1990, 6.50%, 12/15/22 ..................................... 1,823,588
5,500,000 St. Joseph's University, Series 1990, Pre-Refunded, 8.30%, 06/01/10 ....................... 6,249,265
Montgomery County IDAR,
2,530,000 Refunding, PCR, Philadelphia Electric Co., Series A, 7.60%, 04/01/21 ...................... 2,692,679
10,000,000 Resources Recovery, 7.50%, 01/01/12 ....................................................... 10,595,200
5,000,000 Montgomery County PCR, Philadelphia Electric Revenue, Series B, MBIA Insured, 6.70%, 12/01/21 . 5,321,050
600,000 Moon Transportation Authority, Highway Improvement Revenue, Pre-Refunded, 9.50%, 02/01/16 ..... 637,674
1,000,000 Neshaminy School District GO, FGIC Insured, 7.00%, 02/15/14 ................................... 1,081,420
6,600,000 North Allegheny School District GO, AMBAC Insured, Pre-Refunded, 7.60%, 05/01/13 .............. 7,242,378
Northeastern Pennsylvania Hospital and Educational Authority Revenue, Refunding,
1,000,000 Kings College Project, Series B, 6.00%, 07/15/11 .......................................... 961,900
1,000,000 Kings College Project, Series B, 6.00%, 07/15/18 .......................................... 920,150
5,000,000 Wilkes University, 6.125%, 10/01/11 ....................................................... 4,872,650
600,000 Northeastern Pennsylvania Hospital Authority Revenue, Wilkes Barre General Hospital, Series B,
Pre-Refunded, 8.375%, 07/01/06 ............................................................... 632,736
400,000 Northeastern York County Sewer Authority Revenue, Series 1987, Pre-Refunded, 8.75%, 09/01/18 .. 418,356
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 ........................................ 1,237,827
6,100,000 North Hampton County IDA, PCR, Refunding, 6.10%, 07/15/21 ..................................... 6,171,858
5,000,000 Pennsylvania Convention Center Authority Revenue, Refunding, Series A, 6.60%, 09/01/09 ........ 5,238,200
Pennsylvania EDA,
3,000,000 MacMillian L.P. Project, 7.60%, 12/01/20 .................................................. 3,285,660
5,000,000 Resources Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15 .................... 5,215,100
Pennsylvania HFA,
10,000,000 Refunding, Rental Housing, FNMA Insured, 5.75%, 07/01/14 .................................. 9,889,200
5,655,000 SFMR, Series 1987-K, 6.125%, 10/01/24 ..................................................... 5,668,855
50,000 SFMR, Series 1987-L, 7.125%, 04/01/14 ..................................................... 51,848
750,000 SFMR, Series 1987-P, 8.00%, 04/01/16 ...................................................... 771,803
1,335,000 SFMR, Series 1988-R, 8.125%, 10/01/19 ..................................................... 1,374,516
4,885,000 SFMR, Series 1988-U, 7.80%, 10/01/20 ...................................................... 5,149,865
1,965,000 SFMR, Series 1989-W, 7.80%, 10/01/20 ...................................................... 2,056,608
3,570,000 SFMR, Series 1989-Y, 7.45%, 04/01/16 ...................................................... 3,731,471
5,715,000 SFMR, Series 1990-29, 7.375%, 10/01/16 .................................................... 6,050,642
4,500,000 SFMR, Series 1991-30, 7.30%, 10/01/17 ..................................................... 4,769,595
5,000,000 SFMR, Series 1991-32, 7.15%, 04/01/15 ..................................................... 5,230,950
3,000,000 SFMR, Series 1992-34-A, 6.85%, 04/01/16 ................................................... 3,107,070
6,000,000 SFMR, Series 1992-34-B, 7.00%, 04/01/24 ................................................... 6,176,760
Pennsylvania Infrastructure Investment Authority Revenue, Pennvest Lane Pool Program,
MBIA Insured, 5.625%,
6,010,000 09/01/13 .................................................................................. 5,903,623
2,870,000 09/01/14 .................................................................................. 2,801,809
6,400,000 Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue, Philadelphia Funding
Project, FGIC Insured, Pre-Refunded, 7.00%, 06/15/14.......................................... 7,241,472
12,565,000 Pennsylvania State Financial Authority Revenue, Refunding, 6.60%, 11/01/09 .................... 13,188,095
Pennsylvania State Higher Educational Facilities Authority, College and University Revenue,
1,000,000 Allegheny College Project, Series B, 6.125%, 11/01/13 ..................................... 983,750
3,140,000 Allegheny College Project, Series B, 6.00%, 11/01/22 ...................................... 2,973,580
Pennsylvania State Higher Educational Facilities Authority, College and University Revenue, (cont.)
$ 2,000,000 Hahnemann University Project, MBIA Insured, Pre-Refunded, 7.20%, 07/01/09 ................. $ 2,181,180
5,350,000 Hahnemann University Project, MBIA Insured, Pre-Refunded, 7.20%, 07/01/19 ................. 5,834,657
4,000,000 La Salle University, MBIA Insured, 5.625%, 05/01/17 ....................................... 3,869,280
1,000,000 Lycoming College, Pre-Refunded, 8.375%, 10/01/18 .......................................... 1,097,800
1,000,000 Medical College of Pennsylvania, Series A, Pre-Refunded, 8.375%, 03/01/11 ................. 1,108,920
3,135,000 Medical College of Pennsylvania, Series A, Pre-Refunded, 7.50%, 03/01/14 .................. 3,360,187
3,040,000 Philadelphia College of Textiles and Science, 6.75%, 04/01/20 ............................. 3,073,896
2,250,000 Philadelphia College of Textiles and Science, Pre-Refunded, 7.50%, 02/01/07 ............... 2,282,805
1,955,000 Temple University, 7.375%, 10/01/06 ....................................................... 1,998,362
4,505,000 Temple University, 7.40%, 10/01/10 ........................................................ 4,602,623
1,000,000 Widner University, AMBAC Insured, Pre-Refunded, 7.625%, 10/01/13 .......................... 1,066,830
Pennsylvania State Higher Educational Facilities Authority Health Services Revenue,
10,000,000 Refunding, Allegheny Delaware Valley, MBIA Insured, 5.875%, 11/15/21 ...................... 9,786,700
10,000,000 University of Pennsylvania, Series A, Refunding, 5.75%, 01/01/22 .......................... 9,688,200
5,220,000 Pennsylvania State Higher Educational Facilities Authority Revenue, Drexel University, Refunding,
6.375%, 05/01/17.............................................................................. 5,175,056
Pennsylvania State Higher Educational Facilities Authority Revenue, State System of Higher Education,
2,220,000 Series L, AMBAC Insured, 6.20%, 06/15/19 .................................................. 2,271,926
3,000,000 Series N, MBIA Insured, 5.80%, 6/15/24 .................................................... 2,903,280
4,250,000 Pennsylvania State IDAR, Economic Revenue, AMBAC Insured, 6.00%, 01/01/12 ..................... 4,350,045
890,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ................................................................ 934,429
Pennsylvania State Turnpike Commission Revenue, Pre-Refunded,
1,000,000 Series A, 7.875%, 12/01/15 ................................................................ 1,029,970
1,000,000 Series C, FGIC Insured, 7.625%, 12/01/17 .................................................. 1,090,130
1,900,000 Series K, 7.50%, 12/01/19 ................................................................. 2,101,495
2,500,000 Series K, MBIA Insured, 7.50%, 12/01/12 ................................................... 2,765,125
5,000,000 Philadelphia Airport Revenue, Philadelphia Airport System, Series A, AMBAC Insured, 6.10%, 6/15/25 5,011,150
3,000,000 Philadelphia City GO, Refunding, Series 1987-B, Pre-Refunded, 8.125%, 08/01/17 ................ 3,168,900
Philadelphia Gas Works Revenue,
8,300,000 11th Series A, Pre-Refunded, 7.875%, 07/01/17 ............................................. 8,726,537
795,000 11th Series C, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/10 ............................... 842,303
1,000,000 12th Series, MBIA Insured, ETM, 7.00%, 05/15/20 ........................................... 1,111,880
1,255,000 13th Series, Pre-Refunded, 7.70%, 06/15/11 ................................................ 1,427,462
2,745,000 13th Series, Pre-Refunded, 7.70%, 06/15/11 ................................................ 3,128,531
10,100,000 14th Series A, 6.375%, 07/01/26 ........................................................... 10,197,060
205,000 Pre-Refunded, AMBAC Insured, 7.25%, 01/01/10 .............................................. 221,357
Philadelphia Hospitals and Higher Educational Facilities Authority, Hospital Revenue,
5,225,000 Albert Einstein Medical Center, 7.30%, 10/01/08 ........................................... 5,616,718
7,755,000 Albert Einstein Medical Center, 7.625%, 04/01/11 .......................................... 8,206,806
1,000,000 Children's Seashore House, Series A, 7.00%, 08/15/17 ...................................... 1,040,640
2,600,000 Children's Seashore House, Series B, 7.00%, 08/15/22 ...................................... 2,697,474
100,000 Presbyterian Medical Center, AMBAC Insured, Pre-Refunded, 8.00%, 07/01/13 ................. 105,198
2,750,000 Philadelphia Municipal Authority, Gas Works Lease Revenue, 7.625%, 05/01/14 ................... 2,909,033
Philadelphia Municipal Authority Revenue, Refunding,
1,360,000 FGIC Insured, Pre-Refunded, 7.80%, 04/01/18 ............................................... 1,498,489
2,000,000 Justice Lease, Series D, 6.30%, 07/15/17 .................................................. 1,976,940
300,000 Series 1987, Pre-Refunded, 7.875%, 07/15/17 ............................................... 315,861
45,000 Philadelphia Parking Authority, Airport Revenue, Refunding, 7.30%, 09/01/03 ................... 45,454
Philadelphia RDA, Home Improvement Loan Revenue, FHA Mortgage Insured,
185,000 Series A, 7.375%, 06/01/03 ................................................................ 187,679
1,000,000 Series B, 6.10%, 06/01/17 ................................................................. 983,720
Philadelphia RDA, Housing Revenue,
$ 295,000 Sub-Series 2-B, 8.625%, 08/01/26 .......................................................... $ 298,053
500,000 Sub-Series 3-B, 8.00%, 08/01/13 ........................................................... 538,380
5,000,000 Philadelphia School District, Series B, AMBAC Insured, 5.50%, 09/01/15 ........................ 4,845,400
Philadelphia Water and Sewer Revenue,
6,920,000 10th Series, ETM, 7.35%, 09/01/04 ......................................................... 7,764,724
11,000,000 16th Series, Pre-Refunded, 7.50%, 08/01/10 ................................................ 12,473,560
10,000,000 Philadelphia Water and Wastewater Revenue, Refunding, 5.75%, 06/15/13 ......................... 9,563,700
1,700,000 Pittsburgh Urban RDA, Mortgage Revenue, Series D, 6.25%, 10/01/17 ............................. 1,692,010
Pittsburgh Urban RDA, SFMR,
990,000 Series A, 7.15%, 10/10/27 ................................................................. 1,031,659
2,500,000 Series B, GNMA Secured, 7.375%, 12/01/16 .................................................. 2,594,225
1,250,000 Pittsburgh Water and Sewer Authority, Crossover System Revenue, Refunding, FGIC Insured,
ETM, 7.25%, 09/01/14 ......................................................................... 1,383,875
Pottstown Borough Authority,
4,000,000 Sewer Revenue, 7.70%, 11/01/21 ............................................................ 4,197,200
1,000,000 Water Revenue, Pre-Refunded, 7.80%, 08/01/10 .............................................. 1,041,600
2,415,000 Rose Tree Media, Pennsylvania School District, FGIC Insured, 5.85%, 2/15/17 ................... 2,406,330
19,195,000 Schuylkill County IDA, Resource Recovery Revenue, Refunding, Schuylkill Energy Resource, Inc.,
6.50%, 01/01/10 .............................................................................. 18,210,680
1,500,000 Schuylkill County, RDA Lease Revenue, Series A, FGIC Insured, 7.125%, 06/01/13 ................ 1,657,260
500,000 Scranton-Lackawanna Health and Welfare Authority, Health Facilities Revenue, Allied Services,
FHA Insured, Series C, Pre-Refunded, 8.125%, 01/15/28 ........................................ 543,335
750,000 Silver Spring Towership Authority, Sewer Revenue, FGIC Insured, 6.70%, 07/15/21 ............... 784,860
7,585,000 Southeastern Transportation Authority, Pennsylvania Supply Revenue, Series A, FGIC Insured,
5.75%, 03/01/20 .............................................................................. 7,394,237
2,715,000 Southside Area School District, AMBAC Insured, Pre-Refunded, 7.00%, 04/15/10 .................. 2,833,347
State Public School Building Authority, Pennsylvania School Revenue, Refunding,
2,165,000 Cornell School District, Series B, MBIA Insured, 5.375%, 09/01/12 ......................... 2,074,265
1,000,000 Shenandoah Valley School District, AMBAC, 7.375%, 09/15/10 ................................ 1,082,630
1,975,000 Temple University, System of Higher Education, Pennsylvania Hospital Revenue, Series A, FHA
Insured, Pre-Refunded, 7.25%, 08/01/16 ....................................................... 2,085,205
100,000 Union County Higher Educational Facilities Financing Authority, University Revenue, Bucknell
University, MBIA Insured, Pre-Refunded, 7.75%, 04/01/07 ...................................... 102,084
3,000,000 Union School District GO, AMBAC Insured, Pre-Refunded, 7.25%, 04/01/15 ........................ 3,141,390
100,000 University of Pittsburgh Higher Education, University Capital Project, Series 1987-A, Pre-Refunded,
8.375%, 06/01/05 ............................................................................. 105,146
1,000,000 Venango County GO, AMBAC Insured, Pre-Refunded, 7.25%, 09/15/19 ............................... 1,077,890
1,000,000 Warren County GO, MBIA Insured, Pre-Refunded, 7.20%, 07/01/16 ................................. 1,103,480
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 ............................ 2,235,580
100,000 Washington County Hospital Authority Revenue, Washington Hospital, Series 1987, Pre-Refunded,
9.50%, 07/01/17 .............................................................................. 105,387
1,500,000 Westmoreland County IDAR, Refunding, Citizen's General Hospital Project, Series A, 8.25%, 07/01/13 1,551,735
3,000,000 Wilkes Barre Area School District, GO, FGIC Insured, 6.375%, 04/01/15 ......................... 3,153,150
750,000 Wyoming Valley Sanitary Authority, Sewer Revenue, BIG Insured, Pre-Refunded, 7.25%, 11/15/05 .. 823,200
York County Solid Waste and Refuse Authority, IDR, Resource Recovery Project, 8.20%, 12/01/14,
105,000 Series B .................................................................................. 112,162
900,000 Series C .................................................................................. 961,389
--------------
Total Long Term Investments (Cost $608,783,974).......................................... 635,889,114
--------------
$ 200,000 Allegheny County, Hospital Development Authority, Health Center Presbyterian, MBIA Insured,
Weekly VRDN and Put, Series D, 3.50%, 03/01/20 ............................................... $ 200,000
300,000 Chester County, Pennsylvania Industrial Development Authority, Industrial Development
Revenue, Daily VRDN & Put, 3.850%, 08/01/01................................................... 300,000
960,000 Schuylkill County, Pennsylvania Industrial Development Authority, Daily VRDN & Put, 3.950% 11/01/09 960,000
--------------
Total Short-Term Investments (Cost $1,460,000) .......................................... 1,460,000
--------------
Total Investments (Cost $610,243,974) 98.7% ........................................ 637,349,114
Other Assets and Liabilities, Net 1.3% ............................................. 8,009,956
--------------
Net Assets 100.0% .................................................................. $645,359,070
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments for
income tax purposes of $610,243,974 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 29,965,607
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (2,860,467)
--------------
Net unrealized appreciation.................................................................. $ 27,105,140
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
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 Authority/Agency
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
IDAR - Industrial Development Authority Revenue
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MFMR - Multi-Family Mortgage Revenue
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
RDAR - Redevelopment Agency Revenue
SFMR - Single Family Mortgage Revenue
TWP - Township
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). eSee Note 1(h) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Puerto Rico Tax-Free Income Fund (Note 1)
Long Term Investments 97.2%
Guam Airport Authority Revenue, Series B,
<S> <C> <C>
$ 1,675,000 6.60%, 10/01/10 ........................................................................... $ 1,709,204
5,800,000 6.70%, 10/01/23 ........................................................................... 5,858,406
Guam Government, GO, Series A,
4,775,000 5.90%, 09/01/05 ........................................................................... 4,785,839
1,085,000 6.00%, 09/01/06 ........................................................................... 1,087,463
5,590,000 Guam Government Limited Obligation Highway, Refunding, Series A, 6.30%, 05/01/12 .............. 5,894,376
Guam Power Authority Revenue,
7,190,000 GO, 6.30%, 10/01/22 ....................................................................... 7,189,497
2,680,000 Series A, 6.75%, 10/01/24 ................................................................. 2,758,685
5,000,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Series A, Port Saipan
Harbor Improvement, 6.85%, 10/01/25 .......................................................... 5,018,850
Puerto Rico Commonwealth GO,
250,000 6.25%, 07/01/10 ........................................................................... 257,918
3,905,000 6.40%, 07/01/11 ........................................................................... 4,114,035
1,515,000 Public Improvement, Series B, Pre-Refunded, 7.25%, 07/01/12 ............................... 1,587,190
2,000,000 Refunding, MBIA Insured, 5.75%, 07/01/24 .................................................. 1,977,900
400,000 Refunding, Series A, 6.00%, 07/01/14 ...................................................... 401,196
Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue,
1,000,000 Series T, Pre-Refunded, 6.625%, 07/01/18 .................................................. 1,101,960
8,000,000 Series Y, 6.00%, 07/01/22 ................................................................. 8,005,840
1,500,000 Series Y, 5.50%, 07/01/26 ................................................................. 1,400,220
Puerto Rico Commonwealth Highway Authority, Highway Revenue, Pre-Refunded,
70,000 Refunding, Series N, 8.00%, 07/01/03 ...................................................... 76,079
3,925,000 Series P, 8.125%, 07/01/13 ................................................................ 4,274,364
350,000 Series Q, 7.75%, 07/01/10 ................................................................. 395,143
2,265,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ........................ 2,274,173
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
3,000,000 7.90%, 07/01/07 ........................................................................... 3,215,670
2,300,000 7.75%, 07/01/08 ........................................................................... 2,459,413
2,600,000 7.50%, 07/01/09 ........................................................................... 2,769,000
3,350,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 ......... 3,681,550
Puerto Rico Electric Power Authority, Power Revenue,
2,160,000 Refunding, Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 ................................... 2,281,003
1,000,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 ................................... 1,086,840
1,445,000 Refunding, Series K, Pre-Refunded, 9.375%, 07/01/17 ....................................... 1,537,841
830,000 Refunding, Series U, 6.00%, 07/01/14 ...................................................... 825,427
1,525,000 Series 1989-O, 7.125%, 07/01/14 ........................................................... 1,629,066
2,115,000 Series 1991-P, Pre-Refunded, 7.00%, 07/01/11 .............................................. 2,364,126
1,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ................................................... 1,117,790
10,000,000 Series T, 6.375%, 07/01/24 ................................................................ 10,236,900
7,225,000 Series X, 6.125%, 07/01/21 ................................................................ 7,201,374
Puerto Rico HFC Revenue,
2,060,000 FHA Mortgage Insured, Section 8 Assisted, Sixth Portfolio, Pre-Refunded, 7.75%, 12/01/26 .. 2,450,349
420,000 MF, Portfolio A, Series I, 7.50%, 10/01/15 ................................................ 440,735
1,750,000 MF, Portfolio A, Series I, 7.50%, 04/01/22 ................................................ 1,832,250
375,000 MF, Series A, 8.25%, 06/01/11 ............................................................. 382,980
2,405,000 Puerto Rico HFC, SFMR, Series C, GNMA Insured, 6.85%, 10/15/23................................. 2,508,992
Puerto Rico Housing Bank and Finance Agency, SFMR, Homeownership Development Program,
3,025,000 Affordable Housing Mortgage, First Portfolio, 6.25%, 04/01/29 ............................. 3,045,721
955,000 Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15 ............................................ 1,046,632
5,810,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities, Financing
Authority, Hospital Revenue, Hospital Auxilio Mutuo Obligation Group, Series A, MBIA Insured,
6.25%, 07/01/24 .............................................................................. 5,978,490
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA,
$ 4,010,000 Baxter Travenol Labs, Series A, 8.00%, 09/01/12 ........................................... $ 4,356,063
900,000 PepsiCo, Inc. Project, 6.25%, 11/15/13 .................................................... 947,889
2,000,000 Special Facilities, American Airlines, Series A, 6.45%, 12/01/25 .......................... 2,039,340
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities,
Financing Authority,
5,000,000 Hospital Revenue, Mennonite General Hospital PJ, Series A, 6.50%, 07/01/26 ................ 4,852,200
2,500,000 Hospital Revenue, Refunding, Dr. Pila Hospital Project, Series A, 6.125%, 08/01/25 ........ 2,516,600
500,000 Hospital Revenue, Refunding, Dr. Pila Hospital Project, Series A, 6.25%, 08/01/32 ......... 504,285
6,550,000 Industrial Revenue, Guaynabo Municipal Government Center, Series A, 5.625%, 07/01/15 ...... 6,038,773
2,025,000 Industrial Revenue, Teachers Retirement System Revenue, Series B, 5.50%, 07/01/16 ......... 1,949,184
2,035,000 Industrial Revenue, Teachers Retirement System Revenue, Series B, 5.50%, 07/01/21 ......... 1,937,035
Puerto Rico Municipal Finance Agency,
4,550,000 Series 1988-A, 8.25%, 07/01/08 ............................................................ 4,928,742
2,000,000 Series 1994-A, 6.50%, 07/01/19 ............................................................ 2,105,020
Puerto Rico PBA Revenue, Government Facilities, Series A, AMBAC Insured,
1,000,000 5.50%, 07/01/21 ........................................................................... 955,630
1,000,000 5.75%, 07/01/22 ........................................................................... 987,980
Puerto Rico Port Authority Revenue,
1,250,000 Series D, FGIC, 6.00%, 07/01/21 ........................................................... 1,257,650
5,655,000 Special Facilities, American Airlines, Series A, 6.30%, 06/01/23 .......................... 5,654,265
1,900,000 Special Facilities, American Airlines, Series A, 6.25%, 06/01/26 .......................... 1,887,061
Puerto Rico Telephone Authority Revenue,
6,450,000 Series 1992-L, 6.125%, 01/01/22 ........................................................... 6,485,153
500,000 Series 1993-N, 5.50%, 01/01/13 ............................................................ 480,185
1,885,000 Series 1993-N, 5.50%, 01/01/22 ............................................................ 1,767,546
University of Puerto Rico, University System Revenues, Series M, MBIA Insured,
4,000,000 5.50%, 06/01/15 ........................................................................... 3,881,320
3,000,000 5.25%, 06/01/25 ........................................................................... 2,766,300
Virgin Islands HFA, SFR, Refunding, Series A, GNMAInsured,
950,000 6.45%, 03/01/16 ........................................................................... 957,904
2,250,000 6.50%, 03/01/25 ........................................................................... 2,277,248
5,600,000 Virgin Islands Water and Power Authority, Electric System Revenue, Series A, 7.40%, 07/01/11 .. 5,895,453
--------------
Total Long Term Investments (Cost $179,526,527) ......................................... 185,689,313
--------------
a Short Term Investments .7%
1,300,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.10%, 12/01/15 (Cost $1,300,000) ............................................................ 1,300,000
--------------
Total Investments (Cost $180,826,527) 97.9%......................................... 186,989,313
Other Assets and Liabilities, Net 2.1%............................................. 4,021,465
--------------
Net Assets 100.0% .................................................................. $191,010,778
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments for
income tax purposes of $180,826,527 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 6,623,053
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (460,267)
--------------
Net unrealized appreciation.................................................................. $ 6,162,786
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corp.
IDC - Industrial Development Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
SFMR - Single Family Mortgage Revenue
SFR - Single Family Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin Federal Intermediate-Term Tax-Free Income Fund (Note 1)
Long Term Investments 99.2%
Alabama 1.1%
<S> <C> <C>
$1,000,000 Morgan County, Decatur Health Care Authority Revenue, Refunding, Connie Lee Insured,
5.80%, 03/01/04 ................................................................................ $ 1,021,270
--------------
Alaska .8%
480,000 Alaska State HFC, Collateral, First Mortgage Program, 5.80%, 06/01/04 ........................... 493,493
200,000 Anchorage Parking Authority Lease Revenue, Refunding, 5th Avenue Garage, 6.50%, 12/01/02 ........ 209,990
--------------
703,483
--------------
Arizona 3.6%
2,000,000 Maricopa County COP, 5.625%, 06/01/00 ........................................................... 2,023,620
1,000,000 Maricopa County School District No. 40, Glendale Improvement, 6.10%, 07/01/08 ................... 1,020,540
200,000 Mohave County IDA, Hospital Systems Revenue, Refunding, Medical Environments, Inc., Phoenix
Baptist Hospital and Medical Center, ETM, 6.00%, 07/01/00 ...................................... 209,910
65,000 Phoenix HFC, Mortgage Revenue, Refunding, Project A, MBIA Insured, FHA Section 8, 6.00%, 07/01/02 66,953
--------------
3,321,023
--------------
California 16.4%
100,000 ABAG Finance Corp., COP, Association XXVI, Series B, 6.30%, 10/01/02 ............................ 103,296
3,000,000 Bakersfield Public Financing Authority Revenue, Series A, 5.80%, 09/15/05 ....................... 3,043,080
1,500,000 California Educational Facilities Authority Revenue, College and University Financing, Refunding,
Series B, 5.90%, 06/01/03 ...................................................................... 1,518,945
California Statewide CDA Revenue, Refunding, COP, Health Facilities, Barton Memorial Hospital, Series B,
200,000 5.70%, 12/01/00 .............................................................................. 201,332
300,000 6.40%, 12/01/05 .............................................................................. 302,556
1,000,000 California Statewide Community Development Corp., COP, Pacific Homes, Series A, 5.90%, 04/01/09 . 996,430
300,000 Coalinga Public Financing Authority Revenue, Series B, 6.10%, 09/15/04 .......................... 301,581
2,600,000 Fresno Joint Powers Financing Authority, Local Agency Revenue, Refunding, Series A, 6.00%, 09/02/01 2,599,974
100,000 Los Angeles County Transportation Commission, COP, Series B, 5.90%, 07/01/00 .................... 103,263
450,000 Merced Irrigation District COP, Water Facilities Project, 6.00%, 11/01/02 ....................... 467,037
200,000 Paso Robles USD, COP, Measure D, Capital Projects, Phase III, 5.75%, 08/01/02 ................... 203,992
100,000 San Diego County COP, Children's Center Project, 6.00%, 10/01/02 ................................ 101,025
100,000 San Diego Port Facilities Revenue, Refunding, National Steel and Shipbuilding Co., 6.60%, 12/01/02 102,202
130,000 San Francisco City and County RDA, Refunding, MBIA Insured, Series A, 6.125%, 07/01/02 .......... 129,165
200,000 San Francisco Downtown Parking Corp. Revenue, 6.25%, 04/01/04 ................................... 209,430
200,000 San Joaquin County COP, General Hospital Project, 5.90%, 09/01/03 ............................... 204,820
2,000,000 San Ramon Valley USD, COP, Measure A, Capital Project, Series A, 5.95%, 10/01/01 ................ 2,078,660
Snowline Joint USD, COP, Series 1993,
245,000 5.50%, 07/01/00 .............................................................................. 246,318
260,000 5.60%, 07/01/01 .............................................................................. 261,173
275,000 5.70%, 07/01/02 .............................................................................. 276,460
290,000 5.80%, 07/01/03 .............................................................................. 291,755
400,000 Solano County COP, Refunding, Justice Facility and Public Building Project, 5.875%, 10/01/05 .... 407,964
100,000 Southern California Rapid Transit District Revenue, Special Benefit AD A2, Series 92A, 6.00%, 09/01/02 103,862
Susanville Public Financing Authority Revenue, Water Facilities, Series A, AMBAC Insured,
25,000 5.90%, 09/01/02 .............................................................................. 26,310
100,000 6.00%, 09/01/03 .............................................................................. 105,664
500,000 Tahoe City, Public Utilities District COP, Capital Facilities Project, Series B, 6.05%, 06/01/01 510,445
100,000 Tuolumne County COP, Multiple Facilities Project, 6.00%, 06/01/99 ............................... 101,068
--------------
14,997,807
--------------
Colorado 5.8%
Denver City and County Airport System Revenue,
3,000,000 Series A, 7.00%, 11/15/99 .................................................................... 3,177,540
335,000 Series C, 6.25%, 11/15/00 .................................................................... 343,633
Colorado (cont.)
$1,500,000 Montrose County COP, 6.20%, 06/15/03 ............................................................ $ 1,540,665
255,000 Summit County Recreational Facilities Revenue, Refunding, Copper Mountain, Mandatory Put
10/01/99, 5.90%, 04/01/17 ...................................................................... 262,398
--------------
5,324,236
--------------
Connecticut 2.8%
560,000 Connecticut State Health and Educational Facilities Authority Revenue, Refunding, Sacred Heart
University, Series C, 6.00%, 07/01/05 .......................................................... 561,081
2,000,000 Connecticut State HFA, Housing Mortgage Finance, Series C-2, 6.00%, 11/15/10 .................... 2,004,780
--------------
2,565,861
--------------
District of Columbia .8%
700,000 District of Columbia GO, Refunding, Series A, 5.875%, 06/01/05 .................................. 690,767
--------------
Florida 14.9%
225,000 Alachua County, HFA, Refunding, Santa Fe Health Care Facilities Project, Pre-Refunded, 6.875%,
11/15/02 ....................................................................................... 245,315
2,840,000 Gateway Service District Revenue, Transportation/Roadway Service Charges, 8.50%, 05/01/04 ....... 2,967,431
1,000,000 Hillsborough County, IDA, University Community Hospital, MBIA Insured, 5.375%, 08/15/04 ......... 1,024,300
2,590,000 Meadow Pointe Community Development District, Capital Improvement Revenue, 6.00%, 07/01/01 ...... 2,553,611
1,000,000 Nassau County Pollution Control Revenue, Refunding, ITT Rayonier, Inc. Project, 6.25%, 06/01/10 . 1,001,090
Northern Palm Beach County Water Control District, Unit Development Number 31, 6.60%, 11/01/03,
405,000 Program 1..................................................................................... 419,641
320,000 Program 2 .................................................................................... 331,568
795,000 Palm Bay Lease Revenue, Refunding, Florida Education and Research Foundation, Project A, 6.10%,
09/01/03 ....................................................................................... 801,773
Palm Beach County IDR, Lourdes-Noreen Mckeen Residence, Geriatric Care, Inc. Project,
275,000 6.20%, 12/01/08 .............................................................................. 277,786
580,000 6.30%, 12/01/09 .............................................................................. 585,841
2,700,000 Palm Beach County Solid Waste IDR, Okeelanta Power Project, Series A, 6.375%, 02/15/07 .......... 2,410,668
1,000,000 Pembroke Pines Special Assessment, No. 94-1, 5.75%, 11/01/05 .................................... 994,990
--------------
13,614,014
--------------
Georgia 3.6%
100,000 Fulton County Development Authority, Special Facilities Revenue, Delta Air Lines, Inc. Project, 6.85%,
11/01/07 ....................................................................................... 103,906
3,105,000 Wayne County Development Authority, Pollution Control Revenue, Refunding, ITT Rayonier, Inc.
Project, 6.10%, 11/01/07 ....................................................................... 3,142,105
--------------
3,246,011
--------------
Guam 1.1%
1,000,000 Guam Government GO, Series 1995-A, 5.90%, 09/01/05 .............................................. 1,002,270
--------------
Hawaii .5%
500,000 Hawaii State Department of Budget and Finance, Special Purpose Revenue, Kapi'Olani Health
Obligation, 5.60%, 07/01/06 .................................................................... 500,325
--------------
Illinois 2.4%
850,000 Illinois Educational Facilities Authority Revenue, Columbia College, 5.875%, 12/01/03 ........... 864,680
360,000 Illinois Housing Development Authority Revenue, Homeowner Mortgage, Sub-Series A-1, 6.10%,
02/01/05 ....................................................................................... 374,605
1,000,000 Metropolitan Pier and Exposition Authority, Illinois Hospitality Facilities Revenue, McCormick Place
Convention, 5.75%, 07/01/06 .................................................................... 980,820
--------------
2,220,105
--------------
Indiana 2.4%
$2,000,000 Franklin City, EDR, Refunding, Hoover Universal, Inc. Project, Johnson Controls, 6.10%,
12/01/04 ....................................................................................... $ 2,075,740
100,000 Indianapolis Local Public Improvement Bond, Series D, 6.10%, 02/01/02 ........................... 104,475
--------------
2,180,215
--------------
Iowa .2%
200,000 Iowa State Financial Authority Hospital, Facilities Revenue, Refunding, Trinity Regional Hospital Project,
6.50%, 07/01/00 ................................................................................ 206,790
--------------
Kentucky .7%
100,000 Kenton County Airport Board Revenue, Special Facilities, Delta Airlines, Inc. Project A, 6.75%, 02/01/02 104,112
500,000 Mt. Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 5.625%, 03/01/03 .......... 505,810
--------------
609,922
--------------
Louisiana .6%
45,000 Calcasieu Parish, Public Transportation Authority Mortgage Revenue, Refunding, Series B,
6.375%, 11/01/02 ............................................................................... 46,814
300,000 Louisiana State Correctional Facilities Corp. Lease Revenue, Refunding, FSA Insured, 5.25%, 12/15/00 305,256
100,000 Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Refunding, First Stage Loop, Inc.,
Series B, 6.20%, 09/01/03 ...................................................................... 105,377
100,000 Louisiana State Public Facility Authority Revenue, Student Loan, Series A-1, 6.20%, 03/01/01 .... 104,485
--------------
561,932
--------------
Maryland .3%
220,000 Baltimore EDR, Lease, Refunding, Armistead Partnership, Series A, 6.75%, 08/01/02 ............... 233,691
--------------
Massachusetts .7%
200,000 Massachusetts State Industrial Finance Agency, Resource Recovery Revenue, Refunding,
Refusetech, Inc. Project, Series A, 5.45%, 07/01/01 ............................................ 204,314
415,000 New England Educational Loan Corp., Massachusetts Student Loan Revenue, Refunding,
Series B, 5.60%, 06/01/02 ...................................................................... 423,727
--------------
628,041
--------------
Michigan 1.1%
1,000,000 Detroit GO, Refunding, Series B, 6.375%, 04/01/06 ............................................... 1,027,680
--------------
Minnesota .2%
200,000 Minneapolis CDA, Supported Development Revenue, Series 91-5A, 7.20%, 12/01/04 ................... 214,308
--------------
Nebraska .3%
300,000 Nebraska Higher Education Loan Program, Inc. Revenue, Subject Lien, Series A-6, 6.70%, 12/01/02.. 314,889
--------------
New Jersey 1.3%
110,000 New Jersey EDA, Economic Growth, 2nd Revenue, Series F-1, 6.00%, 12/01/02 ....................... 111,815
1,000,000 New Jersey Health Care Facilities Financing Authority Revenue, Refunding, Monmouth Medical Center,
Series C, CGIC Insured, 5.80%, 07/01/04 ........................................................ 1,046,570
--------------
1,158,385
--------------
New York 10.9%
New York City GO,
515,000 Refunding, Series C, 6.50%, 08/01/04 ......................................................... 533,931
1,850,000 Refunding, Series C, 6.50%, 08/01/07 ......................................................... 1,886,445
500,000 Refunding, Series D, 5.70%, 11/01/06 ......................................................... 484,975
100,000 Series B, 6.25%, 10/01/01 .................................................................... 104,397
250,000 Series H, 7.00%, 02/01/05 .................................................................... 263,745
1,000,000 Series J, 6.00%, 02/15/04 .................................................................... 1,005,310
2,500,000 New York City Health and Hospital Authority, Local Government Revenue, Refunding,
Series A, 6.00%, 02/15/06 ...................................................................... 2,476,825
90,000 New York City IDA, Civic Facilities Revenue, New York Blood Center, Inc. Project, ETM, 6.80%, 05/01/02 93,749
New York (cont.)
$1,000,000 New York State HFA, Refunding, Series A, 5.90%, 05/01/05 ........................................ $ 997,230
1,000,000 New York State Tollway Authority Service Contract Revenue, Local Highway and Bridge, 5.90%, 04/01/08 1,003,840
100,000 Oneida-Herkimer Solid Waste Management Authority, Solid Waste Systems Revenue, Refunding,
6.20%, 04/01/00 ................................................................................ 101,945
1,000,000 Port Authority of New York and New Jersey, Special Obligation Revenue, 3rd Installment, 7.00%,
10/01/07 ....................................................................................... 1,051,060
--------------
10,003,452
--------------
Oklahoma 3.3%
2,020,000 Jackson County Memorial Hospital Authority Revenue, Refunding, Memorial Hospital Project, 6.75%,
08/01/04 ....................................................................................... 1,989,538
100,000 Tulsa Public Facilities Authority, Lease Payment Revenue, Refunding, Assembly Center, 5.80%, 07/01/01 102,137
1,000,000 Valley View Hospital Authority Revenue, Refunding, Valley View Regional Medical Center, 5.75%,
08/15/06 ....................................................................................... 955,500
--------------
3,047,175
--------------
Pennsylvania 5.3%
100,000 Cambria County Hospital Development Authority Revenue, Refunding and Improvement, Conemaugh
Valley Hospital, Series B, Connie Lee Insured, 5.90%, 07/01/03 ................................. 103,679
325,000 Chartiers Valley Industrial and Commercial Development Authority, First Mortgage Revenue, Asbury
Place Project, 6.25%, 02/01/06 ................................................................. 328,448
Lebanon County Good Samaritan Hospital Authority Revenue, Refunding, Good Samaritan Hospital Project,
335,000 5.25%, 11/15/01 .............................................................................. 330,933
215,000 5.35%, 11/15/02 .............................................................................. 211,979
575,000 5.50%, 11/15/03 .............................................................................. 567,571
Northeastern Hospital and Educational Authority Revenue, Kings College,
390,000 5.50%, 07/15/02 .............................................................................. 387,274
410,000 5.60%, 07/15/03 .............................................................................. 406,749
Philadelphia Gas Works Revenue, Refunding, Series A,
300,000 5.70%, 07/01/00 .............................................................................. 304,386
300,000 5.80%, 07/01/01 .............................................................................. 304,752
2,000,000 Schuylkill County IDA, Resource Recovery Revenue, Refunding, Schuylkill Energy Resource, Inc.,
6.50%, 01/01/10 ................................................................................ 1,897,440
--------------
4,843,211
--------------
Puerto Rico 1.8%
Puerto Rico Electric Power Authority Revenue,
100,000 Series Q, 5.90%, 07/01/01 .................................................................... 104,023
1,345,000 Series T, 6.00%, 07/01/04 .................................................................... 1,408,914
100,000 Puerto Rico Municipal Finance Agency, Series A, 5.30%, 07/01/00 ................................. 101,580
--------------
1,614,517
--------------
South Dakota 3.4%
1,000,000 South Dakota HDA, Homeownership Mortgage, Series B, 6.05%, 05/01/04 ............................. 1,049,810
2,000,000 South Dakota State Student Loan Finance Corp., 6.35%, 08/01/05 .................................. 2,014,260
--------------
3,064,070
--------------
Tennessee .8%
750,000 Metropolitan Government, Nashville & Davidson County IDBR, Refunding and Improvement,
Osco Treatment, Inc., 6.00%, 05/01/03 .......................................................... 751,965
--------------
Texas 1.3%
785,000 Abilene Higher Education Facilities Corp., Higher Education Revenue, Refunding and Improvement,
Abilene Christian Facility, 5.90%, 10/01/05 .................................................... 797,073
375,000 Houston HFC, SFMR, Refunding, Series A, FSA Insured, 5.45%, 06/01/03 ............................ 381,090
--------------
1,178,163
--------------
Utah 3.3%
$2,000,000 Davis County Solid Waste Management and Energy Recovery Revenue, Refunding, Special
Service District, 5.50%, 06/15/00 .............................................................. $ 1,983,040
1,000,000 Utah State HFA, Refunding, SFM, 5.85%, 07/01/08 ................................................. 996,530
--------------
2,979,570
--------------
Virginia 6.8%
2,800,000 Covington-Alleghany County, Refunding, Westvaco Corp. Project, 5.85%, 09/01/04 .................. 2,968,392
Virginia State HDA, Commonwealth Mortgage, Series C, Sub-Series 7,
1,695,000 5.60%, 01/01/03 .............................................................................. 1,756,833
1,475,000 5.70%, 01/01/04 .............................................................................. 1,535,696
--------------
6,260,921
--------------
Washington .7%
600,000 Marysville Water and Sewer Revenue, Refunding, MBIA Insured, 5.75%, 12/01/05 .................... 618,180
--------------
Total Long Term Investments (Cost $89,576,495) ............................................ 90,704,249
--------------
a Short Term Investments .1%
100,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.10%, 12/01/15 (Cost $100,000)................................................................. 100,000
--------------
Total Investments (Cost $89,576,495) 99.3% ........................................... 90,804,249
Other Assets and Liabilities, Net .7% ................................................ 661,872
--------------
Net Assets 100.0% .................................................................... $91,466,121
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments for
income tax purposes of $89,576,495 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................. $ 1,749,680
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................. (521,926)
--------------
Net unrealized appreciation ................................................................... $ 1,227,754
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
ABAG - Association of Bay Area Governments
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Agency
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
EDA - Economic Development Authority
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GO - General Obligation
HDA - Housing Development Authority/Agency
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corp.
IDA - Industrial Development Authority/Agency
IDBR - Industrial Development Board Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
RDA - Redevelopment Agency
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
USD - Unified School District
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, August 31, 1996 (unaudited)
Face Value
Amount Franklin High Yield Tax-Free Income Fund (Note 1)
Long Term Investments 96.9%
Bonds 94.5%
Alabama .5%
<S> <C> <C>
$ 6,490,000 Homewood Special Care Facilities Financing Authority, Hospital Revenue, Lakeshore Hospital
Project, Series B, Pre-Refunded, 8.25%, 02/01/04 .......................................... $ 6,871,677
Marshall County Health Care Authority, Hospital Revenue, Pre-Refunded,
5,000,000 Guntersville, Arab Medical Center, 10.25%, 10/01/13 .................................... 5,557,200
3,300,000 Refunding, Boaz-Albertville Medical Center, 6.20%, 01/01/08 ............................ 3,260,070
500,000 Marshall County Hospital Board Revenue, Refunding, Boaz-Albertville Medical Center,
Pre-Refunded, 8.875%, 01/01/05 ............................................................ 517,660
2,500,000 Prichard Water Works and Sewer Board Revenue, Pre-Refunded, 9.50%, 11/15/14 ................ 2,836,350
--------------
19,042,957
--------------
Alaska 1.0%
Alaska Industrial Development and Export Revenue,
4,000,000 American President Lines Project, 8.00%, 11/01/09 ...................................... 4,293,960
935,000 Revolving Fund, Series A, 6.20%, 04/01/10 .............................................. 956,131
Alaska State HFC,
5,760,000 Mortgage Program, First Series, 5.90%, 12/01/33 ........................................ 5,398,675
10,000,000 Refunding, Series A, 5.40%, 12/01/13 ................................................... 9,309,100
4,670,000 Refunding, MBIA Insured, Series A, 5.85%, 12/01/15 ..................................... 4,553,764
4,500,000 eRefunding, MBIA Insured, Series A, 6.00%, 12/01/15 .................................... 4,428,900
5,000,000 Refunding, MBIA Insured, Series A, 5.875%, 12/01/24 .................................... 4,835,750
4,000,000 Anchorage Electric Utility Revenue, Senior Lien, 5.50%, 02/01/26 ........................... 3,704,280
1,635,000 Palmer Golf Course Lease, COP, 10.25%, 07/01/08 ............................................ 1,729,797
--------------
39,210,357
--------------
Arizona 1.0%
950,000 Gila County IDA, PCR, Refunding, ASARCO, Inc. Project, 8.90%, 07/01/06 ..................... 1,005,214
8,500,000 Maricopa County PCR, Refunding, Public Services, Palo Verde, Series A, 6.375%, 08/15/23 .... 8,260,130
4,000,000 Maricopa County Rural Road ID, 8.625%, 07/01/07 ............................................ 4,352,760
16,785,000 Red Hawk Canyon Community Facility, 7.625%, 06/01/05 ....................................... 16,463,399
7,900,000 Salt River Project, Agricultural Improvement and Power District, Electric System Revenue, Series A,
6.00%, 01/01/31 ........................................................................... 7,842,330
2,245,000 Tempe IDA, Residential Care Facilities Revenue, Volunteers of America Care Facilities,
9.00%, 06/01/18 ........................................................................... 2,352,199
--------------
40,276,032
--------------
Arkansas .4%
2,400,000 Baxter County IDR, Refunding, Aeroquip/Trinova Corp. Project, 5.80%, 10/01/13 .............. 2,314,296
1,000,000 Conway Hospital Revenue, Refunding, Series 1990, 8.375%, 07/01/11 .......................... 1,063,400
Independence County PCR,
4,275,000 Mississippi Power and Light Co. Project, Series A, 9.00%, 07/01/13 ..................... 4,671,122
1,185,000 Mississippi Power and Light Co. Project, Series B, 9.00%, 07/01/13 ..................... 1,294,802
200,000 Mississippi Power and Light Co. Project, Series C, 9.50%, 07/01/14 ..................... 221,062
5,000,000 Refunding, Arkansas Power and Light Co. Project, 6.25%, 01/01/21 ....................... 4,925,700
750,000 Litte Rock Sewer Revenue, Refunding, 5.40%, 08/01/10 ....................................... 720,893
--------------
15,211,275
--------------
California 12.6%
21,330,000 Adelanto California Water Authority Revenue, Water Systems Acquisition Project, Series A,
7.50%, 09/01/28 ........................................................................... 21,094,943
7,500,000 Alameda County COP, Refunding, Santa Rita Jail Project, MBIA Insured, 5.70%, 12/01/14 ...... 7,390,575
13,400,000 Alameda County MFHR, Refunding, Claremont House Project, Series A, 8.00%, 12/01/23 ......... 13,787,930
California (cont.)
Antioch 1915 Act, AD No. 27, Lone Tree,
$ 11,080,000 Series C, 7.70%, 09/02/17 .............................................................. $ 11,421,596
4,385,000 Series D, 7.30%, 09/02/13 .............................................................. 4,406,136
2,500,000 Arroyo Grande California COP, Vista Hospital Systems, Series A, 8.375%, 07/01/06 ........... 2,494,550
22,515,000 Arroyo Grande Hospital System COP, Vista Hospital Systems, Refunding, Series A,
9.50%, 07/01/20 ........................................................................... 23,374,623
2,850,000 Azusa RDA, Tax Allocation, Refunding, Merged Area Project, Series A, 6.75%, 08/01/23 ....... 2,882,604
4,575,000 Beaumont Public Financing Authority Revenue, Sewer Enterprise Project, Series A, Pre-Refunded,
6.90%, 09/01/23............................................................................ 5,224,925
Benicia 1915 Act, Refunding, Fleetside Industrial Park Assessment,
205,000 4.50%, 09/02/96 ........................................................................ 205,000
210,000 4.80%, 09/02/97 ........................................................................ 209,777
220,000 5.00%, 09/02/98 ........................................................................ 218,112
230,000 5.25%, 09/02/99 ........................................................................ 227,746
245,000 5.50%, 09/02/00 ........................................................................ 243,185
260,000 5.65%, 09/02/01 ........................................................................ 258,216
270,000 5.80%, 09/02/02 ........................................................................ 268,518
285,000 5.90%, 09/02/03 ........................................................................ 283,227
305,000 6.00%, 09/02/04 ........................................................................ 302,899
320,000 6.10%, 09/02/05 ........................................................................ 317,597
340,000 6.20%, 09/02/06 ........................................................................ 337,256
365,000 6.30%, 09/02/07 ........................................................................ 361,861
385,000 6.40%, 09/02/08 ........................................................................ 381,508
410,000 6.50%, 09/02/09 ........................................................................ 406,101
435,000 6.60%, 09/02/10 ........................................................................ 430,694
460,000 6.70%, 09/02/11 ........................................................................ 455,285
300,000 6.80%, 09/02/12 ........................................................................ 298,263
3,000,000 California Educational Facilities Authority Revenue, Pooled College and University Financing,
Series B, 6.125%, 06/01/09 ................................................................ 2,985,240
1,030,000 California Special Districts, Association Financial Corp. COP, Santa Cruz Port Authority, Series B,
7.50%, 05/01/13 ........................................................................... 1,051,795
California State Health Facilities Hospital Revenue, Summit Medical Center, Pre-Refunded,
4,855,000 Series A, 7.50%, 05/01/09 .............................................................. 5,311,856
2,155,000 Series A, 7.60%, 05/01/15 .............................................................. 2,363,108
5,835,000 Series B, 7.50%, 05/01/09 .............................................................. 6,384,074
3,500,000 California State Higher Education Loan Authority, Inc., Student Loan Revenue, Refunding,
Junior Lien, Series B, 9.00%, 07/03/97 .................................................... 3,579,800
7,320,000 California State Variable Purpose, 5.75%, 03/01/19 ......................................... 7,157,423
2,500,000 California Statewide CDA, California State University Northridge, Refunding, AMBAC Insured,
6.00%, 04/01/26 ........................................................................... 2,516,425
Capistrano USD, CFD, Special Tax No. 92-1,
285,000 6.60%, 09/01/05 ........................................................................ 286,912
280,000 6.70%, 09/01/06 ........................................................................ 281,870
325,000 6.80%, 09/01/07 ........................................................................ 327,161
260,000 6.90%, 09/01/08 ........................................................................ 261,724
1,000,000 7.00%, 09/01/18 ........................................................................ 988,930
2,335,000 City of Oakland Revenue, YMCA East Bay Project, Refunding, 7.10%, 06/01/10 ................. 2,345,694
3,695,000 Colton Community Facilities District, Special Tax No. 90-1, 9.00%, 09/01/20 ................ 3,350,478
Contra Costa County Public Financing Authority Revenue, Refunding,
2,455,000 6.625%, 09/02/10 ....................................................................... 2,431,825
2,870,000 6.875%, 09/02/16 ....................................................................... 2,868,422
California (cont.)
Corona COP,
$ 8,820,000 Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/20 ...................... $ 11,652,543
9,155,000 Corona Community Hospital Project, Pre-Refunded, ETM, 9.425%, 09/01/06 ................. 11,158,206
11,100,000 Vista Hospital Systems, Series B, Refunding, 8.375%, 07/01/06 .......................... 11,400,144
10,885,000 Vista Hospital Systems, Series B, Refunding, 9.50%, 07/01/20 ........................... 11,387,996
4,845,000 Eden Township Hospital District Health Facilities Revenue, COP, Refunding, Insured Eden Hospital
Health Services Corp., 5.85%, 07/01/18 .................................................... 4,648,729
Emeryville RDA, MFHR, Emery Bay Apartments, Series 1991, 8.75%
230,000 12/01/02 ............................................................................... 234,911
3,770,000 12/01/21 ............................................................................... 3,809,208
37,675,000 Foothill Eastern Transportation Corridor Agency, California Toll Road Revenue, Series A,
6.50%, 01/01/32 ........................................................................... 37,618,488
4,500,000 Gateway Improvement Authority, Marin City Community Facilities District, Series A, 7.75%, 09/01/25 4,606,785
4,175,000 Hawthorne CRDA, Refunding, Hawthorne Plaza Project, 8.50%, 07/01/20 ........................ 4,317,660
8,900,000 Hesperia Public Financing Authority Revenue, Series B, 7.375%, 10/01/23 .................... 8,842,506
6,000,000 Lake Elsinore, 1915 Act, AD No. 93-1, Series A, 7.90%, 09/02/24 ............................ 6,092,760
3,065,000 Long Beach Special Tax, CFD No. 2, West Long Beach, 7.50%, 09/01/11 ........................ 3,084,187
30,100,000 Los Angeles County, CFD No. 4, Special Tax Improvement, Calabassas Area B, Series A,
9.25%, 09/01/22 ........................................................................... 28,931,518
Los Angeles MFR, Refunding, 01/01/24
240,000 Series J-1A, 7.125% .................................................................... 235,858
675,000 Series J-1B, 7.125% .................................................................... 663,350
1,435,000 Series J-1C, 7.125% .................................................................... 1,410,232
1,275,000 Series J-2A, 8.50% ..................................................................... 1,235,399
3,345,000 Series J-2B, 8.50% ..................................................................... 3,241,104
7,120,000 Series J-2C, 8.50% ..................................................................... 6,898,853
Los Angeles Regional Airports Improvement Corp., Lease Revenue,
25,000,000 Refunding, Delta Airlines, Inc., 6.35%, 11/01/25 ....................................... 25,058,500
9,500,000 Refunding, United Airlines, Inc., 6.875%, 11/15/12 ..................................... 9,887,410
2,000,000 Sub-Lease Revenue, Continental Airlines, Inc., Terminal Facilities, 9.00%, 08/01/08 .... 2,129,760
7,730,000 Sub-Lease Revenue, Continental Airlines, Inc., Terminal Facilities, 9.00%, 08/01/17 .... 8,231,522
4,420,000 Needles Public Financing Authority, Local Agency Revenue, Series A, 10.00%, 10/01/24 ....... 4,435,956
2,938,000 Orinda, 1915 Act, AD No. 94-1, Oak Springs, 8.25%, 09/02/19 ................................ 2,994,792
Palmdale California Special Tax Community Facility, Ritter Ranch, Series A, 8.50%,
23,500,000 09/01/24 ............................................................................... 22,305,025
4,500,000 09/01/25 ............................................................................... 4,269,375
Perris Public Financing Authority, Local Agency Revenue, Series B,
2,035,000 7.125%, 08/15/15 ....................................................................... 1,990,474
4,095,000 7.25%, 08/15/23 ........................................................................ 4,028,129
5,345,000 Richmond Joint Power Finance Authority Improvement Bond, 1915 Act, Improvement Districts
Nos. 851 and 853, Series B, 8.50%, 09/02/19 ............................................... 5,513,047
Riverside County COP, Airforce Village Project, Series 1992, 8.125%,
7,160,000 06/15/07 ............................................................................... 7,539,194
5,290,000 06/15/12 ............................................................................... 5,554,183
12,000,000 Roseville Special Tax, North Center Community Facility District, 8.60%, 11/01/17 ........... 12,543,480
Sacramento County, 1915 Act, Refunding, Sunrise/US Corridor Assessment,
1,020,000 6.10%, 09/02/01 ........................................................................ 1,019,551
1,125,000 6.30%, 09/02/02 ........................................................................ 1,127,205
1,515,000 6.50%, 09/02/03 ........................................................................ 1,530,195
1,620,000 6.60%, 09/02/04 ........................................................................ 1,637,982
1,725,000 6.70%, 09/02/05 ........................................................................ 1,745,855
California (cont.)
Sacramento County, 1915 Act, Refunding, Sunrise/US Corridor Assessment, (cont.)
$ 1,840,000 6.80%, 09/02/06 ........................................................................ $ 1,863,902
1,970,000 6.90%, 09/02/07 ........................................................................ 1,997,225
2,100,000 7.00%, 09/02/08 ........................................................................ 2,130,597
2,165,000 7.00%, 09/02/09 ........................................................................ 2,179,657
San Bernardino County Finance Authority Revenue, Refunding, Public Improvement, AD, Series A,
1,460,000 6.00%, 09/02/01 ........................................................................ 1,446,991
1,285,000 6.50%, 09/02/04 ........................................................................ 1,284,190
2,720,000 7.00%, 09/02/17 ........................................................................ 2,658,637
15,000,000 San Francisco City and County RDA, Pre-Refunded, 7.75%, 09/01/06 ........................... 15,745,800
San Francisco Downtown Parking Corp. Revenue, Series 1993,
1,800,000 6.55%, 04/01/12 ........................................................................ 1,836,486
2,150,000 6.65%, 04/01/18 ........................................................................ 2,193,409
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue, Sr. Lien,
12,350,000 6.75%, 01/01/32 ........................................................................ 12,656,033
5,930,000 5.00%, 01/01/33 ........................................................................ 4,884,778
1,500,000 San Jose MFHR, Timberwood Apartments, Series B, 9.25%, 02/01/10 ............................ 1,547,730
San Ramon, 1915 Act, Fostoria Parkway Reassessment District No. 93-1,
1,005,000 6.30%, 09/02/03 ........................................................................ 1,004,427
2,585,000 6.80%, 09/02/15 ........................................................................ 2,528,440
3,000,000 Santa Margarita, Dana Point Authority, California Revenue, Refunding, Improvement Districts,
Series B, MBIA Insured, 5.75%, 08/01/20 ................................................... 2,912,610
Santa Rosa, 1915 Act, Fountaingrove Parkway Extension,
3,340,000 7.40%, 09/02/13 ........................................................................ 3,385,190
3,450,000 7.625%, 09/02/19 ....................................................................... 3,531,248
2,000,000 South San Francisco RDA, Tax Allocation, Gateway Redevelopment Project, 7.60%, 09/01/18,
Vallejo Special Tax,....................................................................... 2,088,580
7,500,000 CFD No. 1988-1, 8.90%, 08/01/21 ........................................................ 7,775,925
12,000,000 CFD No. 1991-1, 8.80%, 10/01/21 ........................................................ 12,600,240
--------------
515,040,031
--------------
Colorado 4.4%
2,485,000 Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 06/01/11 .................... 2,763,892
3,000,000 Arvada MFHR, Springwood Community, Project A, 6.45%, 02/20/26 .............................. 3,061,170
Auraria Higher Education Center, Parking Facilities Revenue, Refunding, Pre-Refunded,
3,450,000 7.75%, 04/01/09 ........................................................................ 3,789,756
1,600,000 7.875%, 04/01/12 ....................................................................... 1,764,080
12,700,000 Colorado Health Facilities Authority, Beneficial Living System, Inc., Series A, 10.125%, 10/01/20 13,595,223
Colorado HFA,
545,000 SF Program, Issue A-2, 9.375%, 08/01/02 ................................................ 569,007
405,000 SF Program, Series A-2, 9.25%, 08/01/01 ................................................ 421,670
550,000 SF Program, Series B-1, 8.70%, 08/01/01 ................................................ 569,338
1,120,000 SFMR, Series 1991-C, 9.075%, 08/01/03 .................................................. 1,164,184
565,000 SFMR, Series B-3, 9.75%, 08/01/02 ...................................................... 572,718
955,000 SFMR, Series C, 9.20%, 08/01/02 ........................................................ 991,204
3,735,000 Colorado Springs, Utility Improvements, Revenue, Series A, 6.10%, 11/15/24 ................. 3,765,926
Denver City and County Airport System Revenue,
5,840,000 Series A, 8.25%, 11/15/12 .............................................................. 6,589,914
11,065,000 Series A, 8.00%, 11/15/17 .............................................................. 11,656,535
31,800,000 Series A, 8.50%, 11/15/23 .............................................................. 36,179,178
22,050,000 Series A, 7.25%, 11/15/25 .............................................................. 23,285,241
Colorado (cont.)
Denver City and County Airport System Revenue, (cont.)
$ 145,000 Series A, 8.00%, 11/15/25 .............................................................. $ 162,270
5,830,000 Series A, Pre-Refunded, 7.50%, 11/15/12 ................................................ 6,693,540
8,900,000 Series A, Pre-Refunded, 7.25%, 11/15/25 ................................................ 10,152,230
500,000 Series D, 7.75%, 11/15/13 .............................................................. 577,700
4,190,000 Series D, 7.75%, 11/15/21 .............................................................. 4,597,813
2,305,000 Eagle County, Airport Terminal Project, Revenue, 7.50%, 05/01/21 ........................... 2,358,937
Eagle County Sports Facilities Revenue, Refunding, 8.00%, 08/01/09,
19,600,000 Beaver Creek Association Project ....................................................... 20,911,240
21,600,000 Vail Association Project ............................................................... 23,045,040
300,000 Fort Collins IDR, Vipont Pharmaceutical, Inc. Project, Pre-Refunded, 9.25%, 08/01/13 ....... 331,701
3,000,000d Village Castle Rock Metropolitan District No. 4, 8.50%, 06/01/31 ........................... 1,066,920
--------------
180,636,427
--------------
Connecticut .7%
2,825,000 Connecticut Development Authority, First Mortgage Revenue, East Hill Gladeview Health
Project 86, 9.75%, 12/15/16 ............................................................... 3,095,381
2,000,000 Connecticut State Health and Educational Facilities Authority Revenue, Sacred Heart University,
Refunding, Series C, 6.50%, 07/01/16 ...................................................... 2,003,020
Connecticut State HFA Housing Mortgage Finance Program,
19,995,000 Series C-1, 6.30%, 11/15/17 ............................................................ 20,173,755
3,500,000 Subseries F-1, 6.00%, 05/15/17 ......................................................... 3,462,830
--------------
28,734,986
--------------
District of Columbia 1.8%
5,410,000 District of Columbia, Carnegie Endowment, Revenue, 5.75%, 11/15/26 ......................... 5,099,953
District of Columbia, GO,
7,800,000 Refunding, Series A, 5.875%, 06/01/05 .................................................. 7,697,118
11,775,000 Refunding, Series A, 6.00%, 06/01/07 ................................................... 11,618,157
5,000,000 Series E, 6.00%, 06/01/11 .............................................................. 5,036,600
District of Columbia Hospital Revenue, Series A,
6,500,000 Medlantic Healthcare Group, Refunding, MBIA Insured, 5.70%, 08/15/08 ................... 6,527,690
8,850,000 Medlantic Healthcare Group, Refunding, MBIA Insured, 5.875%, 08/15/19 .................. 8,637,335
2,000,000 Washington Hospital Center, 7.00%, 08/15/05 ............................................ 2,124,820
4,500,000 Washington Hospital Center, 7.125%, 08/15/19 ........................................... 4,616,055
14,770,000 Washington Hospital Center, Pre-Refunded, 9.00%, 01/01/08 .............................. 17,265,244
3,750,000 Washington Hospital Center, Pre-Refunded, 8.75%, 01/01/15 .............................. 4,339,575
1,500,000 District of Columbia Redevelopment Agency, Washington D. C. Sports Arena Special Tax Revenue,
5.625%, 11/01/10 .......................................................................... 1,441,185
--------------
74,403,732
--------------
Florida 8.5%
2,990,000 Alachua County Health Facilities Authority Revenue, Shands Teaching Hospital, MBIA Insured,
Series A, 5.80%, 12/01/26 ................................................................. 2,939,439
1,075,000 Bay County Resource Recovery Revenue, Series 1984, Pre-Refunded, 8.00%, 07/01/12 ........... 1,110,722
19,910,000 Broward County Resource Recovery Revenue, Broward Waste Energy Co., L. P., North Project,
Series 1984, 7.95%, 12/01/08 .............................................................. 21,856,402
12,400,000 Cape Coral Health Facilities Authority, Revenue, Refunding, First Mortgage, Gulf Care, Inc. Project,
Pre-Refunded, 11.00%, 10/01/17 ............................................................ 15,159,372
Capron Trails Community Development District, Series 1990,
1,940,000 9.375%, 12/01/01 ....................................................................... 2,012,575
5,795,000 9.50%, 12/01/10 ........................................................................ 6,078,260
Florida (cont.)
$ 10,000,000 Dade County, Florida Water and Sewer System Revenue, FGIC Insured, 5.50%, 10/01/25 ......... $ 9,473,100
East County Water Control District, Lee County Drain, Series 1991, Pre-Refunded,
2,770,000 8.75%, 09/01/01 ........................................................................ 3,041,100
10,565,000 8.625%, 09/01/11 ....................................................................... 12,224,445
1,640,000 Escambia County Health Facilities Authority Revenue, Refunding, Baptist Hospital, Inc.,
Series A, 8.70%, 10/01/14 ................................................................. 1,781,778
2,945,000 Flagler County IDA, First Mortgage Revenue, RHA South Florida Properties, Inc. Projects,
10.50%, 12/01/18 .......................................................................... 2,968,531
Florida Board of Education, Outlay Public Education, Series B, 5.875%,
7,000,000 06/01/24 ............................................................................... 6,947,150
2,000,000 06/01/25 ............................................................................... 1,984,680
Florida State, Mid Bay Bridge Authority, Series 1991-B, Pre-Refunded, 8.50%,
3,200,000 10/01/08 ............................................................................... 3,578,880
15,400,000 10/01/22 ............................................................................... 17,223,360
4,025,000 Gateway Services District, Florida Water Management Benefit Tax Revenue, Second Assessment
Area Phase One, 8.00%, 05/01/20 ........................................................... 3,875,914
11,000,000 Indian Trace Community Development District, Florida Water and Sewer Revenue, Expansion,
6.875%, 04/01/10 .......................................................................... 10,609,830
Indian Trace Community Development District, Refunding, Water Management Special Benefit,
Sub-Series B, 8.25%,
11,935,000 05/01/05 ............................................................................... 12,057,453
12,760,000 05/01/11 ............................................................................... 12,811,550
10,000,000 Kissimmee Florida Utility Authority, Electric Systems Revenue, Refunding, FGIC Insured,
5.50%, 10/01/15 ........................................................................... 9,678,400
1,765,000 Lake Clarke Shores Utility System Revenue, Pre-Refunded, 8.75%, 10/01/18 ................... 1,952,461
12,000,000 Lakeland Retirement Community First Mortgage Revenue, Carpenters Home Estates Project,
9.75%, 09/01/18 ........................................................................... 12,535,320
Lakewood Ranch Community Development District 2, Benefit Special Assessment, 8.125%,
05/01/17,
10,495,000 Series A ............................................................................... 10,364,022
9,760,000 Series B ............................................................................... 9,638,195
6,500,000 Manatee County IDR, Manetee Hospital and Health Systems, Inc., Pre-Refunded, 9.25%, 03/01/21 7,740,265
Meadow Pointe Community Development District, Capital Improvement Revenue,
2,565,000 6.25%, 07/01/98 ........................................................................ 2,563,410
7,870,000 6.875%, 07/01/99 ....................................................................... 7,910,845
Mount Dora County Club Community Development District, Special Assessment Revenue,
2,365,000 6.75%, 05/01/03 ........................................................................ 2,306,750
4,110,000 7.125%, 05/01/05 ....................................................................... 4,058,707
2,955,000 7.75%, 05/01/13 ........................................................................ 2,887,153
North Springs ID, Water Management,
1,980,000 Series A, 8.20%, 05/01/24 .............................................................. 2,072,585
1,740,000 Series B, 8.30%, 05/01/24 .............................................................. 1,820,997
Northwood Community Development District, Special Assessment Revenue,
2,165,000 Series A, 7.125%, 05/01/00 ............................................................. 2,145,234
1,620,000 Series B, 7.60%, 05/01/17 .............................................................. 1,601,467
6,000,000 Palm Beach County Health Facility Authority Revenue, Refunding, Abbey del Ray Project,
Series 1992, 8.25%, 10/01/15 .............................................................. 6,472,200
Pelican Marsh Community Development District, Special Assessment Revenue, 8.25%, 05/01/16,
8,540,000 Series A ............................................................................... 8,895,691
5,130,000 Series B ............................................................................... 5,343,665
1,225,000 Pembroke Pines Florida, Capital Improvement Revenue, AMBAC Insured, 5.95%, 10/01/20 ........ 1,235,082
2,425,000 Port Orange Lease Finance Corp., Recreation Facilities Lease Revenue, Pre-Refunded,
8.75%, 10/01/12 ........................................................................... 2,754,558
Florida (cont.)
Riverwood Community Development, Special AD, Series A,
$ 4,420,000 6.75%, 05/01/04 ........................................................................ $ 4,437,768
2,960,000 7.75%, 05/01/14 ........................................................................ 2,975,303
5,000,000 St. Lucie County Florida, Reserve CDD, Storm Water Management, 8.25%, 05/01/14 ............. 5,081,350
5,000,000 St. Lucie West Services District, Florida Water Management Benefit Tax, 7.70%, 05/01/25 .... 4,903,000
St. Lucie West Services District Revenue, Refunding, Port St. Lucie,
20,430,000 7.875%, 05/01/20 ....................................................................... 20,651,461
23,480,000 8.25%, 12/01/23 ........................................................................ 24,224,081
Santa Rosa County Health Facilities Authority Revenue, Gulf Breeze Hospital, Inc.,
265,000 8.60%, 10/01/02 ........................................................................ 281,308
835,000 Pre-Refunded, 8.70%, 10/01/14 .......................................................... 921,105
Tampa Capital Improvement Program Revenue,
3,085,000 Series A, 8.25%, 10/01/18 .............................................................. 3,270,501
8,900,000 Series B, 8.375%, 10/01/18 ............................................................. 9,392,259
10,000,000 Tampa Revenue, Aquarium, Inc. Project, 7.55%, 05/01/12 ..................................... 10,791,100
Village Community Development, District No. 1, Capital Improvement Revenue,
4,765,000 6.75%, 05/01/02 ........................................................................ 4,831,281
2,765,000 8.40%, 05/01/12 ........................................................................ 2,907,480
4,125,000 8.00%, 05/01/15 ........................................................................ 4,230,765
--------------
350,610,310
--------------
Georgia .1%
735,000 Burke County Development Authority, PCR, Georgia Power Co., Plant Vogtle Project,
8.375%, 07/01/17 .......................................................................... 769,317
40,000 Fulton County Residential Care Facilities, Elderly Authority Revenue, Refunding, Lenbrook Square
Foundation, Inc. Project, Series 1987, 9.75%, 01/01/17 .................................... 40,662
1,365,000 Tift County IDAR, Beverly Enterprises, 10.125%, 09/01/10 ................................... 1,526,111
--------------
2,336,090
--------------
Hawaii .3%
6,500,000 Hawaii Department of Transportation Special Revenue, Continental Airlines, Inc., 9.70%, 06/01/20 6,927,180
4,980,000 Hawaii State Special AD No. 17, AMBAC Insured, 9.50%, 08/01/11 ............................. 5,196,929
1,315,000 Hawaiian Home Lands Department Revenue, 7.60%, 07/01/08 .................................... 1,419,280
--------------
13,543,389
--------------
Illinois 4.0%
9,150,000 Alton Hospital Facilities Revenue, Refunding, St. Anthony's Health Center Project, Pre-Refunded,
8.375%, 09/01/14........................................................................... 10,258,523
5,635,000 Aurora MFMR, Fox Valley Two-Oxford, 8.50%, 12/01/08 ........................................ 5,672,022
Chicago O'Hare Airport Special Facility,
7,830,000 Refunding, American Airlines, Inc. Project, 8.20%, 12/01/24 ............................ 8,971,223
3,705,000 United Airlines, Inc., Revenue, 8.85%, 05/01/18 ........................................ 4,147,007
15,450,000 United Airlines, Inc., Series 1984-A, 8.85%, 05/01/18 .................................. 17,293,185
Chicago Wastewater Transmission Revenue,
2,810,000 FGIC Insured, Pre-Refunded, 6.35%, 01/01/22 ............................................ 3,067,143
4,780,000 MBIA Insured, 6.375%, 01/01/24 ......................................................... 4,938,218
7,000,000 Illinois Development Financial Authority PCR, Refunding, Commonwealth Edison Co. Project,
7.25%, 06/01/11 ........................................................................... 7,422,450
Illinois Educational Facilities Authority Revenues, Osteopathic Health Systems,
2,330,000 ETM, 7.125%, 05/15/11 .................................................................. 2,546,900
7,000,000 Pre-Refunded, 7.25%, 05/15/22 .......................................................... 7,693,910
Illinois (cont.)
Illinois Health Facilities Authority Revenue,
$ 3,000,000 Bensenville Home Society, Series B, 8.20%, 02/15/19 .................................... $ 3,174,450
6,500,000 Northwestern Medical Center, 6.625%, 11/15/25 .......................................... 6,795,620
9,000,000 Refunding, Rush Presbyterian Hospital, MBIA Insured, Series A, 6.25%, 11/15/20 ......... 9,121,590
3,000,000 Refunding, Westlake Community Hospital, 7.875%, 01/01/13 ............................... 3,170,820
2,000,000 Sarah Bush Lincoln Health Center, 7.25%, 05/15/12 ...................................... 2,055,340
3,000,000 Servantcor, Series 1989-B, Pre-Refunded, 7.875%, 08/15/19 .............................. 3,327,060
18,765,000 Illinois Health Facilities Authority Revenue, Revolving Fund, Pooled Financing, Thorek Hospital and
Medical Center, Series H, 9.50%, 08/01/15 ................................................. 19,965,022
6,500,000 Lombard, Village of, Revenue, Refunding, Beacon Hill Project, 9.30%, 02/15/18 .............. 6,695,585
Metropolitan Pier and Exposition Authority, Illinois Hospitality Facilities Revenue, McCormick
Place Convention,
1,650,000 5.75%, 07/01/06 ........................................................................ 1,618,353
11,000,000 6.25%, 07/01/17 ........................................................................ 10,662,960
7,500,000 7.00%, 07/01/26 ........................................................................ 7,969,650
17,500,000 Robbins Resources Recovery Revenue, Series B, 9.25%, 10/15/16 .............................. 17,480,925
1,330,000 Sterling Illinois First Mortgage Revenue, Hoosier Care Project, Series A, 9.75%, 08/01/19 .. 1,413,032
--------------
165,460,988
--------------
Indiana .8%
5,000,000 Crawfordsville Industrial EDR, Refunding, Kroger Co., 7.70%, 11/01/12 ...................... 5,354,050
3,000,000 Indiana Health Facility Financing Authority, Hospital Revenue, Hancock Memorial Hospital Project,
Series 1990, 8.30%, 08/15/20 .............................................................. 3,197,160
1,000,000 Indiana State Educational Facilities Authority Revenue, Anderson University Project,
8.40%, 10/01/08 ........................................................................... 1,079,260
12,500,000 Indianapolis Local Public Improvement Bond, Series C, 6.00%, 01/10/18 ...................... 12,539,375
2,500,000 Jefferson County Hospital Authority Facility Revenue, Refunding, King's Daughters' Hospital,
8.50%, 08/15/13 ........................................................................... 2,678,500
Kokomo Hospital Authority Revenue, Refunding, St. Joseph's Hospital and Health Center of Kokomo,
Pre-Refunded, 8.75%, 02/15/13,
3,700,000 Series A ............................................................................... 4,074,144
2,445,000 Series B ............................................................................... 2,692,238
--------------
31,614,727
--------------
Iowa .0%
500,000 Clinton Hospital Facilities Revenue, Jane Lamb Health Center Project, Pre-Refunded,
8.75%, 08/01/03 ........................................................................... 550,740
--------------
Kansas .2%
5,730,000 Prairie Village Revenue, Claridge Court Project, Series A, 8.75%, 08/15/23 ................. 6,167,600
--------------
Kentucky 1.2%
900,000 Danville Multi-City Lease Revenue, Sewer and Drain System, Series G, MBIA Insured,
Pre-Refunded, 6.75%, 03/01/11 ............................................................. 994,455
940,000 Florence Housing Facilities Revenue, Bluegrass Retirement Housing Foundation Project,
9.50%, 07/01/17 ........................................................................... 939,784
3,200,000 Jefferson County, Health Facilities Revenue, Beverly Project, 10.125%, 08/01/07 ............ 3,449,152
Kenton County Airport Revenue, Special Facilities, Delta Airlines, Inc. Project,
11,000,000 8.10%, 12/01/15 ........................................................................ 11,756,910
11,230,000 Series A, 7.50%, 02/01/20 .............................................................. 11,934,907
3,595,000 Series B, 7.25%, 02/01/22 .............................................................. 3,787,836
975,000 Powderly IDR, First Mortgage Revenue, Kroger Co., Refunding, 7.375%, 09/01/06 .............. 1,024,403
Russell County, Franciscan Health System Revenue, Series B, 8.10%,
1,700,000 07/01/01 ............................................................................... 1,848,087
7,500,000 07/01/15 ............................................................................... 8,405,100
Kentucky (cont.)
$ 1,000,000 Stanford Health Facilities Revenue, Refunding, Beverly Project, 10.375%, 11/01/09 .......... $ 1,129,830
3,350,000 Winchester Hospital Revenue, Refunding, Clark County Hospital Project, 7.75%, 04/01/13 ..... 3,402,428
--------------
48,672,892
--------------
Louisiana 2.9%
2,695,000 Calcasieu Parish, SFMR, Series 1991-A, 7.75%, 06/01/12 ..................................... 2,841,689
705,000 Iberville Parish Consolidated School District No. 5, GO, Unlimited Tax, Pre-Refunded,
8.00%, 10/01/06 ........................................................................... 768,767
35,000,000 Lake Charles Harbor and Terminal District Port Facilities Revenue, Refunding, Trunkline Co.
Project, 7.75%, 08/15/22 .................................................................. 38,985,800
4,850,000 Pointe Coupee Parish, PCR, Refunding, Gulf States Utilities Co. Project, 6.70%, 03/01/13 ... 4,867,751
St. Charles Parish PCR, Louisiana Power and Light Co. Project,
25,500,000 8.25%, 06/01/14 ........................................................................ 27,718,245
13,525,000 8.00%, 12/01/14 ........................................................................ 14,689,638
West Feliciana PCR,
17,200,000 Refunding, Gulf System Utilities Co. Project, 8.00%, 12/01/24 .......................... 18,255,736
8,740,000 Series B, 7.50%, 05/01/15 .............................................................. 9,245,347
--------------
117,372,973
--------------
Maine .2%
5,000,000 Maine State Finance Authority Solid Waste Disposal Revenue, Boise Cascade Corp. Project,
7.90%, 06/01/15 ........................................................................... 5,300,150
4,800,000 Rumford PCR, Boise Cascade Corp. Project, Refunding, 6.625%, 07/01/20 ...................... 4,901,616
--------------
10,201,766
--------------
Maryland .9%
Gaithersberg Hospital Facilities Revenue, Refunding, Shady Grove Adventist Hospital,
3,635,000 Nursing Home, Series 1992-B, Pre-Refunded, 8.50%, 09/01/22 ............................. 4,346,769
6,075,000 Series 1992-B, 8.50%, 09/01/03 ......................................................... 6,049,364
5,340,000 Series 1992-B, 8.50%, 09/01/07 ......................................................... 5,710,863
5,000,000 Series C, 6.00%, 09/01/21 .............................................................. 5,007,900
Takoma Park, Hospital Facilities Revenue, Washington Adventist Hospital Project, Series B, 8.50%,
6,320,000 09/01/03 ............................................................................... 6,492,030
6,975,000 09/01/07 ............................................................................... 7,459,414
--------------
35,066,340
--------------
Massachusetts 1.6%
2,000,000 Bay Transit Authority, General Transportation System, Series A, 7.00%, 03/01/21 ............ 2,300,200
4,500,000 Cape Cod Health Systems, Massachusetts Industry Finance Authority, Pre-Refunded,
8.50%, 11/15/20 ........................................................................... 5,223,285
Massachusetts Municipal Wholesale, Electric Co. Power Supply System Revenue, 6.75%,
4,435,000 Series A, 07/01/11 ..................................................................... 4,594,970
3,170,000 Series B, 07/01/17 ..................................................................... 3,348,725
Massachusetts State Health and Educational Facilitity Revenue,
5,000,000 Baystate Medical Center, Series E, 6.00%, 07/01/26 ..................................... 4,917,650
2,000,000 Framingham, Union Hospital, Pre-Refunded, 8.50%, 07/01/10 .............................. 2,294,820
2,000,000 Massachusetts State Industrial Finance Agency, First Mortgage Revenue, Brookhaven at Lexington
Retirement Project, Pre-Refunded, 10.25%, 01/01/18 ........................................ 2,210,040
Massachusetts State Industrial Finance Agency, Semass Project, 07/01/15,
15,490,000 Series 1991-A, 9.00% ................................................................... 17,437,558
20,590,000 Series 1991-B, 9.25% ................................................................... 23,251,463
1,000,000 Massachusetts State Water Resources Authority, Series A, 6.00%, 04/01/20 ................... 1,000,260
--------------
66,578,971
--------------
Michigan 2.2%
$ 6,240,000 City of Cadillac, Local Development Financial Authority, Tax Increment Revenue, Refunding,
8.50%, 03/01/10 ........................................................................... $ 6,571,781
Detroit GO,
5,175,000 City School District, Series A, AMBAC Insured, 5.85%, 05/01/16 ......................... 5,191,871
5,160,000 Series A, 6.80%, 04/01/15 .............................................................. 5,507,165
7,535,000 Series B, Refunding, 6.375%, 04/01/07 .................................................. 7,741,534
3,000,000 Series B, Refunding, 6.25%, 04/01/08 ................................................... 3,048,510
2,750,000 Dickinson County, Memorial Hospital System Revenue, 8.125%, 11/01/24 ....................... 3,067,268
11,770,000 Kent Hospital Finance Authority, Michigan Health Care Revenue, Series A, MBIA Insured,
6.125%, 1/15/21 ........................................................................... 11,898,528
6,605,000 Michigan State Hospital, Finance Authority Revenue, Refunding, Detroit Osteopathic Hospital,
Pre-Refunded, Series A, 7.50%, 11/01/10 ................................................... 6,995,356
7,825,000 Michigan State Strategic Funding Obligation, 6.20%, 08/15/25 ............................... 7,986,665
12,000,000 Midland County EDC, PCR, Refunding, 9.50%, 07/23/09 ........................................ 13,076,160
3,500,000 Muskegon, Hospital Finance Authority, Muskegon General Hospital, 8.25%, 02/15/11 ........... 3,728,865
2,085,000 Tawas City HFA, Hospital Revenue, Tawas St. Joseph's Hospital Project, Series A, 8.50%, 03/15/12 2,150,135
1,900,000 Wayne County, Downriver Systems Sewer Disposal, Series A, 7.00%, 11/01/13 .................. 1,949,514
4,500,000 Wayne County, Michigan Building Authority IDA, Pre-Refunded, 8.00%, 03/01/17 ............... 5,228,505
5,000,000 Wayne County, South Huron Valley Wastewater Control, Refunding, 7.875%, 05/01/02 ........... 5,501,150
Wyandotte Tax Increment Finance Authority, Central Development Area Project, Pre-Refunded,
7.875%,
500,000 06/01/08 ............................................................................... 521,690
500,000 06/01/09 ............................................................................... 547,805
500,000 06/01/10 ............................................................................... 547,805
--------------
91,260,307
--------------
Minnesota 2.9%
Burnsville Solid Waste Revenue, Freeway Transfer, Inc. Project, 9.00%,
515,000 10/01/00 ............................................................................... 564,605
1,500,000 04/01/10 ............................................................................... 1,645,125
5,000,000 Duluth Minnesota, Commercial Development Revenue, Refunding, Duluth Radisson Hotel Project,
8.00%, 12/01/15 ........................................................................... 4,870,050
Minneapolis CDA, Limited Tax, Supported Development Revenue,
3,075,000 Series 2, 8.40%, 12/01/12 .............................................................. 3,247,046
600,000 Series 3-A, 8.375%, 12/01/19 ........................................................... 650,994
290,000 Minneapolis CDR, Selwyn/Lavin Project, 9.00%, 12/01/11 ..................................... 290,592
4,000,000 Minnesota State HFA, Rental Housing, Refunding, MBIA Insured, Series D, 5.95%, 02/01/18 .... 3,961,520
1,255,000 Northfield First Mortgage Nursing Home Revenue, Minnesota Odd Fellows Home Project,
8.75%, 10/01/03 ........................................................................... 1,316,357
5,165,000 Northwest Multi-County RDA, Governmental Housing Revenue Pooled Housing Project,
7.40%, 07/01/26 ........................................................................... 4,949,258
4,110,000 Robbinsdale, MFHR, Refunding, Copperfield Phase II Apartments, 9.00%, 03/01/25 ............. 4,133,550
10,000,000 South Central Multi-County Housing and RDA, Pooled Housing, 8.00%, 02/01/25 ................ 6,500,000
5,930,000 St. Cloud, IDR, Nahan Printing, 9.75%, 06/01/20 ............................................ 6,278,981
St. Paul Housing and RDA, Hospital Facility Revenue, Healtheast Project,
4,475,000 Series A, Pre-Refunded, 9.75%, 11/01/17 ................................................ 4,760,729
410,000 Series B, 9.75%, 11/01/17 .............................................................. 439,053
660,000 Series C, Pre-Refunded, 9.75%, 11/01/17 ................................................ 702,141
3,320,000 Series D, Pre-Refunded, 9.75%, 11/01/17 ................................................ 3,531,982
1,530,000 St. Paul Housing and RDA, Housing Tax, 8.625%, 09/01/07 .................................... 1,697,841
590,000 St. Paul Port Authority Commercial Development, Theole Printing Project, 9.00%, 10/01/21 ... 602,868
4,690,000 St. Paul Port Authority Energy Park, Tax Increment Revenue, Refunding, Pre-Refunded,
8.00%, 12/01/07 ........................................................................... 5,149,901
Minnesota (cont.)
St. Paul Port Authority, IDR,
$ 1,095,000 SDA Enterprises, Series K, 10.25%, 10/01/10 ............................................ $ 999,954
40,000 Series 1979-2, 7.50%, 10/01/09 ......................................................... 37,745
50,000 Series 1980-F, 10.25%, 10/01/96 ........................................................ 49,992
55,000 Series 1980-F, 10.25%, 10/01/97 ........................................................ 55,025
60,000 Series 1980-F, 10.25%, 10/01/98 ........................................................ 60,049
65,000 Series 1980-F, 10.25%, 10/01/99 ........................................................ 65,073
70,000 Series 1980-F, 10.25%, 10/01/00 ........................................................ 69,434
80,000 Series 1980-F, 10.25%, 10/01/01 ........................................................ 79,362
90,000 Series 1980-F, 10.25%, 10/01/02 ........................................................ 88,421
1,300,000 Series 1982-N, 10.75%, 10/01/02 ........................................................ 1,289,795
860,000 Series 1983-C, 10.00%, 12/01/01 ........................................................ 852,810
715,000 Series 1983-C, 10.00%, 12/01/02 ........................................................ 702,166
2,930,000 Series 1983-C, 10.00%, 12/01/06 ........................................................ 2,663,868
3,100,000 Series 1983-C, 9.875%, 12/01/08 ........................................................ 2,768,083
15,000 Series 1984-I, 10.75%, 12/01/00 ........................................................ 15,015
15,000 Series 1984-I, 10.75%, 12/01/01 ........................................................ 15,018
15,000 Series 1984-I, 10.75%, 12/01/02 ........................................................ 14,876
25,000 Series 1984-L, 9.75%, 12/01/01 ......................................................... 24,792
30,000 Series 1984-L, 9.75%, 12/01/02 ......................................................... 29,462
1,530,000 Series 1984-L, 9.75%, 12/01/14 ......................................................... 1,331,819
65,000 Series 1984-N, 10.00%, 12/01/01 ........................................................ 64,457
65,000 Series 1984-N, 10.00%, 12/01/02 ........................................................ 63,833
1,405,000 Series 1984-N, 10.00%, 12/01/14 ........................................................ 1,244,029
80,000 Series 1985-J, 9.50%, 12/01/01 ......................................................... 79,338
95,000 Series 1985-J, 9.50%, 12/01/02 ......................................................... 93,303
1,325,000 Series 1985-J, 9.50%, 12/01/11 ......................................................... 1,140,176
40,000 Series 1985-L, 9.50%, 12/01/01 ......................................................... 39,669
45,000 Series 1985-L, 9.50%, 12/01/02 ......................................................... 44,196
1,025,000 Series 1985-L, 9.50%, 12/01/14 ......................................................... 881,982
55,000 Series 1985-S, 9.625%, 12/01/01 ........................................................ 54,544
60,000 Series 1985-S, 9.625%, 12/01/02 ........................................................ 58,927
1,280,000 Series 1985-S, 9.625%, 12/01/14 ........................................................ 1,101,376
30,000 Series 1985-T, 9.625%, 12/01/01 ........................................................ 29,751
35,000 Series 1985-T, 9.625%, 12/01/02 ........................................................ 34,374
910,000 Series 1985-T, 9.625%, 12/01/14 ........................................................ 783,010
25,000 Series 1989-F, 8.00%, 09/01/00 ......................................................... 24,089
25,000 Series 1989-F, 8.00%, 09/01/01 ......................................................... 24,084
25,000 Series 1989-F, 8.00%, 09/01/02 ......................................................... 24,082
1,025,000 Series 1989-F, 8.00%, 09/01/19 ......................................................... 862,189
1,185,000 Series 1991 A-I, 8.50%, 12/01/01 ....................................................... 1,129,530
260,000 Series 1991 A-I, 9.00%, 12/01/02 ....................................................... 252,840
4,300,000 Series 1991 A-I, 9.00%, 12/01/12........................................................ 3,700,838
1,160,000 Series 1991 A-II, 8.50%, 12/01/01 ...................................................... 1,105,700
255,000 Series 1991 A-II, 9.00%, 12/01/02 ...................................................... 247,977
4,235,000 Series 1991 A-II, 9.00%, 12/01/12 ...................................................... 3,453,812
1,220,000 Series 1991 A-III, 8.50%, 12/01/01 ..................................................... 1,162,892
265,000 Series 1991 A-III, 9.00%, 12/01/02 ..................................................... 257,702
4,430,000 Series 1991 A-III, 9.00%, 12/01/12 ..................................................... 3,812,724
930,000 Series 1991 A-IV, 8.50% 12/01/01 ....................................................... 886,467
205,000 Series 1991 A-IV, 9.00%, 12/01/02 ...................................................... 199,354
3,375,000 Series 1991 A-IV, 9.00%, 12/01/12 ...................................................... 2,904,728
Minnesota (cont.)
St. Paul Port Authority Lease Revenue, Mears Park Center Project, 6.50%,
$ 5,155,000 06/01/16 ............................................................................... $ 5,120,358
10,660,000 06/01/26 ............................................................................... 10,575,360
9,280,000 Washington County Housing and RDA, MFHR, Season Villas, 9.00%, 12/01/22 .................... 9,352,662
--------------
117,315,705
--------------
Mississippi 1.5%
Claiborne County PCR, Middle South Energy, Inc. Project,
10,680,000 Series A, 9.50%, 12/01/13 .............................................................. 11,809,730
9,750,000 Series B, 8.25%, 06/01/14 .............................................................. 10,523,175
10,000,000 Series C, 9.875%, 12/01/14 ............................................................. 11,135,500
22,795,000 System Energy Residential Income Project, 6.20%, 02/01/26 .............................. 21,616,271
2,500,000 Claiborne County PCR, System Energy Resources Inc., 7.30%, 05/01/25 ........................ 2,589,500
4,250,000 Lowndes County, Golden Triangle Medical Center, 8.50%, 02/01/10 ............................ 4,577,930
720,000 Mississippi Hospital Equipment and Facilities Authority Revenue, Refunding, Mississippi Methodist
Hospital and Rehabilitation Center, Pre-Refunded, 9.375%, 05/01/12 ........................ 798,833
--------------
63,050,939
--------------
Missouri 1.6%
8,800,000 Missouri Health and Educational Facilities Authority, Health Facility Marshall, IDA, John Fitzgibbons
Hospital, Series 1990, Pre-Refunded, 10.00%, 05/01/20 ..................................... 10,490,656
7,300,000 Missouri State Revenue, Refunding and Improvement, Heartland Health Systems Project,
Pre-Refunded, 8.125%, 10/01/10 ............................................................ 7,997,588
200,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc. Project,
Pre-Refunded, 8.75%, 03/01/16 ............................................................. 217,028
1,515,000 Newton County IDA, Health Facilities Revenue, Beverly Enterprises, 10.375%, 11/01/08 ....... 1,679,241
1,800,000 Perry Co., Perry Memorial Hospital, Series 1990, 9.125%, 06/01/11 .......................... 1,942,164
1,000,000 St. Louis County IDA, Health Facilities Revenue, Refunding and Improvement, First Mortgage,
Normandy Osteopathic Hospitals Project, 9.125%, 08/01/13 .................................. 1,045,950
St. Louis County IDA, Refunding, Kiel Center,
8,000,000 7.625%, 12/01/09 ....................................................................... 8,503,040
5,175,000 7.75%, 12/01/13 ........................................................................ 5,510,599
6,000,000 7.875%, 12/01/24 ....................................................................... 6,396,900
St. Louis Municipal Financial Corp. Leasehold Revenue, Refunding, Series A,
14,250,000 6.00%, 07/15/13 ........................................................................ 14,392,500
8,640,000 AMBAC Insured, 5.95%, 02/15/16 ......................................................... 8,590,406
--------------
66,766,072
--------------
Montana .9%
445,000 Montana State Board of Housing, SFM, Senior Bonds, Series B-2, 8.90%, 10/01/00 ............. 457,990
2,500,000 Montana State Board of Investments EDR, Refunding, Bozeman Holiday Inn Project,
11.00%, 12/01/07 .......................................................................... 2,611,325
35,000,000 Montana State Board of Investments, Resource Recovery Revenue, Yellowstone Energy Project,
7.00%, 12/31/19 ........................................................................... 32,429,950
725,000 Montana State SFMR, Series 1991-A, 8.275%, 10/01/03 ........................................ 756,719
--------------
36,255,984
--------------
Nebraska .1%
3,500,000 Douglas County, Nebraska Hospital Authority Revenue, Health Facilities, Catholic Health,
MBIA Insured, Series C, 5.375%, 11/15/15 .................................................. 3,286,395
2,100,000 Scotts Bluff County, Hospital No. 1, Hospital Revenue, 6.375%, 12/15/08 .................... 2,161,572
--------------
5,447,967
--------------
Nevada 2.8%
Henderson Local Improvement,
$ 6,975,000 District No. 2, 9.50%, 08/01/11 ........................................................ $ 7,237,609
44,600,000 District No. T-1, Series A, 8.50%, 08/01/13 ............................................ 45,368,904
10,905,000 District No. T-4, Series A, 8.50%, 11/01/12 ............................................ 11,222,554
5,195,000 District No. T-4, Series B, 7.30%, 11/01/12 ............................................ 5,216,403
7,350,000 District No. T-10, 7.50%, 08/01/15 ..................................................... 7,382,708
2,000,000 Las Vegas Downtown RDA, Tax Increment Revenue, Fremont Street Project, Series A,
6.10%, 06/15/14 ........................................................................... 1,914,120
Las Vegas Special ID,
3,580,000 No. 404, 5.85%, 11/01/09 ............................................................... 3,544,093
8,180,000 No. 505, Elkhorn Springs, 8.00%, 09/15/13 .............................................. 8,075,051
1,000,000 No. 707, 6.60%, 06/01/05 ............................................................... 1,000,520
1,235,000 No. 707, 6.70%, 06/01/06 ............................................................... 1,235,692
1,805,000 No. 707, 6.80%, 06/01/07 ............................................................... 1,806,101
8,000,000 No. 707, 7.10%, 06/01/16 ............................................................... 8,005,200
Nevada Housing Division, SF Program, Subordinated, FI/GML,
295,000 Series A, 9.30%, 10/01/00 .............................................................. 303,862
300,000 Series A-1, 8.75%, 10/01/04 ............................................................ 311,718
335,000 Series A-2, 9.375%, 10/01/00 ........................................................... 345,914
570,000 Series A-2, 8.65%, 10/01/01 ............................................................ 586,958
325,000 Series A-3, 9.20%, 10/01/00 ............................................................ 333,661
465,000 Series B, 9.50%, 10/01/01 .............................................................. 481,452
710,000 Series B-1, 7.90%, 10/01/05 ............................................................ 723,710
925,000 Series C-1, 7.55%, 10/01/05 ............................................................ 954,286
Nevada Housing Finance Division Subordinate,
320,000 Series 1989 B-2, 9.65%, 10/01/02 ....................................................... 327,731
375,000 Series 1990 C-1, 9.60%, 10/01/02 ....................................................... 380,235
6,310,000 White Pine County, School District Building, 6.75%, 06/01/18 ............................... 6,421,435
--------------
113,179,917
--------------
New Hampshire 1.5%
New Hampshire Higher Education and Health Facility Authority Revenue,
18,950,000 Hillcrest Terrace, 7.50%, 07/01/24 ..................................................... 16,973,705
9,730,000 Kendal at Hanover Project, 8.00%, 10/01/19 ............................................. 9,747,125
New Hampshire IDA, PCR,
8,835,000 Public Service Co., Project A, 7.65%, 05/01/21 ......................................... 8,900,114
21,930,000 Public Service Co., Project C, 7.65%, 05/01/21 ......................................... 22,091,624
500,000 United Illuminating Co., 10.75%, 10/01/12 .............................................. 542,015
3,000,000 New Hampshire State Business Financial Authority, PCR, Refunding, United Illuminating Co.,
Series A, 5.875%, 10/01/33 ................................................................ 2,692,380
60,946,963
--------------
New Jersey .4%
4,000,000 New Jersey EDA, EDR, Refunding, Stolt Terminals, Series 1988-A, 10.50%, 01/15/18 ........... 4,338,720
2,100,000 New Jersey Health Care Facilities Financing Authority Revenue, Lutheran Home, Series A,
8.40%, 07/01/19 ........................................................................... 2,195,172
New Jersey State Housing and Mortgage Finance Agency, MFHR, Refunding, Series A,
AMBAC Insured,
3,000,000 6.00%, 11/01/14 ........................................................................ 3,020,820
5,500,000 6.05%, 11/01/20 ........................................................................ 5,516,555
--------------
15,071,267
--------------
New Mexico 1.4%
Farmington PCR, Refunding,
$ 37,350,000 Public Service of New Mexico Co., San Juan Project, Series A, 6.40%, 08/15/23 .......... $ 35,646,093
2,900,000 Public Service of New Mexico Co., San Juan Project, Series X, 5.90%, 04/01/07 .......... 2,817,785
11,000,000 Southern California Edison Co., Series A, MBIA Insured, 5.875%, 06/01/23 ............... 10,788,030
New Mexico Mortgage Finance Authority, SFM Program,
1,705,000 Refunding Series A-1, 7.90%, 07/01/04 .................................................. 1,767,233
505,000 Series 1988-A, 9.50%, 09/01/00 ......................................................... 512,626
335,000 Series 1988-B, 9.30%, 09/01/00 ......................................................... 339,965
1,045,000 Series 1991-A, 9.10%, 09/01/03 ......................................................... 1,090,217
460,000 Series A, FHA Insured, 8.80%, 09/01/01 ................................................. 476,790
995,000 Sub Series 1990-A, 9.55%, 09/01/02 ..................................................... 1,008,920
3,620,000 Rio Rancho Water and Wastewater Revenue, Series A, 5.90%, 05/15/15 ......................... 3,603,384
--------------
58,051,043
--------------
New York 12.1%
Babylon IDA, Resource Recovery Revenue, Inc., Ogden Martin System, Babylon, Inc., Pre-Refunded,
3,920,000 8.50%, 01/01/19 ........................................................................ 4,316,234
1,000,000 Series B, 8.50%, 01/01/19 .............................................................. 1,101,080
Metropolitan Transportation Authority, Service Contract, Refunding,
10,000,000 Commuter Facilities, Series 1, 5.70%, 07/01/24 ......................................... 9,556,500
3,860,000 Commuter Facilities, Series 5, 6.50%, 07/01/16 ......................................... 3,921,027
7,500,000 Commuter Facilities, Series A, FGIC Insured, 6.10%, 07/01/26 ........................... 7,562,025
3,330,000 Commuter Facilities, Series N, 6.80%, 07/01/04 ......................................... 3,562,101
3,050,000 Commuter Facilities, Series N, 6.90%, 07/01/05 ......................................... 3,254,045
2,330,000 Transportation Facilities, Series N, 6.80%, 07/01/04 ................................... 2,486,413
2,470,000 Transportation Facilities, Series N, 6.90%, 07/01/05 ................................... 2,635,243
7,830,000 Transportation Facilities, Series N, 7.125%, 07/01/09 .................................. 8,459,924
New York City GO,
10,190,000 Refunding, Series A, 6.125%, 08/01/06 .................................................. 10,207,934
10,000,000 Refunding, Series A, 6.25%, 08/01/08 ................................................... 9,974,300
1,795,000 Refunding, Series G, 5.75%, 08/01/10 ................................................... 1,697,962
3,435,000 Series A, 7.25%, 03/15/20 .............................................................. 3,681,530
1,200,000 Series A, 6.25%, 08/01/21 .............................................................. 1,155,984
6,565,000 Series A, Pre-Refunded, 7.25%, 03/15/20 ................................................ 7,204,825
17,070,000 Series B, 7.00%, 08/15/16 .............................................................. 17,813,399
4,090,000 Series B, 7.00%, 02/01/18 .............................................................. 4,232,577
5,000,000 Series B, 7.50%, 02/01/18 .............................................................. 5,454,000
5,000,000 Series B, 7.00%, 02/01/19 .............................................................. 5,192,200
5,745,000 Series B, 7.00%, 02/01/20 .............................................................. 5,965,838
5,000,000 Series B, Sub Series B-1, 7.25%, 08/15/19 .............................................. 5,310,700
4,250,000 Series C, 6.75%, 10/01/15 .............................................................. 4,315,620
4,800,000 Series C, 7.00%, 08/01/17 .............................................................. 4,976,112
11,050,000 Series C, 7.25%, 08/15/24 .............................................................. 11,613,550
1,000,000 Series C, Sub Series C-1, 7.00%, 08/01/16 .............................................. 1,036,690
4,875,000 Series C, Sub Series C-1, 7.50%, 08/01/21 .............................................. 5,364,450
11,600,000 Series D, 6.00%, 02/15/10 .............................................................. 11,246,084
150,000 Series D, 7.70%, 02/01/11 .............................................................. 164,118
3,350,000 Series D, 7.70%, 02/01/11 .............................................................. 3,834,343
5,000,000 Series D, 7.625%, 02/01/13 ............................................................. 5,451,050
4,500,000 Series D, 7.625%, 02/01/14 ............................................................. 4,905,945
7,425,000 Series D, 7.625%, 02/01/14 ............................................................. 8,116,416
New York (cont.)
New York City GO, (cont.)
$ 5,000,000 Series D, 7.50%, 02/01/19 .............................................................. $ 5,493,100
1,575,000 Series D, Pre-Refunded, 7.625%, 02/01/14 ............................................... 1,797,154
10,000,000 Series E, 6.25%, 02/15/07 .............................................................. 10,052,800
525,000 Series E, Pre-Refunded, 7.50%, 02/01/18 ................................................ 572,670
4,500,000 Series F, 7.625%, 02/01/13 ............................................................. 4,905,945
400,000 Series F, 7.625%, 02/01/15 ............................................................. 439,784
8,545,000 Series F, 7.50%, 02/01/21 .............................................................. 9,350,024
8,625,000 Series F, 6.625%, 02/15/25 ............................................................. 8,692,361
60,000 Series G, 7.50%, 02/01/22............................................................... 64,550
780,000 Series G, Pre-Refunded, 7.50%, 02/01/22 ................................................ 885,433
5,000,000 Series H, 7.625%, 02/01/14 ............................................................. 5,329,950
12,600,000 Series H, 7.20%, 02/01/15 .............................................................. 13,335,840
12,000,000 Series H, 7.00%, 02/01/19 .............................................................. 12,461,280
2,925,000 Series H, 7.00%, 02/01/20 .............................................................. 3,035,682
350,000 Series H, 7.00%, 02/01/22 .............................................................. 363,244
6,825,000 New York City IDA, Civic Facility Revenue, Amboy Corp. Project, Series 1990, 9.625%, 06/01/15 7,524,358
New York City Municipal Water Financing Authority, Water and Sewer System Revenue,
10,075,000 Series A, Refunding, FGIC Insured, 5.75%, 06/15/18 ..................................... 9,769,929
10,000,000 Series B, 5.75%, 06/15/26 .............................................................. 9,667,300
New York State Dormitory Authority Revenue, City University System, Pre-Refunded,
1,000,000 Series B, 7.20%, 07/01/21 .............................................................. 1,119,420
1,000,000 Series F, 7.875%, 07/01/07 ............................................................. 1,129,550
8,500,000 Series F, 7.875%, 07/01/17 ............................................................. 9,601,175
730,000 New York State Dormitory Authority Revenue, State University Educational Facilities, Series A,
Pre-Refunded, 7.125%, 05/15/17 ............................................................ 792,554
12,350,000 New York State Energy Research and Development Authority, Gas Facilities Revenue, Refunding,
Brooklyn Union Gas Company, MBIA Insured, 5.50%, 01/01/21 ................................. 11,715,087
New York State Environmental Facility Corp.,
5,000,000 PCR, State Water Revenue, New York Municipal Water, Refunding, Series A, 5.875%, 06/15/14 4,985,800
1,000,000 Water Facility Revenue, Long Island Water Corp., Project, Series 1987-A, 10.00%, 10/01/17 1,053,520
New York State HFA, Series A,
12,515,000 Revenue, Refunding, 5.90%, 11/01/05 .................................................... 12,478,832
10,000,000 Service Contract Obligation, 6.50%, 03/15/25 ........................................... 10,093,700
9,715,000 Service Contract Obligation, Pre-Refunded, 7.80%, 09/15/20 ............................. 11,000,003
New York State Local Government Assistance Corp.,
15,000,000 Series B, 7.25%, 04/01/05 .............................................................. 16,641,900
10,000,000 Series B, 7.25%, 04/01/06 .............................................................. 11,094,600
3,500,000 Series D, Pre-Refunded, 7.00%, 04/01/18 ................................................ 3,922,485
6,850,000 Series D, Pre-Refunded, HFA, 7.80%, 09/15/10 ........................................... 7,756,050
New York State Medical Care Facilities Finance Agency Revenue,
6,175,000 Montefiore Medical Center, Series A, AMBAC Insured, 5.75%, 02/15/25 .................... 5,957,146
4,000,000 St. Luke's Nursing Home Mortgage Insured, Series B, 6.95%, 12/15/32 .................... 4,222,800
2,500,000 Security Hospital, Series A, 7.35%, 08/15/11 ........................................... 2,658,750
Port Authority of New York and New Jersey, Special Obligation Revenue,
1,000,000 2nd Installment, 6.50%, 10/01/01 ....................................................... 1,023,720
8,000,000 3rd Installment, 7.00%, 10/01/07 ....................................................... 8,408,480
5,000,000 4th Installment, 6.75%, 10/01/11 ....................................................... 5,020,100
17,500,000 5th Installment, 6.75%, 10/01/19 ....................................................... 17,337,250
5,000,000 Consolidated 102nd Series, MBIA Insured, 5.75%, 10/15/23 ............................... 4,912,050
10,000,000 Continental Airlines, Inc., Eastern Project, La Guardia, 9.00%, 12/01/10 ............... 11,131,000
27,650,000 Continental Airport Project, Eastern Project, La Guardia, 9.125%, 12/01/15 ............. 30,903,852
New York (cont.)
Troy IDA, Lease Revenue, City of Troy, 8.00%,
$ 5,000,000 03/15/12 ............................................................................... $ 4,950,000
5,500,000 03/15/22 ............................................................................... 5,445,000
1,500,000 Warren and Wash Counties IDAR, Refunding, Resource Recovery, Series A, 7.90%, 12/15/07 ..... 1,523,940
--------------
496,390,387
--------------
North Carolina .1%
North Carolina HFA, SF, Series II, GNMA Secured, 6.20%,
3,000,000 03/01/16 ............................................................................... 3,007,290
2,000,000 09/01/17 ............................................................................... 2,004,860
--------------
5,012,150
--------------
North Dakota .6%
24,655,000 Mercer County, PCR, Refunding, Basin Electric Power, Second Series, AMBAC Insured,
6.05%, 01/01/19 ........................................................................... 24,859,390
--------------
Ohio 4.9%
2,670,000 Allen County Nursing Home, First Mortgage Revenue, Volunteers of America Care Facilities
Project, 9.00%, 03/01/18 .................................................................. 2,787,800
21,235,000 Cleveland Airport Special Revenue, Continental Airlines, Inc. Project, 9.00%, 12/01/19 ..... 22,069,748
10,065,000 Cuyahoga County Hospital Revenue, Refunding, University Hospitals Health System, Series B,
MBIA Insured, 5.50%, 01/15/16 ............................................................. 9,569,701
2,500,000e Dayton Special Facilities IDR, Refunding, 6.05%, 10/01/09 .................................. 2,482,025
Montgomery County Health Systems Revenue, Franciscan, 8.10%,
1,200,000 Series B, 07/01/01 ..................................................................... 1,304,004
6,300,000 Series B, 07/01/18 ..................................................................... 6,934,662
1,100,000 Series B-1, 07/01/01 ................................................................... 1,195,337
6,500,000 Series B-1, 07/01/18 ................................................................... 7,154,810
9,600,000 Series B-2, 07/01/18 ................................................................... 10,567,104
1,200,000 Muskingum County, Ohio Hospital Facilities Revenue, Refunding, Franciscan Sisters, Connie Lee
Insured, 5.375%, 02/15/12 ................................................................. 1,117,116
Ohio State Air Quality Authority,
17,900,000 Dayton Power and Light Company Project, Refunding, 6.10%, 09/01/30 ..................... 17,985,025
5,265,000 Toledo Edison, Series B, 8.00%, 05/15/19 ............................................... 5,413,631
10,100,000 Ohio State HFA, Chagrin Fall, Retirement Rental Housing Revenue, 10.375%, 04/01/09 ......... 11,062,328
6,700,000 Ohio State Solid Waste Revenue, Republic Engineered Steels, Inc., 9.00%, 06/01/21 .......... 6,964,382
Ohio State Water Development Authority,
27,700,000 PCR, Refunding, Cleveland Electric, Series A, 8.00%, 10/01/23 .......................... 28,350,119
6,200,000 Toledo Edison, Series A, 8.00%, 05/15/19 ............................................... 6,366,346
4,750,000 Ohio State Water Development Authority Revenue, Refunding and Improvement, Pure Water,
AMBAC Insured, 5.50%, 12/01/18 ............................................................ 4,538,483
500,000 Pike County Hospital Facilities Revenue, National Church Residences, Series 1987, Pre-Refunded,
9.875%, 07/01/17 .......................................................................... 550,470
3,775,000 Seneca County Nursing HMR, Refunding and Improvement, Volunteers of America Care Facilities,
9.00%, 01/01/13 ........................................................................... 3,931,210
Toledo-Lucas County Port Authority Airport Revenue, Burlington Air Express,
6,820,000 Project 1, 7.00%, 04/01/04 ............................................................. 7,132,697
1,125,000 Series 1991-1, 9.125%, 09/15/01 ........................................................ 1,211,051
5,875,000 Series 1991-1, 9.125%, 09/15/13 ........................................................ 6,282,373
5,385,000 Series 1994-1, 7.25%, 04/01/09 ......................................................... 5,657,373
8,200,000 Series 1994-1, 7.375%, 04/01/14 ........................................................ 8,627,220
14,365,000 Series 1994-1, 7.50%, 04/01/19 ......................................................... 15,135,251
Ohio (cont.)
Toledo-Lucas County Port Authority Development Revenue, Nortwest Ohio Bond Fund,
$ 2,070,000 Series 1989-B, 9.00%, 11/15/08 ......................................................... $ 2,197,636
1,260,000 Series 1990-A, Pre-Refunded, 8.625%, 05/15/10 .......................................... 1,422,565
3,005,000 Series 1990-D, 8.25%, 05/15/20 ......................................................... 3,168,532
--------------
201,178,999
--------------
Oklahoma .9%
6,335,000 Jackson County Memorial Hospital Authority Revenue, Refunding, Jackson County Memorial
Hospital Project, Pre-Refunded, 9.00%, 08/01/15 ........................................... 6,743,417
Tulsa Municipal Airport Transportation Revenue,
12,845,000 American Airlines, Inc., 7.375%, 12/01/20 .............................................. 13,512,683
10,050,000 American Airlines Project, Refunding, 6.25%, 06/01/20 .................................. 9,902,165
4,000,000 Valley View Hospital Authority, Oklahoma Revenue, Refunding, Valley View Regional Medical
Center, 6.00%, 08/15/14 ................................................................... 3,721,760
2,500,000 Washington County Medical Authority Revenue, Bartlesville, Refunding, Jane Phillips Hospital,
Series A, 8.50%, 11/01/10 ................................................................. 2,648,800
--------------
36,528,825
--------------
Oregon .5%
2,500,000 Northern Wasco County, Peoples' Utility District, Oregon Electric Revenue, FGIC Insured,
5.625%, 12/01/22 .......................................................................... 2,418,250
20,135,000 Oregon State Department Administrative Services, COP, Series A, MBIA Insured, 5.50%, 11/01/20 19,177,782
--------------
21,596,032
--------------
Pennsylvania 7.1%
Chartiers Valley Industrial and Commercial Development Authority Revenue, Refunding,
4,750,000 Asbury Health Center Project, 7.40%, 12/01/15 .......................................... 4,841,295
6,000,000 First Mortgage, United Methodist Health Center, Series A, Pre-Refunded, 9.50% 12/01/15 . 6,764,760
5,000,000 Delaware County IDAR, Refunding, Resource Recovery Project, Series A, 8.10%, 12/01/13 ...... 5,187,400
20,750,000 Delaware River Port Authority, Pennsylvania and New Jersey Revenue, FGIC Insured,
5.50%, 01/01/26 ........................................................................... 19,652,118
980,000 Fayette County Hospital Authority Revenue, Refunding, Uniontown Hospital Project, Pre-Refunded,
7.625%, 07/01/15 .......................................................................... 1,003,579
Franklin County IDA, Health Facilities Revenue, Encore Nursing Center,
650,000 10.375%, 07/01/11 ...................................................................... 736,606
3,100,000 Refunding, 10.375%, 07/01/11 ........................................................... 3,503,155
3,200,000 Gettysburg IDA, Health Facilities Revenue, Refunding, Encore Nursing Center, 10.375%, 07/01/11 3,626,368
4,000,000 Lehigh County IDA, PCR, Refunding, Pennsylvania Power & Light Co. Project, Series A,
MBIA Insured, 6.15%, 08/01/29 ............................................................. 4,095,440
Montgomery County Higher Education and Health Authority, Hospital Revenue, United Hospital,
Pre-Refunded,
200,000 Series A, 8.375%, 11/01/11 ............................................................. 225,260
3,560,000 Series A, 7.50%, 11/01/12 .............................................................. 3,862,956
750,000 Series A, 7.50%, 11/01/13 .............................................................. 813,825
600,000 Series A, 7.50%, 11/01/14 .............................................................. 651,060
3,940,000 Series B, 7.50%, 11/01/14 .............................................................. 4,275,294
1,600,000 Series B, 7.50%, 11/01/15 .............................................................. 1,736,160
Montgomery County Higher Education and Health Authority Revenue,
1,925,000 First Mortgage, Holy Redeemer Long-Term Care, Series A, 8.20%, 06/01/06 ................ 2,003,713
3,500,000 First Mortgage, Holy Redeemer Long-Term Care, Series A, 8.00%, 06/01/22 ................ 3,559,710
5,000,000 St. Joseph's University, Series 1990, Pre-Refunded, 8.30%, 06/01/10 .................... 5,681,150
10,000,000 Montgomery County IDAR, Resources Recovery, 7.50%, 01/01/12 ................................ 10,595,200
Pennsylvania (cont.)
Pennsylvania Convention Center Authority Revenue, Refunding, Series A,
$ 4,960,000 5.75%, 09/01/99 ........................................................................ $ 5,019,520
5,000,000 6.25%, 09/01/04 ........................................................................ 5,203,700
16,000,000 6.60%, 09/01/09 ........................................................................ 16,762,240
20,760,000 6.70%, 09/01/14 ........................................................................ 21,665,344
15,800,000 6.75%, 09/01/19 ........................................................................ 16,487,458
10,000,000 Pennsylvania EDA, Resource Recovery Revenue, Colver Project, Series D,
7.125%, 12/01/15 .......................................................................... 10,430,200
Pennsylvania State Higher Educational Facilities Authority,
1,200,000 College and University Revenue, Medical College of Pennsylvania, Series A, Pre-Refunded,
8.375%, 03/01/11 ...................................................................... 1,330,704
15,000,000 Health Services Revenue, Allegheny Deleware Valley Obligated Group, Series A, MBIA
Insured, 5.875%, 11/15/16 ............................................................. 14,797,800
1,825,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ............................................................. 1,916,104
2,850,000 Philadelphia Gas Works Revenue, 14th Series A, 6.375%, 07/01/26 ............................ 2,877,389
3,080,000 Philadelphia GO, Refunding, Series A, 6.00%, 05/15/05 ...................................... 3,106,642
Philadelphia Municipal Authority Revenue, Justice Lease,
3,500,000 Refunding, Series D, 6.30%, 07/15/17 ................................................... 3,459,645
4,000,000 Sub-Series C, 8.625%, 11/15/16 ......................................................... 4,323,360
25,500,000 Sub-Series C, Pre-Refunded, 8.625%, 11/15/16 ........................................... 30,307,005
3,000,000 Sub-Series D, 6.25%, 07/15/13 .......................................................... 2,968,920
Philadelphia Water and Sewer Revenue,
14,405,000 10th Series, ETM, 7.35%, 09/01/04 ...................................................... 16,163,418
9,750,000 16th Series, Pre-Refunded, 7.00%, 08/01/18 ............................................. 10,690,388
11,400,000 Pittsburg Water and Sewer Authority, Water and Sewer Systems Revenue, Series B,
5.75%, 09/01/25 ........................................................................... 11,010,462
15,940,000 Schuylkill County IDA, Resource Recovery Revenue, Refunding, Schuylkill Energy Resources, Inc.,
6.50%, 01/01/10 ........................................................................... 15,122,597
8,870,000 South Wayne County, Water and Sewer Authority Revenue, Refunding, 8.20%, 04/15/13 .......... 8,953,378
100,000 Washington County Hospital Authority Revenue, Washington Hospital, Series 1987, Pre-Refunded,
9.50%, 07/01/17 ........................................................................... 105,387
5,025,000 Washington County IDA, PCR, West Pennsylvania Power Company, 6.05%, 04/01/14 ............... 5,087,310
--------------
290,604,020
--------------
Puerto Rico .1%
1,875,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
Series 1988-A, 7.75%, 07/01/08 ............................................................ 2,004,956
--------------
Rhode Island .3%
5,000,000 Rhode Island HFC, Homeownership Opportunity, Series 17-A, 6.25%, 04/01/17 .................. 5,022,700
6,000,000 Rhode Island State Health and Educational Building Corp., Hospital Financing Revenue, Landmark
Medical Center Assessment, 5.875%, 10/01/19 ............................................... 5,761,980
West Warwick GO, Series A,
1,715,000 6.80%, 07/15/98 ........................................................................ 1,739,542
170,000 7.00%, 08/15/02 ........................................................................ 173,431
915,000 7.30%, 07/15/08 ........................................................................ 955,306
--------------
13,652,959
--------------
South Carolina .9%
3,805,000 Charleston County Hospital Facilities, First Mortgage Revenue, Sandpiper Village, Inc.,
8.00%, 11/01/13 ........................................................................... 3,559,578
32,500,000 South Carolina State Public Service Authority Revenue, Refunding, Series A, MBIA Insured,
5.75%, 01/01/22 ........................................................................... 31,651,750
--------------
35,211,328
--------------
South Dakota .3%
$ 5,000,000 South Dakota HDA, Homeownership Mortgage, Series A, 6.125%, 05/01/17 ....................... $ 5,001,550
3,500,000 South Dakota State Health and Educational Facilities Authority Revenue, Refunding, Prairie
Lakes Health Care, 7.25%, 04/01/22 ........................................................ 3,539,690
3,000,000 Watertown Hospital Facilities Revenue, Prairie Lakes Health Care System Project, Pre-Refunded,
9.125%, 04/01/13 .......................................................................... 3,275,160
--------------
11,816,400
--------------
Tennessee .6%
3,110,000 Knox County Health, Educational and Housing Facilities Board, MFHR, GNMA Secured,
Eastown Village Project, 8.20%, 07/01/28 .................................................. 3,234,307
Memphis-Shelby County Airport Authority, Special Facilities and Project Revenue, Federal Express Corp.,
3,250,000 Series 1982-B, 8.30%, 09/01/12 ......................................................... 3,318,185
6,000,000 Series 1984, 7.875%, 09/01/09 .......................................................... 6,571,860
5,000,000 Metropolitan Government, Nashville and Davidson County Public Improvements, 5.875%, 05/15/26 4,920,100
1,710,000 Scott County IDB, IDR, Fruehauf Corp. Project, 10.75%, 01/01/09 ............................ 1,699,911
2,900,000 Shelby County, Health and Education Housing Facility Revenue, Beverly Enterprise,
10.125%, 12/01/11 ......................................................................... 3,227,758
200,000 Tennessee HDA, Financial Mortgage, Series A, 6.90%, 07/01/25 ............................... 209,112
--------------
23,181,233
--------------
Texas 3.1%
10,000,000 Alliance Airport Authority, Special Facilities Revenue, Series 1990, 7.50%, 12/01/29 ....... 10,573,500
8,750,000 Bexar County, Texas, Health Facilities Development Corporation Revenue, Refunding, 6.00%,
11/15/15 .................................................................................. 8,805,738
Brazos River Authority, PCR,
16,000,000 Houston Light & Power Co., 8.25%, 05/01/19 ............................................. 17,101,600
1,675,000 Texas Utilities Electric Co. Project, Collateralized, Series 1988-A, 9.25%, 03/01/18 ... 1,792,016
4,650,000 Coppell Special Assessment Gateway Project, 8.70%, 03/01/12 ................................ 4,791,453
5,561,000 Copperas Cove Health Facilities Development Corp., Hospital Revenue, First Mortgage,
Metroplex Health, Series B, Pre-Refunded, 9.125%, 12/01/19 ................................ 6,360,116
6,115,000 El Paso County, SFMR, Series 1991-A, 8.75%, 10/01/11 ....................................... 6,608,419
7,700,000 Houston Texas, Water and Sewer Systems Revenue, Refunding, Jr. Lien, Series A, FGIC Insured,
5.25%, 12/01/25 ........................................................................... 6,936,853
4,550,000 Matagorda County Navigation District No. 1, PCR, Collateralized, Refunding, Houston Lighting
and Power Co., Series B, 7.70%, 02/01/19 .................................................. 4,791,014
Metropolitan Health Facilities Development Corp., Hospital Revenue, Refunding and Improvement,
Wilson N. Jones Memorial Hospital Project, Pre-Refunded,
2,770,000 7.75%, 01/01/05 ........................................................................ 2,858,889
7,500,000 7.875%, 01/01/14 ....................................................................... 7,743,675
2,000,000 Midland County Hospital District Revenue, Series 1989, Pre-Refunded, 8.375%, 06/01/02 ...... 2,154,540
5,300,000 National Research Laboratory Commission Financing Corp. Lease Revenue, Pre-Refunded,
7.10%, 12/01/21 ........................................................................... 5,948,773
250,000 Port of Corpus Christi IDC Revenue, Refunding, Valero Refining, Series A, 10.25%, 06/01/17 . 266,235
8,000,000 Red River Authority PCR, Refunding, West Texas Utilities Co. Project, MBIA Insured,
6.00%, 06/01/20 ........................................................................... 7,999,040
7,000,000 Sabine River Authority PCR, Refunding, Southwestern Electric Power, MBIA Insured,
6.10%, 04/01/18 ........................................................................... 7,057,400
6,000,000 San Antonio Texas Electric and Gas Revenue, Series 95, MBIA Insured, 5.375%, 02/01/18 ...... 5,612,580
3,000,000 Tarrant County, Texas Health Facilities Development Corporation, Health Systems Revenue,
Refunding, Harris Methodist Health, AMBAC Insured, 5.125%, 09/01/12 ....................... 2,781,930
7,430,000 Texas State Refunding, VHA, Series A, 6.15%, 12/01/25 ...................................... 7,489,069
Texas (cont.)
$ 6,180,000 Texas State Turnpike Authority, Dallas North Throughway Revenue, President George Bush
Turnpike, FGIC Insured, 5.40%, 01/01/15 ................................................... $ 5,862,657
4,000,000 Texas State Water Development Board Revenue, 6.00%, 07/15/13 ............................... 4,069,760
--------------
127,605,257
--------------
United States Territories .5%
2,405,000 American Samoa EDA, Executive Office Building Revenue, 10.125%, 09/01/08 ................... 2,551,200
14,000,000 Virgin Island Public Finance Authority Revenue, Refunding, Matching Fund Loan Notes,
Series A, 7.25%, 10/01/18 ................................................................. 14,749,140
Virgin Island Water and Power Authority,
400,000 Electric Services, Series A, 7.40%, 07/01/11 ........................................... 421,104
4,000,000 Water Power Revenue, Series B, 7.60%, 01/01/12 ......................................... 4,279,120
--------------
22,000,564
--------------
Utah 1.1%
2,000,000 Box Elder County PCR, Nucor Corp. Project, 6.90%, 05/15/17 ................................. 2,127,100
11,800,000 Davis County Solid Waste Management Energy Recovery Revenue, Refunding, Special Services
District, 6.125%, 06/15/09 ................................................................ 11,468,184
Intermountain Power Agency, Utah Power Supply Revenue, Refunding, Series D, 5.00%,
4,700,000 07/01/21 ............................................................................... 4,085,898
11,000,000 07/01/23 ............................................................................... 9,515,000
11,000,000 Utah Assessed Municipal Power Systems Revenue, San Juan Project, 6.375%, 06/01/22 .......... 11,389,840
Utah State HFA, SFM,
90,000 Series 1988-A, 9.625%, 07/01/00 ........................................................ 93,373
75,000 Series 1988-B, 9.50%, 07/01/00 ......................................................... 77,510
55,000 Series 1988-B, 9.60%, 07/01/00 ......................................................... 57,017
220,000 Series 1988-C-1, 9.375%, 07/01/00 ...................................................... 226,481
100,000 Series 1988-E, 9.50%, 07/01/00 ......................................................... 103,347
60,000 Series 1988-F, 9.60%, 07/01/00 ......................................................... 61,368
80,000 Series 1988-G-2, 9.30%, 07/01/00 ....................................................... 80,746
100,000 Series 1989-B, 9.25%, 07/01/01 ......................................................... 102,303
85,000 Series 1990-A-2, 9.625%, 07/01/02 ...................................................... 87,081
120,000 Series 1990-B-2, 9.50%, 07/01/02 ....................................................... 122,699
270,000 Series 1991-A-2, 9.45%, 07/01/03 ....................................................... 278,178
305,000 Series 1991-B-2, 9.45%, 07/01/03 ....................................................... 314,733
325,000 Series 1991-C-2, 9.05%, 07/01/03 ....................................................... 338,978
625,000 Series 1991-D-2, 9.00%, 07/01/03 ....................................................... 651,794
550,000 Series 1991-E-1, 8.70%, 07/01/03 ....................................................... 573,639
700,000 Sub-Series B-2, 8.70%, 07/01/04 ........................................................ 729,183
500,000 Sub-Series D, 8.45%, 07/01/04 .......................................................... 512,365
--------------
42,996,817
--------------
Virginia .3%
9,725,000 Hanover County, Virginia IDA Hospital Revenue, Memorial Regional Medical Center Project,
MBIA Insured, 5.50%, 08/15/25 ............................................................. 9,098,418
2,855,000 Norfolk Virginia Water Revenue, AMBAC Insured, 5.375%, 11/01/23 ............................ 2,620,633
3,000,000 Upper Occoquan Sewer Authority, Virginia Regional Sewer Revenue, Series A, MBIA Insured,
5.15%, 07/01/20 ........................................................................... 2,749,650
--------------
14,468,701
--------------
Washington .8%
2,370,000 Chelan County PUD No. 1, Columbia River Rock, First Hydro Electric System Revenue,
6.375%, 06/01/29 .......................................................................... 2,375,356
2,675,000 Washington State Health Care Facilities Authority Revenue, Swedish Hospital Medical Center,
Empire Health Service, Spokane, AMBAC Insured, 6.30%, 11/15/22 ............................ 2,727,778
Washington (cont.)
Washington State Public Power Supply System Revenue, Refunding,
$ 5,000,000 Nuclear Project No. 1, Series C, Pre-Refunded, 8.00%, 07/01/17 ......................... $ 5,650,600
20,300,000 Nuclear Project No. 2, Series A, 6.00%, 07/01/12 ....................................... 19,992,455
3,000,000 Nuclear Project No. 2, Series A, 6.50%, 07/01/15 ....................................... 3,082,800
1,000,000 Yakima-Tieton Irrigation District Revenue, Refunding, Pre-Refunded, 8.40%, 06/01/18 ........ 1,069,270
--------------
34,898,259
--------------
West Virginia .5%
1,415,000 Beckley First Mortgage Revenue, Refunding, Pine Lodge Health Care Center, 10.25%, 08/01/12 . 1,465,105
10,000,000 West Virginia State Hospital Finance Authority, Hospital Revenue, 7.25%, 07/01/20 .......... 10,087,900
West Virginia State Water Development Authority Revenue,
1,550,000 Loan Program II, Series A, Pre-Refunded, 8.625%, 11/01/28 .............................. 1,715,757
2,790,000 Loan Program II, Series A, Pre-Refunded, 8.125%, 11/01/29 .............................. 3,059,933
2,480,000 Solid Waste Management, Series C, 8.125%, 08/01/15 ..................................... 2,677,706
--------------
19,006,401
--------------
Wisconsin 1.1%
12,840,000 Wisconsin Center District, Wisconsin Tax Revenue, Junior Dedicated, Series B, 5.75%, 12/15/27 12,112,100
2,500,000 Wisconsin Housing EDA, Home Ownership Revenue, Series C, 6.15%, 09/01/17 ................... 2,503,800
Wisconsin State Health and Educational Facilities Authority Revenue,
1,000,000 Bethany Lutheran Home of La Crosse, 8.75%, 12/01/06 .................................... 1,036,070
9,510,000 Franciscan Health System, Inc. Project, 6.25%, 11/15/20 ................................ 9,562,115
6,000,000 Franciscan Health System, Inc. Project, Pre-Refunded, 8.375%, 03/01/05 ................. 6,789,420
6,000,000 Franciscan Health System, Inc. Project, Pre-Refunded 8.50%, 03/01/20 ................... 6,813,240
5,000,000 Refunding, Felician Health Care, Series A, AMBAC Insured, 7.00%, 01/01/15 .............. 5,326,700
1,670,000 Wisconsin State Health Facilities Authority Revenue, Refunding, Franciscan Health Advisory,
Pre-Refunded, 7.80%, 03/01/14 ............................................................. 1,734,646
--------------
45,878,091
--------------
Wyoming .3%
1,575,000 Natrona County Health Care Facility Revenue, Luthercare, Inc. Project, 9.25%, 07/15/08 ..... 1,613,446
10,500,000 Sweetwater County PCR, Refunding, Idaho Power Co., Series A, 6.05%, 07/15/26 ............... 10,328,010
1,000,000 Wyoming CDA Revenue, Series 1, 6.15%, 06/01/17 ............................................. 1,008,480
--------------
12,949,936
--------------
Total Bonds (Cost $3,719,927,893)..................................................... 3,869,919,452
--------------
Zero Coupon Bonds 2.4%
San Francisco City and County RDA, Lease Revenue, George Moscone Center,
3,750,000 (original accretion rate 7.00%), 07/01/09 .............................................. 1,716,150
4,500,000 (original accretion rate 7.00%), 07/01/10 .............................................. 1,924,650
4,500,000 (original accretion rate 7.05%), 07/01/12 .............................................. 1,681,290
4,250,000 (original accretion rate 7.05%), 07/01/13 .............................................. 1,479,978
2,250,000 (original accretion rate 7.05%), 07/01/14 .............................................. 729,585
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue, Jr. Lien,
7,400,000 (original accretion rate 8.50%), 01/01/04 .............................................. 4,503,048
8,000,000 (original accretion rate 8.75%), 01/01/05 .............................................. 4,512,480
9,000,000 (original accretion rate 8.60%), 01/01/06 .............................................. 4,717,710
9,400,000 (original accretion rate 8.60%), 01/01/07 .............................................. 4,574,604
10,400,000 (original accretion rate 8.60%), 01/01/08 .............................................. 4,694,456
21,900,000 (original accretion rate 8.75%), 01/01/09 .............................................. 9,160,332
15,000,000 (original accretion rate 8.75%), 01/01/10 .............................................. 5,808,150
30,100,000 (original accretion rate 8.50%), 01/01/12 .............................................. 10,033,233
52,700,000 (original accretion rate 9.00%), 01/01/24 .............................................. 6,956,927
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue, Jr. Lien, (cont.)
$ 45,200,000 (original accretion rate 9.00%), 01/01/25 .............................................. $ 5,540,616
131,900,000 (original accretion rate 9.00%), 01/01/26 .............................................. 15,012,858
139,100,000 (original accretion rate 9.00%), 01/01/27 .............................................. 14,701,453
--------------
Total Zero Coupon Bonds (Cost $75,804,108)............................................ 97,747,520
--------------
Total Long Term Investments (Cost $3,795,732,001)..................................... 3,967,666,972
--------------
a Short Term Investments 1.0%
100,000 Arkansas Hospital Equipment Finance Authority, Hospital Equipment Revenue, Jefferson Hospital
Association, Weekly VRDN and Put, 3.55%, 12/01/99 ......................................... 100,000
100,000 Arkansas State Development Finance Authority Higher Education Capital Asset, Series A,
Weekly VRDN and Put, 3.40%, 12/1/15........................................................ 100,000
4,300,000 Brazos River Texas Harbor Revenue, BASF Corp. Project, Daily VRDN and Put, 3.85%, 04/01/31 . 4,300,000
3,000,000 Bruce Township Michigan Hospital Finance Authority Revenue, St. Joseph Medical, Weekly
VRDN and Put, 3.30%, 05/01/18 ............................................................. 3,000,000
350,000 Burnsville Minnesota ID, Refunding, Kinder Care Learning Centers, Series C, Weekly VRDN and
Put, 3.80%, 02/01/01 ...................................................................... 350,000
5,550,000 Charlestown County South Carolina IDR, Massey Coal Terminal, Daily VRDN and Put,
3.80%, 01/01/07 ........................................................................... 5,550,000
200,000 Connecticut State Development Authority PCR, Refunding, Connecticut Light and Power Co.
Project, Series A, Weekly VRDN and Put, 3.40%, 09/01/28 ................................... 200,000
300,000 Crossett Arkansas PCR, Georgia Pacific Corp., Weekly VRDN and Put, 3.40%, 10/01/07 ......... 300,000
300,000 Fayetteville Arkansas IDR, Amcast Industrial Corp., Weekly VRDN and Put, 3.65%, 12/01/04 ... 300,000
100,000 Fort Wayne Indiana Hospital Authority Revenue, Parkview Memorial Hospital, Series B, Weekly
VRDN and Put, 3.45%, 01/01/16 ............................................................. 100,000
7,800,000 Jackson County Mississippi PCR, Refunding, Chevron USA, Inc. Project, Weekly VRDN and Put,
3.80%, 06/01/23 ........................................................................... 7,800,000
600,000 Kentucky Development Finance Authority, Pooled Loan Program, Series A, FGIC Insured,
Weekly VRDN and Put, 3.40%, 12/01/15 ...................................................... 600,000
Lincoln County Wyoming PCR, Exxon Project, Daily VRDN and Put, 3.80%, 11/01/14,
2,400,000 Series A ............................................................................... 2,400,000
2,200,000 Series B ............................................................................... 2,200,000
1,400,000 Louisiana Public Facilities Authority, IDR, Kenner Hotel Ltd., Weekly VRDN and Put,
3.80%, 12/01/15 ........................................................................... 1,400,000
100,000 Massachusetts State Updates, Series B, Weekly VRDN and Put, 3.65%, 12/01/97 ................ 100,000
200,000 North Carolina Medical Care Common Hospital Revenue, Baptist Hospital Project, Series B,
Weekly VRDN and Put, 3.40%, 06/01/22 ...................................................... 200,000
100,000 North Carolina Medical Care Common Hospital Revenue, Duke University Hospital, Series B,
Weekly VRDN and Put, 3.45%, 06/01/15 ...................................................... 100,000
4,100,000 North Carolina Medical Care Common Hospital Revenue, Series A, Daily VDRN and Put,
3.85%, 10/01/20 ........................................................................... 4,100,000
2,900,000 Phoenix Arizona Series 95-2, Daily VRDN and Put, 3.75%, 06/01/20 ........................... 2,900,000
300,000 Puerto Rico, Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
3.10%, 12/01/15 ........................................................................... 300,000
1,000,000 San Francisco City and County Redevelopment Agency, MFHR, Refunding, Fillmore Center,
Weekly VRDN and Put, 3.55%, 12/01/17 ...................................................... 1,000,000
Scioto County Ohio Hospital Facilities Revenue, VHA Center, Inc., AMBAC Insured, Weekly
VRDN and Put, 3.30%, 12/01/25,
200,000 Series A ............................................................................... 200,000
500,000 Series E ............................................................................... 500,000
100,000 Tennessee State School Board Authority, Higher Education Bond, Weekly VDRN and Put,
3.50%, 03/01/98 ........................................................................... 100,000
Washington State Health Care Facilities Authority Revenue, Daily VRDN and Put, 3.80%, 10/01/05,
$ 1,600,000 Sisters Providence Series B ............................................................ $ 1,600,000
2,100,000 Sisters Providence Series E ............................................................ 2,100,000
--------------
Total Short Term Investments (Cost $41,900,000) ...................................... 41,900,000
--------------
Total Investments (Cost $3,837,632,001) 97.9% ................................... 4,009,566,972
Other Assets and Liabilities, Net 2.1%........................................... 83,966,341
--------------
Net Assets 100.0% ............................................................... $4,093,533,313
==============
At August 31, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $3,837,634,501 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 206,248,847
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.............................................................. (34,316,376)
--------------
Net unrealized appreciation............................................................... $ 171,932,471
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
1915 ACT - Improvement Bond Act of 1915
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Agency
CDD - Community Development District
CDR - Community Development Revenue
CFD - Community Facilities District
CRDA - Community Redevelopment Agency
COP - Certificate of Participation
EDA - Economic Development Authority
EDC - Economic Development Corp.
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FI/GML - Federally Insured or Guaranteed Mortgage Loans
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority/Agency
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corp.
HMR - Home Mortgage Revenue
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDB - Industrial Development Board
IDC - Industrial Development Corp.
IDR - Industrial Development Revenue
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PCR - Pollution Control Revenue
PUD - Public Utility District
RDA - Redevelopment Agency
SF - Single Family
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
USD - Unified School District
VHA - Volunteer Hospital of America
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
dThe bond pays interest based upon the issuer's ability to pay which may be less
than the stated interest rate.
eSee Note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
August 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost .......................................... $706,677,962 $211,235,237 $163,656,956 $46,379,482
========== =========== =========== ==========
At value .................................................... 737,075,311 221,686,690 173,187,717 48,751,307
Cash ......................................................... 33,291 65,441 256,585 475,847
Receivables:
Interest .................................................... 9,668,049 3,806,594 2,925,057 617,082
Investment securities sold .................................. 160,014 90,555 -- --
Capital shares sold ......................................... 1,054,738 80,791 144,018 74,750
---------- ----------- ----------- ----------
Total assets ............................................ 747,991,403 225,730,071 176,513,377 49,918,986
---------- ----------- ----------- ----------
Liabilities:
Payables:
Investment securities purchased ............................. -- 2,042,413 -- --
Distributions payable to shareholders ....................... 1,084,945 326,700 211,412 58,780
Capital shares repurchased................................... 750,196 4,534 30,833 30,447
Management fees ............................................. 300,550 103,368 83,790 25,806
Distribution fees ........................................... 61,082 30,881 30,486 3,208
Shareholder servicing costs ................................. 18,039 6,513 5,250 2,196
Accrued expenses and other liabilities ....................... 6,622 16,836 5,459 7,432
---------- ----------- ----------- ----------
Total liabilities ....................................... 2,221,434 2,531,245 367,230 127,869
---------- ----------- ----------- ----------
Net assets, at value .......................................... $745,769,969 $223,198,826 $176,146,147 $49,791,117
========== =========== =========== ==========
Net assets consist of:
Undistributed net investment income........................... $ 348,311 $ 422,829 $ 180,903 $ 115,535
Net unrealized appreciation on investments.................... 30,397,349 10,451,453 9,530,761 2,371,825
Undistributed net realized gain (loss)........................ 918,727 (1,412,363) (6,501,146) (840,527)
Class I capital shares........................................ 710,306,509 210,058,847 170,111,569 48,144,284
Class II capital shares....................................... 3,799,073 3,678,060 2,824,060 --
---------- ----------- ----------- ----------
Net assets, at value........................................... $745,769,969 $223,198,826 $176,146,147 $49,791,117
========== =========== =========== ==========
Class I shares:
Net assets, at value.......................................... $742,024,504 $219,548,808 $173,342,047 $49,791,117
========== =========== =========== ==========
Shares outstanding............................................ 66,979,019 18,919,569 16,044,036 4,313,742
========== =========== =========== ==========
Net asset value per share*.................................... $11.08 $11.60 $10.80 $11.54
========== =========== =========== ==========
Class II shares:
Net assets, at value.......................................... $ 3,745,465 $ 3,650,018 $ 2,804,100 --
========== =========== =========== ==========
Shares outstanding............................................ 336,515 313,578 259,145 --
========== =========== =========== ==========
Net asset value per share*.................................... $11.13 $11.64 $10.82 --
========== =========== =========== ==========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
August 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin
Michigan New Jersey Oregon Pennsylvania
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
--------- ----------- ----------- -----------
Assets:
Investments in securities:
<S> <C> <C> <C> <C>
At identified cost .......................................... $2,475,077 $537,651,684 $354,428,315 $610,243,974
========= =========== =========== ===========
At value .................................................... 2,478,986 557,762,847 371,199,518 637,349,114
Cash.......................................................... 77,043 50,723 24,924 537,371
Receivables:
Interest..................................................... 32,482 8,844,565 5,843,418 12,023,022
Investment securities sold .................................. -- -- 771,173 2,168,176
Capital shares sold ......................................... -- 949,273 257,801 356,720
Unamortized organization and offering costs (Note 2) ......... 7,030 -- -- --
--------- ----------- ----------- -----------
Total assets ............................................ 2,595,541 567,607,408 378,096,834 652,434,403
--------- ----------- ----------- -----------
Liabilities:
Payables:
Investment securities purchased on a when-issued basis (Note 1) -- -- -- 5,376,030
Distributions payable to shareholders ....................... -- 667,977 429,640 976,619
Capital shares repurchased................................... -- 708,596 67,542 312,003
Management fees ............................................. 389 233,203 162,373 262,706
Distribution fees ........................................... 212 77,742 27,533 83,296
Shareholder servicing costs ................................. 2,330 25,395 8,940 13,407
Accrued expenses and other liabilities ....................... 2,709 16,800 23,418 51,272
--------- ----------- ----------- -----------
Total liabilities ....................................... 5,640 1,729,713 719,446 7,075,333
--------- ----------- ----------- -----------
Net assets, at value........................................... $2,589,901 $565,877,695 $377,377,388 $645,359,070
========= =========== =========== ===========
Net assets consist of:
Undistributed net investment income........................... $ 15,858 $ 1,246,430 $ 1,388,405 $ 350,884
Net unrealized appreciation on investments.................... 3,909 20,111,163 16,771,203 27,105,140
Net realized loss............................................. (3,772) (3,394,544) (5,449,062) (571,098)
Class I capital shares........................................ 2,573,906 539,975,785 360,597,265 611,153,552
Class II capital shares....................................... -- 7,938,861 4,069,577 7,320,592
--------- ----------- ----------- -----------
Net assets, at value........................................... $2,589,901 $565,877,695 $377,377,388 $645,359,070
========= =========== =========== ===========
Class I shares:
Net assets, at value.......................................... $2,589,901 $558,035,714 $373,332,038 $638,115,130
========= =========== =========== ===========
Shares outstanding............................................ 256,841 48,868,174 32,781,856 62,406,846
========= =========== =========== ===========
Net asset value per share*.................................... $10.08 $11.42 $11.39 $10.23
========= =========== =========== ===========
Class II shares:
Net assets, at value.......................................... -- $ 7,841,981 $ 4,045,350 $ 7,243,940
========= =========== =========== ===========
Shares outstanding............................................ -- 684,207 353,505 706,322
========= =========== =========== ===========
Net asset value per share*.................................... -- $11.46 $11.44 $10.26
========= =========== =========== ===========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
August 31, 1996 (unaudited)
Franklin Franklin Federal Franklin
Puerto Rico Intermediate- High Yield
Tax-Free Term Tax-Free Tax-Free
Income Fund Income Fund Income Fund
----------- ----------- -------------
Assets:
Investments in securities:
<S> <C> <C> <C>
At identified cost........................................................ $180,826,527 $89,576,495 $3,837,632,001
=========== =========== =============
At value.................................................................. 186,989,313 90,804,249 4,009,566,972
Cash....................................................................... 1,446,062 260,752 6,570,964
Receivables:
Interest.................................................................. 2,994,618 1,422,058 76,326,957
Investment securities sold................................................ -- -- 12,027,550
Capital shares sold....................................................... 74,357 160,751 8,543,007
Prepaid expenses........................................................... -- -- 208,596
----------- ----------- -------------
Total assets.......................................................... 191,504,350 92,647,810 4,113,244,046
----------- ----------- -------------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery......................................................... -- 1,019,486 3,497,752
When-issued basis (Note 1)............................................... -- -- 7,020,250
Distributions payable to shareholders .................................... 279,699 121,007 5,643,040
Capital shares repurchased ............................................... 65,859 1,908 1,247,604
Management fees........................................................... 89,998 32,463 1,555,383
Distribution fees ........................................................ 23,856 4,221 660,669
Shareholder servicing costs .............................................. 4,763 2,281 86,035
Accrued expenses and other liabilities .................................... 29,397 323 --
----------- ----------- -------------
Total liabilities .................................................... 493,572 1,181,689 19,710,733
----------- ----------- -------------
Net assets, at value ....................................................... $191,010,778 $91,466,121 $4,093,533,313
=========== =========== =============
Net assets consist of:
Undistributed net investment income........................................ $-- $ 231,075 $ 2,934,933
Accumulated distributions in excess of net investment income .............. (59,528) -- --
Net unrealized appreciation on investments ................................ 6,162,786 1,227,754 171,934,971
Undistributed net realized gain (loss) .................................... 1,554,830 (1,171,136) (48,592,723)
Class I capital shares .................................................... 182,461,482 91,178,428 3,863,548,084
Class II capital shares ................................................... 891,208 -- 103,708,048
----------- ----------- -------------
Net assets, at value ....................................................... $191,010,778 $91,466,121 $4,093,533,313
=========== =========== =============
Class I shares:
Net assets, at value ...................................................... $190,126,278 $91,466,121 $3,990,439,548
=========== =========== =============
Shares outstanding ........................................................ 16,628,868 8,509,316 363,378,420
=========== =========== =============
Net asset value per share*................................................. $11.43 $10.75 $10.98
=========== =========== =============
Class II shares:
Net assets, at value ...................................................... $ 884,500 -- $ 103,093,765
=========== =========== =============
Shares outstanding......................................................... 77,213 -- 9,343,224
=========== =========== =============
Net asset value per share*................................................. $11.46 -- $11.03
=========== =========== =============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Operations
for the six months ended August 31, 1996 (unaudited)
Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
---------- --------- --------- ---------
Investment income:
<S> <C> <C> <C> <C>
Interest (Note 1)................................................. $ 23,278,268 $ 6,947,304 $ 5,494,713 $1,597,598
---------- --------- --------- ---------
Expenses:
Management fees (Note 6).......................................... 1,796,811 608,369 492,760 152,736
Distribution fees - Class I (Note 6).............................. 214,085 88,355 75,441 19,566
Distribution fees - Class II (Note 6)............................. 9,163 8,165 7,613 --
Shareholder servicing costs (Note 6).............................. 91,650 34,584 20,609 11,126
Reports to shareholders .......................................... 61,099 21,694 14,769 5,912
Custodian fees ................................................... 17,947 4,891 5,205 1,818
Professional fees ................................................ 10,927 2,944 1,379 1,811
Trustees' fees and expenses ...................................... 5,941 1,616 1,269 366
Registration and filing fees ..................................... 3,161 663 1,899 100
Other ............................................................ 35,459 17,121 9,942 8,881
---------- --------- --------- ---------
Total expenses .............................................. 2,246,243 788,402 630,886 202,316
---------- --------- --------- ---------
Net investment income ....................................... 21,032,025 6,158,902 4,863,827 1,395,282
---------- --------- --------- ---------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) ......................................... 931,615 474,069 (348,903) 31,737
Net unrealized depreciation ...................................... (15,884,413) (4,876,534) (1,914,427) (931,197)
---------- --------- --------- ---------
Net realized and unrealized loss on investments ................... (14,952,798) (4,402,465) (2,263,330) (899,460)
---------- --------- --------- ---------
Net increase in net assets resulting from operations .............. $ 6,079,227 $ 1,756,437 $ 2,600,497 $ 495,822
========== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended August 31, 1996 (unaudited)
Franklin Franklin Franklin Franklin
Michigan New Jersey Oregon Pennsylvania
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund* Income Fund Income Fund Income Fund
--------- ---------- ---------- ----------
Investment income:
<S> <C> <C> <C> <C> <C>
Interest (Note 1)............................................... $ 17,659 $ 17,634,602 $ 11,640,443 $ 20,943,099
--------- ---------- ---------- ----------
Expenses:
Management fees (Note 6)........................................ 2,499 1,393,013 969,653 1,568,249
Distribution fees - Class I (Note 6)............................ 220 220,383 126,803 254,852
Distribution fees - Class II (Note 6)........................... -- 23,682 9,620 16,841
Shareholder servicing costs (Note 6)............................ 2,341 105,824 53,232 107,409
Reports to shareholders......................................... 2,278 68,044 35,644 77,346
Custodian fees.................................................. 386 20,822 1,976 27,046
Professional fees............................................... 482 8,189 5,631 8,520
Trustees' fees and expenses..................................... -- 4,218 2,781 4,768
Registration and filing fees.................................... 2,341 1,564 3,606 12,845
Amortization of organization and offering costs (Note 2) ....... 2,710 -- -- --
Other........................................................... -- 4,391 21,839 15,754
Management fees waived by Manager (Note 6)...................... (2,499) -- -- --
Other expenses assumed by Manager (Note 6)...................... (8,957) -- -- --
--------- ---------- ---------- ----------
Total expenses............................................. 1,801 1,850,130 1,230,785 2,093,630
--------- ---------- ---------- ----------
Net investment income...................................... 15,858 15,784,472 10,409,658 18,849,469
--------- ---------- ---------- ----------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)........................................ (3,772) 2,284,364 (244,721) 2,484,051
Net unrealized appreciation (depreciation)...................... 3,909 (15,115,403) (6,968,835) (15,690,102)
--------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on investments........... 137 (12,831,039) (7,213,556) (13,206,051)
--------- ---------- ---------- ----------
Net increase in net assets resulting from operations............. $ 15,995 $ 2,953,433 $ 3,196,102 $ 5,643,418
========= ========== ========== ==========
</TABLE>
*For the period July 1, 1996 (effective date) to August 31, 1996.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Operations (cont.)
for the six months ended August 31, 1996 (unaudited)
Franklin Franklin Federal Franklin
Puerto Rico Intermediate-Term High Yield
Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund
--------- ------------ -----------
Investment income:
<S> <C> <C> <C>
Interest (Note 1)............................................................ $ 6,098,445 $ 2,559,688 $140,452,666
--------- ------------ -----------
Expenses:
Management fees (Note 6)..................................................... 538,124 275,894 8,994,715
Distribution fees - Class I (Note 6)......................................... 75,422 41,452 1,610,979
Distribution fees - Class II (Note 6)........................................ 2,220 -- 265,543
Shareholder servicing costs (Note 6)......................................... 37,201 11,656 564,987
Reports to shareholders...................................................... 26,841 10,604 368,316
Custodian fees............................................................... 9,800 723 20,876
Professional fees............................................................ 8,510 1,684 32,766
Trustees' fees and expenses.................................................. 1,134 604 28,946
Registration and filing fees................................................. 14,422 12,276 16,117
Other........................................................................ 2,750 1,687 139,891
Management fees waived by Manager (Note 6)................................... -- (73,535) --
--------- ------------ -----------
Total expenses.......................................................... 716,424 283,045 12,043,136
--------- ------------ -----------
Net investment income................................................... 5,382,021 2,276,643 128,409,530
--------- ------------ -----------
Realized and unrealized loss on investments:
Net realized gain (loss)..................................................... 1,628,200 (104,515) (2,196,468)
Net unrealized depreciation.................................................. (4,120,507) (1,533,055) (67,711,654)
--------- ------------ -----------
Net realized and unrealized loss on investments............................... (2,492,307) (1,637,570) (69,908,122)
--------- ------------ -----------
Net increase in net assets resulting from operations.......................... $ 2,889,714 $ 639,073 $ 58,501,408
========= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended August 31, 1996
(unaudited) and the year ended February 29, 1996
Franklin Arizona Franklin Colorado
Tax-Free Income Fund Tax-Free Income Fund
----------------------- -----------------------
Six months Year Six months Year
ended ended ended ended
8/31/96 2/29/96 8/31/96 2/29/96
---------- ---------- ----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income.......................................... $ 21,032,025 $ 41,892,601 $ 6,158,902 $ 11,758,049
Net realized gain from security transactions .................. 931,615 11,019,710 474,069 1,875,938
Net unrealized appreciation (depreciation) on investments ..... (15,884,413) 12,069,384 (4,876,534) 6,034,367
---------- ---------- ----------- -----------
Net increase in net assets resulting from operations ...... 6,079,227 64,981,695 1,756,437 19,668,354
Distributions to shareholders from:
Undistributed net investment income:
Class I........................................................ (21,504,073) (42,358,865) (6,092,836) (11,642,273)
Class II....................................................... (71,793) (39,644) (63,220) (27,047)
Accumulated net realized gain:
Class I........................................................ (1,726,936) (7,829,470) -- --
Class II....................................................... (8,469) (17,168) -- --
Increase in net assets from capital share transactions (Note 3) . 10,312,313 17,152,083 10,333,460 14,702,000
---------- ---------- ----------- -----------
Net increase (decrease) in net assets...................... (6,919,731) 31,888,631 5,933,841 22,701,034
Net assets:
Beginning of period............................................. 752,689,700 720,801,069 217,264,985 194,563,951
---------- ---------- ----------- -----------
End of period................................................... $745,769,969 $752,689,700 $223,198,826 $217,264,985
========== ========== =========== ===========
Undistributed net investment income included in net assets:
Beginning of period............................................. $ 892,152 $ 1,398,060 $ 419,983 $ 331,254
========== ========== =========== ===========
End of period................................................... $ 348,311 $ 892,152 $ 422,829 $ 419,983
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
Franklin Connecticut Franklin Indiana
Tax-Free Income Fund Tax-Free Income Fund
----------------------- ---------------------
Six months Year Six months Year
ended ended ended ended
8/31/96 2/29/96 8/31/96 2/29/96
----------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income.......................................... $ 4,863,827 $ 9,270,000 $ 1,395,282 $ 2,763,463
Net realized gain (loss) from security transactions............ (348,903) (46,957) 31,737 354,703
Net unrealized appreciation (depreciation) on investments ..... (1,914,427) 4,696,045 (931,197) 1,058,994
----------- ----------- ---------- ----------
Net increase in net assets resulting from operations....... 2,600,497 13,919,088 495,822 4,177,160
Distributions to shareholders from undistributed net investment income:
Class I........................................................ (4,856,969) (9,244,580) (1,385,338) (2,714,978)
Class II....................................................... (60,472) (25,612) -- --
Increase in net assets from capital share transactions (Note 3).. 9,762,314 8,428,442 1,731,357 903,637
----------- ----------- ---------- ----------
Net increase in net assets................................. 7,445,370 13,077,338 841,841 2,365,819
Net assets:
Beginning of period............................................. 168,700,777 155,623,439 48,949,276 46,583,457
----------- ----------- ---------- ----------
End of period................................................... $176,146,147 $168,700,777 $49,791,117 $48,949,276
=========== =========== ========== ==========
Undistributed net investment income included in net assets:
Beginning of period............................................. $ 234,517 $ 234,709 $ 105,591 $ 57,106
=========== =========== ========== ==========
End of period................................................... $ 180,903 $ 234,517 $ 115,535 $ 105,591
=========== =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
Franklin
Michigan Tax-Free Franklin New Jersey Franklin Oregon
Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------ ------------------------ ------------------------
For the Six months Year Six months Year
period ended ended ended ended ended
8/31/96* 8/31/96 2/29/96 8/31/96 2/29/96
------------ ----------- ----------- ----------- ------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C>
Net investment income......................... $ 15,858 $ 15,784,472 $ 31,357,363 $ 10,409,658 $ 19,990,315
Net realized gain (loss) from
security transactions........................ (3,772) 2,284,364 4,841,385 (244,721) 212,997
Net unrealized appreciation (depreciation)
on investments............................... 3,909 (15,115,403) 13,508,714 (6,968,835) 11,590,457
------------ ----------- ----------- ----------- ------------
Net increase in net assets
resulting from operations................ 15,995 2,953,433 49,707,462 3,196,102 31,793,769
Distributions to shareholders from
undistributed net investment income:
Class I....................................... -- (15,577,575) (30,636,840) (10,131,634) (19,773,493)
Class II...................................... -- (160,882) (64,859) (70,003) (35,195)
Increase in net assets from capital
share transactions (Note 3).................... 2,573,906 9,257,322 16,462,806 6,924,019 16,015,941
------------ ----------- ----------- ----------- ------------
Net increase (decrease) in net assets..... 2,589,901 (3,527,702) 35,468,569 (81,516) 28,001,022
Net assets:
Beginning of period............................ -- 569,405,397 533,936,828 377,458,904 349,457,882
------------ ----------- ----------- ----------- ------------
End of period.................................. $2,589,901 $565,877,695 $569,405,397 $377,377,388 $377,458,904
============ =========== =========== =========== ============
Undistributed net investment income included in net assets:
Beginning of period........................... $ -- $ 1,200,415 $ 544,751 $ 1,180,384 $ 998,757
============ =========== =========== =========== ============
End of period................................. $ 15,858 $ 1,246,430 $ 1,200,415 $ 1,388,405 $ 1,180,384
============ =========== =========== =========== ============
</TABLE>
*For the period July 1, 1996 (effective date) to August 31, 1996.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
Franklin Pennsylvania Franklin Puerto Rico
Tax-Free Income Fund Tax-Free Income Fund
----------------------- -----------------------
Six months Year Six months Year
ended ended ended ended
8/31/96 2/29/96 8/31/96 2/29/96
---------- ---------- ----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income ......................................... $18,849,469 $36,650,100 $ 5,382,021 $ 10,582,586
Net realized gain from security transactions................... 2,484,051 1,771,090 1,628,200 874,797
Net unrealized appreciation (depreciation) on investments...... (15,690,102) 15,569,248 (4,120,507) 3,863,282
---------- ---------- ----------- -----------
Net increase in net assets resulting from operations....... 5,643,418 53,990,438 2,889,714 15,320,665
Distributions to shareholders:
From undistributed net investment income:
Class I........................................................ (18,891,736) (37,185,584) (5,349,008) (10,726,805)
Class II....................................................... (139,155) (53,292) (17,724) (7,485)
In excess of net investment income:
Class I........................................................ -- -- (59,643) (15,174)
From net realized gain:
Class I........................................................ -- -- -- (154,421)
Class II....................................................... -- -- -- (176)
Increase in net assets from capital share transactions (Note 3).. 15,790,032 38,838,955 2,437,534 9,805,800
---------- ---------- ----------- -----------
Net increase (decrease) in net assets...................... 2,402,559 55,590,517 (99,127) 14,222,404
Net assets:
Beginning of period............................................. 642,956,511 587,365,994 191,109,905 176,887,501
---------- ---------- ----------- -----------
End of period................................................... $645,359,070 $642,956,511 $191,010,778 $191,109,905
========== ========== =========== ===========
Undistributed net investment income (accumulated distributions in excess of net
investment income) included in net assets:
Beginning of period............................................ $ 532,306 $ 1,121,082 $ (15,174) $ 151,704
========== ========== =========== ===========
End of period.................................................. $ 350,884 $ 532,306 $ (59,528) $ (15,174)
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended August 31, 1996 (unaudited)
and the year ended February 29, 1996
Franklin
Federal Intermediate-Term Franklin High Yield
Tax-Free Income Fund Tax-Free Income Fund
--------------------- -------------------------
Six months Year Six months Year
ended ended ended ended
8/31/96 2/29/96 8/31/96 2/29/96
---------- ---------- ------------ ------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income....................................... $ 2,276,643 $ 4,009,484 $ 128,409,530 $ 236,161,328
Net realized gain (loss) from security transactions ........ (104,515) 28,851 (2,196,468) 10,004,172
Net unrealized appreciation (depreciation) on investments .. (1,533,055) 3,289,690 (67,711,654) 127,528,753
---------- ---------- ------------ ------------
Net increase in net assets resulting from operations.... 639,073 7,328,025 58,501,408 373,694,253
Distributions to shareholders from undistributed net investment income:
Class I..................................................... (2,245,469) (3,973,970) (127,194,390) (233,856,809)
Class II.................................................... -- -- (2,172,970) (937,218)
Increase in net assets from capital share transactions (Note 3) 7,105,032 8,636,138 329,089,316 409,140,087
---------- ---------- ------------ ------------
Net increase in net assets.............................. 5,498,636 11,990,193 258,223,364 548,040,313
Net assets:
Beginning of period.......................................... 85,967,485 73,977,292 3,835,309,949 3,287,269,636
---------- ---------- ------------ ------------
End of period................................................ $91,466,121 $85,967,485 $4,093,533,313 $3,835,309,949
========== ========== ============ ============
Undistributed net investment income included in net assets:
Beginning of period.......................................... $ 199,901 $ 164,387 $ 3,892,763 $ 2,525,462
========== ========== ============ ============
End of period................................................ $ 231,075 $ 199,901 $ 2,934,933 3,892,763
========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Free Trust (the Trust) is an open-end, management investment
company (mutual fund), registered under the Investment Company Act of 1940, as
amended. The Trust currently consists of twenty-eight separate funds. This
report pertains only to the eleven Funds (the Funds) included in the
accompanying financial statements. Each fund seeks to provide investors with as
high a level of income exempt from federal income taxes as is consistent with
prudent investing, while seeking preservation of shareholders' capital. Each
fund, other than the Franklin High Yield Tax-Free Income Fund and the Franklin
Federal Intermediate-Term Tax-Free Income Fund, also seeks to provide a maximum
level of income which is exempt from personal income tax for resident
shareholders of the named state or territory. Each of the Funds issues a
separate series of the Trust's shares and maintains a totally separate
investment portfolio. All funds in this report are diversified except the
Franklin Connecticut Tax-Free Income Fund and the Franklin Federal
Intermediate-Term Tax-Free Income Fund.
All of the funds within this report, except the Franklin Indiana Tax-Free Income
Fund, the Franklin Michigan Tax-Free Income Fund, and the Franklin Federal
Intermediate-Term Tax-Free Income Fund, offer two classes of shares, Class I and
Class II. Class I shares are sold with a higher front-end sales charge than
Class II shares. Each class of shares may be subject to a contingent deferred
sales charge and has the same rights, except with respect to the effect of the
respective sales charges, the distribution fees borne by each class, voting
rights on matters affecting a single class and the exchange privilege of each
class.
The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares.
The Franklin Michigan Tax-Free Income Fund became effective July 1, 1996.
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 Valuation:
Tax-free bonds generally trade in the over-the-counter market rather than on a
national securities exchange. In the absence of a sale or reported bid and asked
prices, information with respect to bond and note transactions, quotations from
bond dealers, market transactions in comparable securities, and various
relationships between securities are used to determine the value of a 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 (the Board). Securities for which market quotations are
not available are valued in accordance with procedures established by the Board.
b. Municipal Bonds or Notes with "Puts":
The Funds have 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 dates 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. Income Taxes:
The Funds intend 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 shareholders which will be sufficient to relieve the
Funds from income and excise taxes. 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.
e. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Original issue discount and
premium are amortized as required by the 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 day
following the 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, and are payable to
shareholders of record at the beginning of business on the ex-dividend date.
Once each month dividends are reinvested in additional shares of the Funds, or
paid in cash as requested by the shareholders.
Realized and unrealized gains or losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale transactions.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. 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.
g. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
h. Securities Purchased on a When-Issued or Delayed Delivery Basis:
The Funds may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding the
securities, they may sell the 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.
2. UNAMORTIZED ORGANIZATION AND OFFERING COSTS
Organization costs are amortized on a straight-line basis over five years.
Offering costs are amortized on a straight-line basis over one year.
3. TRUST SHARES
At August 31, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Funds' shares were as
follows:
<TABLE>
<CAPTION>
Franklin Arizona Franklin Colorado Franklin Connecticut
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
-------------------- -------------------- ---------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- -------- ---------- -------- -----------
Six months ended August 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................... 4,368,917 $ 48,529,725 1,486,703 $ 17,344,888 1,451,418 $ 15,657,572
Shares issued in reinvestment of distributions. 829,702 9,236,542 255,723 2,974,332 199,180 2,151,486
Shares redeemed................................ (4,443,410) (49,354,221)(1,032,994) (12,018,661) (854,139) (9,216,112)
-------- ---------- -------- ---------- -------- -----------
Net increase.................................... 755,209 $ 8,412,046 709,432 $ 8,300,559 796,459 $ 8,592,946
======== ========== ======== ========== ======== ===========
Year ended February 29, 1996
Shares sold.................................... 7,740,101 $ 87,844,314 2,791,482 $ 32,551,013 2,410,965 $ 26,182,802
Shares issued in reinvestment of distributions. 1,757,603 19,931,360 476,428 5,551,957 388,517 4,213,410
Shares redeemed................................ (8,159,585) (92,522,397)(2,153,219) (25,046,129)(2,173,137) (23,622,462)
-------- ---------- -------- ---------- -------- -----------
Net increase.................................... 1,338,119 $ 15,253,277 1,114,691 $ 13,056,841 626,345 $ 6,773,750
======== ========== ======== ========== ======== ===========
Class II Shares:
Six months ended August 31, 1996
Shares sold.................................... 187,360 $ 2,090,558 172,857 $ 2,018,945 111,576 $ 1,205,748
Shares issued in reinvestment of distributions. 4,294 48,036 3,815 44,537 3,947 42,688
Shares redeemed................................ (21,402) (238,327) (2,617) (30,581) (7,303) (79,068)
-------- ---------- -------- ---------- -------- -----------
Net increase.................................... 170,252 $ 1,900,267 174,055 $ 2,032,901 108,220 $ 1,169,368
======== ========== ======== ========== ======== ===========
Year ended February 29, 1996*
Shares sold.................................... 177,823 $ 2,030,215 141,464 $ 1,668,359 152,190 $ 1,668,825
Shares issued in reinvestment of distributions. 2,660 30,423 1,733 20,489 1,584 17,430
Shares redeemed................................ (14,220) (161,832) (3,674) (43,689) (2,849) (31,563)
-------- ---------- -------- ---------- -------- -----------
Net increase.................................... 166,263 $ 1,898,806 139,523 $ 1,645,159 150,925 $ 1,654,692
======== ========== ======== ========== ======== ===========
3. TRUST SHARES (cont.)
Franklin Indiana Franklin Michigan Franklin New Jersey
Tax-Free Income Fund Tax-Free Income Fund** Tax-Free Income Fund
----------------- ----------------- ---------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
------- --------- ------- --------- -------- -----------
Six months ended August 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................... 306,243 $ 3,542,039 257,799 $2,583,561 3,252,591 $ 37,293,847
Shares issued in reinvestment of distributions. 64,320 744,068 -- -- 692,232 7,934,970
Shares redeemed................................ (220,932) (2,554,750) (958) (9,655) (3,441,512) (39,379,800)
------- --------- ------- --------- -------- -----------
Net increase.................................... 149,631 $ 1,731,357 256,841 $2,573,906 503,311 $ 5,849,017
======= ========= ======= ========= ======== ===========
Year ended February 29, 1996
Shares sold.................................... 479,381 $ 5,583,028 -- -- 6,190,382 $ 71,492,146
Shares issued in reinvestment of distributions. 126,481 1,469,667 -- -- 1,344,993 15,524,726
Shares redeemed................................ (529,309) (6,149,058) -- -- (6,497,336) (75,084,622)
------- --------- ------- --------- -------- -----------
Net increase.................................... 76,553 $ 903,637 -- -- 1,038,039 $ 11,932,250
======= ========= ======= ========= ======== ===========
Class II Shares:
Six months ended August 31, 1996
Shares sold.................................... -- -- -- -- 345,852 $ 3,975,882
Shares issued in reinvestment of distributions. -- -- -- -- 9,314 107,258
Shares redeemed................................ -- -- -- -- (58,405) (674,835)
------- --------- ------- --------- -------- -----------
Net increase.................................... -- -- -- -- 296,761 $ 3,408,305
======= ========= ======= ========= ======== ===========
Year ended February 29, 1996*
Shares sold.................................... -- -- -- -- 404,242 $ 4,729,454
Shares issued in reinvestment of distributions. -- -- -- -- 3,829 44,861
Shares redeemed................................ -- -- -- -- (20,625) (243,759)
------- --------- ------- --------- -------- -----------
Net increase.................................... -- -- -- -- 387,446 $ 4,530,556
======= ========= ======= ========= ======== ===========
Franklin Oregon Franklin Pennsylvania Franklin Puerto Rico
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
-------------------- -------------------- ---------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- -------- ---------- -------- -----------
Six months ended August 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................... 2,017,930 $ 23,024,079 3,911,338 $ 40,133,945 843,745 $ 9,635,708
Shares issued in reinvestment of distributions. 500,042 5,706,920 783,534 8,041,683 225,424 2,578,027
Shares redeemed................................ (2,092,735) (23,845,088)(3,567,394) (36,603,277) (886,796) (10,132,735)
-------- ---------- -------- ---------- -------- -----------
Net increase.................................... 425,237 $ 4,885,911 1,127,478 $ 11,572,351 182,373 $ 2,081,000
======== ========== ======== ========== ======== ===========
Year ended February 29, 1996
Shares sold.................................... 3,896,034 $ 44,750,241 8,023,170 $ 83,104,424 2,153,385 $ 24,780,430
Shares issued in reinvestment of distributions. 954,645 10,942,187 1,487,883 15,404,590 448,570 5,163,882
Shares redeemed................................ (3,636,816) (41,707,956)(6,062,378) (62,772,970)(1,796,798) (20,673,186)
-------- ---------- -------- ---------- -------- -----------
Net increase.................................... 1,213,863 $ 13,984,472 3,448,675 $ 35,736,044 805,157 $ 9,271,126
======== ========== ======== ========== ======== ===========
Class II Shares:
Six months ended August 31, 1996
Shares sold.................................... 189,285 $ 2,167,677 426,696 $ 4,396,697 56,448 $ 644,900
Shares issued in reinvestment of distributions. 4,901 56,167 8,625 88,837 812 9,313
Shares redeemed................................ (16,230) (185,736) (25,974) (267,853) (25,952) (297,679)
-------- ---------- -------- ---------- -------- -----------
Net increase.................................... 177,956 $ 2,038,108 409,347 $ 4,217,681 31,308 $ 356,534
======== ========== ======== ========== ======== ===========
Year ended February 29, 1996*
Shares sold.................................... 192,124 $ 2,224,478 301,187 $ 3,147,038 46,373 $ 540,107
Shares issued in reinvestment of distributions. 2,129 24,744 2,993 31,318 372 4,344
Shares redeemed................................ (18,704) (217,753) (7,205) (75,445) (840) (9,777)
-------- ---------- -------- ---------- -------- -----------
Net increase.................................... 175,549 $ 2,031,469 296,975 $ 3,102,911 45,905 $ 534,674
======== ========== ======== ========== ======== ===========
3. TRUST SHARES (cont.)
Franklin Federal
Intermediate-Term Franklin High Yield
Tax-Free Income Fund Tax-Free Income Fund
-------------------- ----------------------
Class I Shares: Shares Amount Shares Amount
-------- ---------- --------- ------------
Six months ended August 31, 1996
<S> <C> <C> <C> <C>
Shares sold........................................................... 1,982,041 $ 21,344,035 41,160,491 $ 452,122,990
Shares issued in reinvestment of distributions........................ 121,971 1,314,325 4,488,207 49,311,292
Shares redeemed....................................................... (1,443,290) (15,553,328) (20,794,341) (228,181,058)
-------- ---------- --------- ------------
Net increase........................................................... 660,722 $ 7,105,032 24,854,357 $ 273,253,224
======== ========== ========= ============
Year ended February 29, 1996
Shares sold........................................................... 2,586,067 $ 28,048,002 62,180,938 $ 688,556,031
Shares issued in reinvestment of distributions........................ 204,492 2,206,996 7,940,979 87,687,277
Shares redeemed....................................................... (2,002,142) (21,618,860) (37,569,351) (414,975,177)
-------- ---------- --------- ------------
Net increase........................................................... 788,417 $ 8,636,138 32,552,566 $ 361,268,131
======== ========== ========= ============
Class II Shares:
Six months ended August 31, 1996
Shares sold........................................................... -- -- 5,248,877 $ 57,949,849
Shares issued in reinvestment of distributions........................ -- -- 99,857 1,102,618
Shares redeemed....................................................... -- -- (292,080) (3,216,375)
-------- ---------- --------- ------------
Net increase........................................................... -- -- 5,056,654 $ 55,836,092
======== ========== ========= ============
Year ended February 29, 1996*
Shares sold........................................................... -- -- 4,395,108 $ 49,085,510
Shares issued in reinvestment of distributions........................ -- -- 40,544 454,078
Shares redeemed....................................................... -- -- (149,082) (1,667,632)
-------- ---------- --------- ------------
Net increase........................................................... -- -- 4,286,570 $ 47,871,956
======== ========== ========= ============
*For the period May 1, 1995 to February 29, 1996.
**For the period July 1, 1996 (effective date) to August 31, 1996.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 29, 1996, for tax purposes, the Funds had capital loss carryovers as
follows:
Franklin Franklin Franklin Franklin
Colorado Connecticut Indiana New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- ---------
Capital loss carryovers
<S> <C> <C> <C> <C>
Expiring in: 2001 ..................................................... $ -- $ 261,598 $ -- $ --
2003...................................................... 1,885,544 5,817,978 872,264 5,678,908
2004...................................................... -- 46,957 -- --
--------- --------- --------- ---------
$1,885,544 $6,126,533 $872,264 $5,678,908
========= ========= ========= =========
Franklin Franklin Franklin Franklin
Oregon Pennsylvania Intermediate- High Yield
Tax-Free Tax-Free Term Tax-Free Tax-Free
Income Fund Insured Fund Income Fund Income Fund
--------- --------- --------- ---------
Capital loss carryovers
Expiring in: 2001...................................................... $ 74,144 $ -- $ -- $--
2002...................................................... 54,202 -- -- 22,886,561
2003...................................................... 5,075,995 3,055,149 1,066,621 23,501,819
--------- --------- --------- ---------
$5,204,341 $3,055,149 $1,066,621 $46,388,380
========= ========= ========= =========
</TABLE>
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS (cont.)
For income tax purposes, the aggregate cost of securities is higher (and
unrealized appreciation is lower) than for financial reporting purposes at
August 31, 1996, by $3,782 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, and $2,500 in the Franklin High Yield Income Fund.
For income tax purposes, the Franklin Arizona Tax-Free Income Fund had an
accumulated net realized gain in the amount of $1,735,427 at
February 29, 1996.
From November 1, 1995 through February 29, 1996, the Franklin Puerto Rico
Tax-Free Income Fund incurred $40,246 of net realized capital loss. As permitted
by tax regulations, the Fund intends to elect to defer this loss and treat it as
having arisen in the year ended February 28, 1997.
5. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the six months ended August 31, 1996 were as follows:
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana Michigan New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund* Income Fund
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Purchases............................... $105,329,146 $27,302,348 $23,415,071 $7,112,336 $2,751,887 $43,479,659
Sales................................... $ 97,609,506 $21,072,335 $13,846,862 $5,939,745 $ 373,125 $36,835,508
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........................................... $14,773,470 $94,949,179 $31,221,161 $24,296,080 $413,782,595
Sales............................................... $11,801,082 $75,021,023 $28,786,455 $16,071,946 $131,635,084
</TABLE>
*For the period July 1, 1996 (effective date) to August 31, 1996.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers)
provides investment advice, administrative services, office space and facilities
to each Fund, and receives fees computed monthly based on the net assets of each
Fund on the last day of the month as follows:
Annualized Fee Rate Month End Net Assets
------------- ------------------------------------
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% In excess of $250 million
The terms of the management agreement provide that annual aggregate expenses of
each Fund 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 each Fund's shares are registered. For the six months ended August 31,
1996, the Fund's expenses did not exceed these limitations. However, Advisers
agreed in advance to waive management fees and assume payment of other expenses
for the Franklin Michigan Tax-Free Income Fund and the Franklin Federal
Intermediate-Term Tax-Free Income Fund, as noted in the Statement of Operations.
b. Shareholder Services Agreement:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the six months ended August 31, 1996, aggregated $1,040,619, of which $962,819
was paid to Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Funds reimburse Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to a maximum of 0.10% per
annum for Class I and 0.65% per annum for Class II, if applicable, of the
average daily net assets of such class of all the Funds, for costs incurred in
the promotion, offering and marketing of the Funds' shares. The Plans do not
permit nor require payments of excess costs after termination. Fees incurred by
the Funds under the Plans aggregated $3,070,405 for the six months ended August
31, 1996.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Distribution Plans and Underwriting Agreement: (cont.)
In its capacity as underwriter for the shares of the Funds, Distributors
receives commissions on sales of the Funds' shares of beneficial interest.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Funds, and as such are not expenses of the Funds. Distributors may
also make payments, out of its own resources, to the dealers for certain sales
of the Funds' shares. Commissions received by Distributors, the amounts paid to
other dealers, and applicable contingent deferred sales charges for the six
months ended August 31, 1996 were as follows:
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana Michigan New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Class I Income Fund Income Fund Income Fund Income Fund Income Fund * Income Fund
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total commissions received...................... $1,333,474 $381,026 $440,401 $109,905 $15,287 $1,021,022
Paid to other dealers........................... $1,262,566 $379,904 $419,340 $102,549 $14,454 $ 966,064
Contingent deferred sales charges............... -- -- -- -- -- --
Class II
Total commissions received...................... $ 20,647 $ 20,315 $ 12,273 -- -- $ 38,980
Paid to other dealers........................... $ 42,192 $ 39,937 $ 24,359 -- -- $ 75,916
Contingent deferred sales charges............... $ 640 -- $ 496 -- -- $ 1,591
Franklin
Franklin Franklin Franklin Federal Franklin
Oregon Pennsylvania Puerto Rico Intermediate- High Yield
Tax-Free Tax-Free Tax-Free Term Tax-Free Tax-Free
Class I Income Fund Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Total commissions received...................... $715,681 $1,352,745 $327,127 $155,891 $11,431,762
Paid to other dealers........................... $672,213 $1,267,779 $307,109 $161,004 $11,072,538
Contingent deferred sales charges............... -- $ 26,114 -- -- $ 52,423
Class II
Total commissions received...................... $ 22,207 $ 43,072 $ 6,539 -- $ 554,372
Paid to other dealers........................... $ 43,784 $ 88,605 $ 13,003 -- $ 1,123,913
Contingent deferred sales charges............... $ 1,067 $ 2,436 $ 2,934 -- $ 15,170
</TABLE>
*For the period July 1, 1996 (effective date) to August 31, 1996.
d. Other Affiliated Parties and Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, and Investor Services, all wholly-owned subsidiaries of
Franklin Resources, Inc.
7. CREDIT RISK
All of the Funds' 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, Florida, and New York. 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 the Funds more
significantly to economic changes occurring within those states and U.S.
territories and possessions.
8. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period, by Fund, are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
--------------------------------------------------- ---------------------------------
Distri- Distri- Net Net Ratio of Net
Net Asset Net Realized butions butions Asset Assets Ratio of Investment
Year Value at Net & Unrealized Total From From Net From Value at at End Expenses Income Portfolio
Ended BeginningInvestmentGain (Loss) Investment Investment Capital End of Total of Period to Average to Average Turnover
Feb. 28, of Period Income on SecuritiesOperations Income Gains Period Return+++(in 000's) Net Assets** Net Assets Rate
Franklin Arizona Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $10.57 $.67 $ .308 $ .978 $(.728) $ -- $10.82 9.45% $ 585,986 .56% 6.37% 1.56%
1993 10.82 .68 .733 1.413 (.663) -- 11.57 13.22 707,702 .55 6.11 5.67
1994 11.57 .66 .020 .680 (.670) -- 11.58 5.76 796,838 .54 5.65 14.17
1995 11.58 .65 (.481) .169 (.639) -- 11.11 1.63 720,801 .60 5.86 18.65
1996 11.11 .64 .362 1.002 (.651) (.121) 11.34 9.24 750,797 .62 5.67 25.12
19962 11.34 .32 (.231) .089 (.323) (.026) 11.08 .81 742,025 .60* 5.66* 13.24
Class II Shares:
19963 11.15 .49 .344 .834 (.483) (.121) 11.38 7.60 1,892 1.20* 5.05* 25.12
19962 11.38 .28 (.216) .064 (.288) (.026) 11.13 .59 3,745 1.20* 5.07* 13.24
Franklin Colorado Tax-Free Income Fund:
Class I Shares:
1992 10.70 .68 .361 1.041 (.741) -- 11.00 9.93 110,085 .70 6.44 21.46
1993 11.00 .70 .845 1.545 (.695) -- 11.85 14.26 159,280 .67 6.20 5.66
1994 11.85 .68 .100 .780 (.690) -- 11.94 6.49 202,158 .64 5.69 10.85
1995 11.94 .67 (.568) .102 (.662) -- 11.38 1.05 194,564 .70 5.94 28.83
1996 11.38 .67 .453 1.123 (.663) -- 11.84 10.12 215,609 .71 5.73 17.58
19962 11.84 .33 (.240) .090 (.330) -- 11.60 .79 219,549 .72* 5.65* 9.81
Class II Shares:
19963 11.40 .50 .461 .961 (.491) -- 11.87 8.57 1,656 1.29* 5.12* 17.58
19962 11.87 .30 (.232) .068 (.298) -- 11.64 .59 3,650 1.27* 5.04* 9.81
Franklin Connecticut Tax-Free Income Fund:
Class I Shares:
1992 10.34 .62 .211 .831 (.681) -- 10.49 8.16 88,184 .71 6.11 28.28
1993 10.49 .64 .664 1.304 (.634) -- 11.16 12.60 126,816 .69 5.97 28.52
1994 11.16 .62 .080 .700 (.630) -- 11.23 6.16 163,050 .65 5.54 5.54
1995 11.23 .62 (.597) .023 (.613) -- 10.64 .37 155,623 .71 5.83 75.72
1996 10.64 .62 .319 .939 (.619) -- 10.96 9.04 167,045 .73 5.70 3.88
19962 10.96 .31 (.159) .151 (.311) -- 10.80 1.41 173,342 .73* 5.68* 8.22
Class II Shares:
19963 10.65 .47 .312 .782 (.462) -- 10.97 7.45 1,656 1.30* 5.12* 3.88
19962 10.97 .29 (.159) .131 (.281) -- 10.82 1.23 2,804 1.30* 5.17* 8.22
Franklin Indiana Tax-Free Income Fund:
Class I Shares:
1992 10.83 .69 .325 1.015 (.775) -- 11.07 9.53 23,914 .50 6.60 .03
1993 11.07 .71 .828 1.538 (.708) -- 11.90 14.10 37,367 .59 6.16 7.98
1994 11.90 .68 .108 .788 (.678) -- 12.01 6.53 47,870 .71 5.62 16.12
1995 12.01 .66 (.608) .052 (.662) -- 11.40 .58 46,583 .81 5.84 26.49
1996 11.40 .67 .350 1.020 (.660) -- 11.76 9.20 48,949 .80 5.80 10.56
19962 11.76 .33 (.221) .109 (.329) -- 11.54 .95 49,791 .83* 5.71* 12.53
Franklin Michigan Tax-Free Income Fund:
Class I Shares:
19964 10.00 .06 .020 .080 -- -- 10.08 .80 2,590 .50* 3.79* 17.59
8. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
--------------------------------------------------- ---------------------------------
Distri- Distri- Net Net Ratio of Net
Net Asset Net Realized butions butions Asset Assets Ratio of Investment
Year Value at Net & Unrealized Total From From Net From Value at at End Expenses Income Portfolio
Ended BeginningInvestmentGain (Loss) Investment Investment Capital End of Total of Period to Average to Average Turnover
Feb. 28, of Period Income on SecuritiesOperations Income Gains Period Return+++(in 000's) Net Assets** Net Assets Rate
Franklin New Jersey Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $10.84 $.68 $ .348 $1.028 $(.708) $ -- $11.16 9.65% $ 332,536 .60% 6.30% 3.66%
1993 11.16 .69 .694 1.384 (.688) (.006) 11.85 12.55 433,702 .59 6.06 14.12
1994 11.85 .67 (.016) .654 (.684) -- 11.82 5.39 561,130 .57 5.60 4.16
1995 11.82 .66 (.550) .110 (.650) -- 11.28 1.12 533,937 .63 5.86 31.05
1996 11.28 .65 .389 1.039 (.639) -- 11.68 9.43 564,864 .65 5.65 12.04
19962 11.68 .32 (.260) .060 (.320) -- 11.42 .54 558,036 .64* 5.60* 6.64
Class II Shares:
19963 11.30 .49 .403 .893 (.473) -- 11.72 8.02 4,542 1.23* 5.15* 12.04
19962 11.72 .31 (.280) .030 (.290) -- 11.46 .27 7,842 1.30* 4.95* 6.64
Franklin Oregon Tax-Free Income Fund:
Class I Shares:
1992 10.71 .63 .384 1.014 (.704) -- 11.02 9.61 208,972 .65 6.09 4.65
1993 11.02 .66 .702 1.362 (.652) -- 11.73 12.52 303,719 .62 5.87 7.78
1994 11.73 .64 (.021) .619 (.649) -- 11.70 5.15 375,684 .58 5.47 9.42
1995 11.70 .63 (.493) .137 (.617) -- 11.22 1.36 349,458 .65 5.71 26.44
1996 11.22 .63 .377 1.007 (.627) -- 11.60 9.19 375,415 .66 5.51 6.52
19962 11.60 .32 (.219) .101 (.311) -- 11.39 .89 373,332 .65* 5.55* 3.21
Class II Shares:
19963 11.23 .47 .414 .884 (.464) -- 11.65 7.99 2,044 1.24* 4.87* 6.52
19962 11.65 .28 (.212) .068 (.278) -- 11.44 .60 4,045 1.23* 4.94* 3.21
Franklin Pennsylvania Tax-Free Income Fund:
Class I Shares:
1992 9.49 .64 .380 1.020 (.670) -- 9.84 10.99 391,301 .59 6.71 4.44
1993 9.84 .64 .703 1.343 (.633) -- 10.55 13.84 505,845 .58 6.34 5.87
1994 10.55 .63 .014 .644 (.634) -- 10.56 5.99 615,546 .56 5.90 4.73
1995 10.56 .62 (.406) .214 (.614) -- 10.16 2.22 587,366 .63 6.15 12.91
1996 10.16 .62 .287 .907 (.627) -- 10.44 9.15 639,847 .64 5.96 9.71
19962 10.44 .30 (.205) .095 (.305) -- 10.23 .94 638,115 .65* 5.88* 11.86
Class II Shares:
19963 10.17 .47 .302 .772 (.472) -- 10.47 7.71 3,110 1.22* 5.36* 9.71
19962 10.47 .29 (.224) .066 (.276) -- 10.26 .65 7,244 1.22* 5.33* 11.86
Franklin Puerto Rico Tax-Free Income Fund:
Class I Shares:
1992 10.84 .69 .301 .991 (.711) -- 11.12 9.31 112,714 .70 6.45 15.01
1993 11.12 .70 .673 1.373 (.683) -- 11.81 12.48 144,806 .69 6.18 10.37
1994 11.81 .68 .034 .714 (.694) -- 11.83 5.95 175,036 .66 5.77 5.10
1995 11.83 .67 (.504) .166 (.686) -- 11.31 1.60 176,888 .73 5.95 18.30
1996 11.31 .66 .299 .959 (.669)+ (.010) 11.59 8.68 190,577 .74 5.71 27.99
19962 11.59 .32 (.153) .167 (.327)++ -- 11.43 1.47 190,126 .75* 5.66* 15.39
Class II Shares:
19963 11.32 .50 .304 .804 (.494) (.010) 11.62 7.21 533 1.32* 5.16* 27.99
19962 11.62 .29 (.155) .135 (.295) -- 11.46 1.19 885 1.31* 5.08* 15.39
Franklin Federal Intermediate-Term Tax-Free Income Fund:
Class I Shares:
19931 10.00 .14 .499 .639 (.099) -- 10.54 14.77* 9,192 -- 5.49* 22.54
1994 10.54 .52 .289 .809 (.549) -- 10.80 7.82 67,603 .30 4.93 28.76
1995 10.80 .54 (.331) .209 (.529) -- 10.48 (.20) 73,977 .56 5.25 38.46
1996 10.48 .55 .468 1.018 (.548) -- 10.95 9.93 85,967 .65 5.12 3.35
19962 10.95 .28 (.204) .076 (.276) -- 10.75 .71 91,466 .64* 5.18* 18.54
8. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
--------------------------------------------------- ---------------------------------
Distri- Distri- Net Net Ratio of Net
Net Asset Net Realized butions butions Asset Assets Ratio of Investment
Year Value at Net & Unrealized Total From From Net From Value at at End Expenses Income Portfolio
Ended BeginningInvestmentGain (Loss) Investment Investment Capital End of Total of Period to Average to Average Turnover
Feb. 28, of Period Income on SecuritiesOperations Income Gains Period Return+++(in 000's) Net Assets** Net Assets Rate
Franklin High Yield Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $10.31 $.78 $ .230 $1.010 $(.840) $ -- $10.48 9.97% $2,110,055 .53% 7.73% 102.57%
1993 10.48 .79 .624 1.414 (.784) (.010) 11.10 13.72 2,742,765 .54 7.45 33.46
1994 11.10 .76 .169 .929 (.779) -- 11.25 8.33 3,372,533 .53 6.79 16.09
1995 11.25 .74 (.509) .231 (.741) -- 10.74 2.28 3,287,270 .60 6.92 15.89
1996 10.74 .74 .446 1.186 (.736) -- 11.19 11.35 3,787,147 .61 6.68 9.23
19962 11.19 .36 (.206) .154 (.364) -- 10.98 1.42 3,990,440 .60* 6.55* 3.43
Class II Shares:
19963 10.81 .56 .423 .983 (.553) -- 11.24 9.27 48,163 1.18* 6.07* 9.23
19962 11.24 .33 (.207) .123 (.333) -- 11.03 1.13 103,094 1.24* 5.91* 3.43
1For the period September 21, 1992 (effective date) to February 28, 1993.
2For the six months ended August 31, 1996.
3For the period May 1, 1995, to February 29, 1996.
4For the period July 1, 1996 (effective date) to August 31, 1996.
+Includes distributions in excess of net investment income in the amount of $.001.
++Includes distributions in excess of net investment income in the amount of $.004.
+++Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or contingent deferred sales charge and assumes reinvestment of dividends
and capital gains at net asset value. Prior to May 1, 1994 dividends were
reinvested at the maximum offering price, and capital gains at net asset value
except for the Franklin Federal Intermediate-Term Tax-Free Income Fund.
Effective May 1, 1994, with the implementation of the Rule 12b-1 distribution
plan for Class I shares, the sales charges on reinvested dividends were
eliminated.
*Annualized
**During the periods indicated, Advisers agreed in
advance to waive a portion of its management fees and to make payments of other
expenses incurred by the funds listed below. Had such action not been taken,
ratios of expenses to average net assets would have been as follows:
</TABLE>
Ratio of Expenses to
Average Net Assets
--------------
Franklin Indiana Tax-Free Income Fund
1992........................................... 0.74%
1993........................................... 0.73
Franklin Michigan Tax-Free Income Fund
19964.......................................... 1.19*
Franklin Federal Intermediate-Term Tax-Free Income Fund
19931.......................................... 1.60*
1994........................................... 0.89
1995........................................... 0.84
1996........................................... 0.85
19962.......................................... 0.81*
Franklin Tax-Free Trust #3 Semi-Annual Report 8/31/96.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This line graph shows the price fluctuation of the Bond Buyer Municipal Bond
Index over a one-year period from 11/30/94 through 12/31/95.
Period Ending Price
Sep-93 6.04% 5.47%
Oct-93 5.96% 5.48%
Nov-93 6.29% 5.65%
Dec-93 6.35% 5.52%
Jan-94 6.23% 5.45%
Feb-94 6.67% 5.77%
Mar-94 7.10% 6.36%
Apr-94 7.22% 6.37%
May-94 7.39% 6.40%
Jun-94 7.63% 6.47%
Jul-94 7.39% 6.33%
Aug-94 7.46% 6.36%
Sep-94 7.82% 6.58%
Oct-94 7.97% 6.85%
Nov-94 7.99% 7.16%
Dec-94 7.89% 6.92%
Jan-95 7.71% 6.66%
Feb-95 7.46% 6.42%
Mar-95 7.44% 6.37%
Apr-95 7.34% 6.35%
May-95 6.67% 6.10%
Jun-95 6.63% 6.28%
Jul-95 6.86% 6.19%
Aug-95 6.65% 6.11%
Sep-95 6.49% 6.07%
Oct-95 6.34% 5.91%
Nov-95 6.14% 5.74%
Dec-95 5.96% 5.56%
Jan-96 6.03% 5.57%
Feb-96 6.48% 5.71%
Mar-96 6.67% 5.96%
Apr-96 6.89% 6.05%
May-96 7.00% 6.09%
Jun-96 6.90% 6.01%
Jul-96 6.96% 5.98%
Aug-96 7.13% 6.02%
GRAPHIC MATERIAL (2)
This chart shows in pie chart format the income and capital appreciation of
the Lehman Brothers 20-Year Municipal Bond Index for the 10-year period ended
8/31/96.
Income: An Important Component of Total Return
Income 90.83%
Capital Appreciation 9.17%
GRAPHIC MATERIAL (3)
This bar chart compares the dollar amount of new long-term municipal bond
issuance from 1987 ($105 billion), 1988 ($118 billion), 1989 ($125 billion),
1990 ($128 billion), 1991 ($174 billion), 1992 ($235 billion), 1993 ($292
billion), 1994 ($164 billion), 1995 ($156 billion), and 1996 (105 billion).
GRAPHIC MATERIAL (4)
This bar chart shows that 37% insured municipal bonds and 63% non-insured
municipal bonds were issued in 1994, 44% insured municipal bonds and 56%
non-insured municipal bonds issued in 1995, and 48% insured municipal bonds
and 52% non-insured municipal bonds issued in 1996.
GRAPHIC MATERIAL (5)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 55.4%
AA 18.4%
A 25.7%
BBB 0.5%
GRAPHIC MATERIAL (6)
This bar chart shows the comparison between the fund's disribution rate of
5.39% and the taxable equivalent distribution rate of 9.45%, for Class I
shares.
GRAPHIC MATERIAL (7)
This bar chart shows the comparison between the fund's disribution rate of
4.88% and the taxable equivalent distribution rate of 8.56%, for Class II
shares.
GRAPHIC MATERIAL (8)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 58.4%
AA 10.8%
A 11.8%
BBB 19.0%
GRAPHIC MATERIAL (9)
This bar chart shows the comparison between the fund's disribution rate of
5.45% and the taxable equivalent distribution rate of 9.50%, for Class I
shares.
GRAPHIC MATERIAL (10)
This bar chart shows the comparison between the fund's disribution rate of
5.12% and the taxable equivalent distribution rate of 8.92%, for Class II
shares.
GRAPHIC MATERIAL (11)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 33.0%
AA 27.2%
A 12.3%
BBB 27.5%
GRAPHIC MATERIAL (12)
This bar chart shows the comparison between the fund's distribution rate of
5.53% and the taxable equivalent distribution rate of 9.59%, for Class I
shares.
GRAPHIC MATERIAL (13)
This bar chart shows the comparison between the fund's distribution rate of
5.24% and the taxable equivalent distribution rate of 9.08%, for Class II
shares.
GRAPHIC MATERIAL (14)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 45.5%
AA 7.1%
A 24.7%
BBB 22.3%
Below Investment Grade 0.4%
GRAPHIC MATERIAL (15)
This bar chart shows the comparison between the fund's distribution rate of
5.48% and the taxable equivalent distribution rate of 9.39%.
GRAPHIC MATERIAL (16)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 59.7%
AA 11.9%
A 11.3%
BBB 15.5%
Below Investment Grade 1.6%
GRAPHIC MATERIAL (17)
This bar chart shows the comparison between the fund's distribution rate of
5.43% and the taxable equivalent distribution rate of 9.60%, for Class I
shares.
GRAPHIC MATERIAL (18)
This bar chart shows the comparison between the fund's distribution rate of
5.12% and the taxable equivalent distribution rate of 9.05%, for Class II
shares.
GRAPHIC MATERIAL (19)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 43.5%
AA 22.1%
A 21.0%
BBB 13.4%
GRAPHIC MATERIAL (20)
This bar chart shows the comparison between the fund's distribution rate of
5.24% and the taxable equivalent distribution rate of 9.53%, for Class I
shares.
GRAPHIC MATERIAL (21)
This bar chart shows the comparison between the fund's distribution rate of
4.86% and the taxable equivalent distribution rate of 8.84%, for Class II
shares.
GRAPHIC MATERIAL (22)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 57.1%
AA 12.7%
A 9.9%
BBB 20.3%
GRAPHIC MATERIAL (23)
This bar chart shows the comparison between the fund's distribution rate of
5.62% and the taxable equivalent distribution rate of 9.57%, for Class I
shares.
GRAPHIC MATERIAL (24)
This bar chart shows the comparison between the fund's distribution rate of
5.25% and the taxable equivalent distribution rate of 8.94%, for Class II
shares.
GRAPHIC MATERIAL (25)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 31.6%
AA 1.2%
A 19.2%
BBB 48.0%
GRAPHIC MATERIAL (26)
This bar chart shows the comparison between the fund's distribution rate of
5.43% and the taxable equivalent distribution rate of 8.99%, for Class I
shares.
GRAPHIC MATERIAL (27)
This bar chart shows the comparison between the fund's distribution rate of
5.09% and the taxable equivalent distribution rate of 8.43%, for Class II
shares.
GRAPHIC MATERIAL (28)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 7.6%
AA 8.8%
A 25.6%
BBB 54.9%
Below Investment Grade 3.1%
GRAPHIC MATERIAL (29)
This bar chart shows the comparison between the fund's distribution rate of
5.02% and the taxable equivalent distribution rate of 8.31%.
GRAPHIC MATERIAL (30)
This chart shows in pie chart format the fund'securities breakdown by sector
as a percentage of the fund's total net assets.
Quality Breakdown on 8/31/96
AAA 22.0%
AA 4.3%
A 5.8%
BBB 39.5%
Below Investment Grade 28.4%
GRAPHIC MATERIAL (31)
This bar chart shows the comparison between the fund's distribution rate of
6.38% and the taxable equivalent distribution rate of 10.56%, for Class I
shares.
GRAPHIC MATERIAL (32)
This bar chart shows the comparison between the fund's distribution rate of
6.03% and the taxable equivalent distribution rate of 9.98%, for Class II
shares.
