Table of Contents
Message from the Chairman
Special Feature: Portfolio Update
Franklin's Tax-Free Income Funds
Fund Reports
Franklin Arizona Insured
Tax-Free Income Fund
Franklin Florida Insured
Tax-Free Income Fund
Franklin Insured Tax-Free
Income Fund
Franklin Massachusetts Insured
Tax-Free Income Fund
Franklin Michigan Insured
Tax-Free Income Fund
Franklin Minnesota Insured
Tax-Free Income Fund
Franklin Ohio Insured
Tax-Free Income Fund
Statement of Investments
Financial Statements
Notes to Financial Statements
Report of Independent Auditors
To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most fund reports, such as annual and semi-annual reports, may be
mailed to a household. Additional copies may be obtained, without charge, by
calling Franklin Templeton Fund Information at 1-800/DIAL BEN (1-800/342-5236).
MESSAGE FROM THE CHAIRMAN
April 15, 1996
Dear Shareholder:
It's a pleasure to bring you the annual report of the Franklin Tax-Free Trust
for the period ended February 29, 1996.
Declining interest rates, low inflation and moderate growth characterized the
year under review. The nation's economic growth slowed significantly, prompting
the Federal Reserve Board to lower the federal funds rate on three occasions
during the reporting period. Bond markets in general anticipated the Fed's
actions; long-term bond yields had been decreasing steadily since the beginning
of 1995. Prices of fixed-income securities appreciated in response to the Fed's
moves in July and December 1995, and February 1996 to lower interest rates.
Hopes for further reductions dimmed as the economy began to show modest signs of
improvement, causing bond prices to give back some of their 1995 gains.
The number of insured bonds brought to market continued to increase during the
reporting period. During 1995, more than 44% of new municipal bonds issued in
the U.S. were insured, versus 37% in 1994.** While the bankruptcy of Orange
County, California may have contributed to increased use of insurance, we feel
that increased competition within the financial industry also played a
significant role. Financial guarantors continued to battle for market share, and
the premiums they charge declined to historically low levels. During the year,
two smaller insurers recently combined to become the fourth major insurer, and
this newly combined company was able to compete more efficiently for
underwritings.
The narrowing of yield spreads between non-insured and AAA-rated insured bonds
during the reporting period further affected the insured municipal market. In
the declining interest-rate environment, high-quality AAA-rated municipal bonds
offered attractive yields relative to those of lower-quality issues, as investor
demand for higher yields pushed up prices on lower-quality bonds (and thus
lowered yields). Overall, this resulted in a relatively small yield difference
between lesser-grade bonds and the high-quality AAA-rated insured bonds in which
the funds invest.
Our fundamental investment principles remain the same: careful selection and
constant professional management. The insured bonds in each fund's portfolio are
insured by private municipal bond insurance companies as to the scheduled
payment of principal and interest on the portfolio's securities.+ Because of
this insurance, each fund continues to enjoy a "AAAf" rating -- the highest
mutual fund rating possible from Standard & Poor's Corporation. The rating
reflects Standard & Poor's assessment of the overall credit quality of the
fund's portfolio, and the fund's stated investment objectives and policies. The
rating does not reflect the funds' yields or market prices, nor does it imply
approval by Standard & Poor's, and is subject to change.
**Source: Bond Buyer, 1/8/96.
+Fund shares are not insured by any U.S. government agency. Insurance relates
only to the payment of principal and interest on the portfolio's securities. It
does not eliminate market risks to the fund's share price or insure the value of
the shares. Terms of the insurance are more fully described in the prospectus,
and no representation is made as to any insurer's ability to meet its
commitments.
The Federal Reserve's policy appears to target slow to moderate economic growth
and controlled inflation, which bodes well for fixed-income securities. Interest
rates did rise following a stronger-than-expected employment report released in
early March, but we believe there is still no clear evidence pointing to a
breakout of inflation. In terms of the supply of municipal bonds, we think the
technical aspect of the market would indicate that demand will be slightly ahead
of supply in 1996. The fluctuation of interest rates in 1995 -- caused by the
Fed's activities -- reinforced our philosophy that shareholders should view
their investments with a long-term perspective. While your fund may react to
these changes, we believe that the performance of tax-free income funds,
including those in the Franklin Tax-Free Trust, will be rewarding over the long
term. Tax-free securities continue to be an important component of one's overall
financial plan. You will find a discussion of each fund's performance on the
following pages.
As always, we appreciate your trust and support and look forward to serving your
investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
An Update on Tax Reform
Tax reform is an issue that has weighed heavy on everyone's mind -- including
ours. We have patiently waited for word from Washington and, in January, the
National Commission on Tax Reform and Economic Growth released its
long-anticipated report on tax reform. Although the Commission endorsed the idea
of sweeping tax reform, the report may have actually raised more questions than
it answered: What would be an acceptable tax rate? Would low-income families be
excluded? What would be the tax status of investment income? Would the rich and
poor gain at the expense of the middle class? While several, more detailed tax
reform plans are being discussed, investors should keep in mind that making such
dramatic change is not a simple process. We recognize that media attention on a
few of the high-profile proposals has caused some investor concern over
municipal investments, and we believe it is important to note that the municipal
bond market could be affected by tax reform. However, we feel that dramatic
changes, if any, are probably far down the road. For more information regarding
the effects of tax reform on the municipal market, please see the Portfolio
Update on page 3.
PORTFOLIO UPDATE - FRANKLIN'S TAX-FREE INCOME FUNDS
Tom Kenny, director of Franklin Templeton's Municipal Bond Department, and
portfolio managers Bernie Schroer, Sheila Amoroso and Don Duerson take a look at
the important issues that shaped the municipal bond market last year.
PICTURE OMITTED
Portfolio managers Don Duerson (left) and Sheila Amoroso (right) discuss aspects
of a new bond issue with Tom Kenny, director of Franklin Templeton's Municipal
Bond Department.
Did the municipal market measure up to your expectations in 1995?
Tom Kenny: In our last portfolio update, we told you we were anticipating a
strong municipal market in 1995. We expected that the supply of new municipal
bonds would continue to be low, and that the interest-rate environment would be
more favorable for bond investors, thereby increasing demand. Generally
speaking, we were right. Tax-free income funds fared well in 1995, and
Franklin's funds were no exception. After enduring one of the worst fixed-income
markets of the last 25 years in 1994, last year's rebound only reinforced our
philosophy that investors should keep a long-term perspective (see fig. 1 on
next page). That being said, the municipal market's performance wasn't quite as
robust as we had anticipated.
Why was that?
Tom: While investor demand was strong in the beginning of the year, it started
to decline in April, due in part to a "hangover" effect from the tough 1994
market. Additionally, the stock market performed so well that it pulled a lot of
assets into equities.
Bernie Schroer: There was also the fear of a "flat tax."
The media has focused considerable attention on a proposed "flat tax." What does
tax reform mean for individual municipal bonds and bond funds?
Don Duerson: It really depends upon which tax-reform proposal you are
discussing. There are several proposals out there, such as a flat tax, a
value-added tax, an unlimited savings allowance, and a consumption tax. The
popular appeal of most of these proposals is that they attempt to bring
simplicity to what is now a complex tax code.
Ultimately, however, no one proposal addresses every problem. So while we are
closely following the debate, we think it's too early to make any investment
decisions based purely on speculation.
Sheila Amoroso: The debate, however, has had an impact on the market, keeping
municipal securities' prices lower than they otherwise might have been.
What are the chances that some type of tax reform will be enacted this year?
Don: Because it is so complicated and the effects so far-reaching, tax reform
probably won't be addressed before 1997 -- although the political rhetoric will
certainly be a big part of the upcoming presidential election. Also, keep in
mind what happened to the health care reform proposals a few years ago. After
all the political debate and havoc that was wrought on health care securities,
the issue has quietly faded into the background.
Sheila: Change of this magnitude is not a simple process, as we have seen
recently with the balanced budget proposals. In that case, everyone agrees on
the goal of balancing the budget, but they disagree on how to get there. Tax
reform is much more difficult because the goals are not the same for all the
parties involved.
PICTURE OMITTED
Staying on top of the municipal market. (From left) Andrew Jennings, Sr., Bernie
Schroer, Tom Kenny and Don Duerson.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
How about Orange County? Did that situation continue to affect the market in
1995?
Tom: Generally speaking, the overall municipal market was impacted by Orange
County's bankruptcy for a relatively short time, rebounding very quickly. The
California market, on the other hand, was affected well into 1995, until Orange
County established a recovery plan. While the "Orange County effect" is
essentially behind us, it does point out one of the major benefits of owning a
Franklin tax-free mutual fund as our funds invest in a variety of issues, and
the impact of any one issue, sector or region is usually very limited.
Interestingly, one measurable effect of Orange County's financial difficulties
may be the increased volume of insured bonds in the market. Approximately 44% of
new municipal bonds in 1995 were insured, versus 37% in 1994 (see fig. 2).1 In
California that figure was even higher.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Does this mean the funds are buying more insured securities?
Bernie: Yes. Recently, we have been buying mostly insured bonds for many of the
Franklin tax-free funds, but that is primarily due to the narrow yield spread
between AAA and lesser-quality issues.2
What do you mean by "narrow spread"?
Bernie: In a declining or low interest-rate environment, investors tend to
"reach for yield," trying to obtain the same yield level they had in an earlier,
higher interest-rate environment. To accomplish this, investors have to buy
lesser-quality bonds, which are usually higher yielding. Paradoxically, this
added demand generally drives the prices of these securities higher and results
in lower relative yields. The end result is a much smaller yield difference, or
"narrow spread," between a AAA insured bond and a lesser-grade BBB bond. When
this happens, it makes more sense for us to buy the insured bonds.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Sheila, are you even purchasing insured bonds for the Franklin High Yield
Tax-Free Income Fund?3
Sheila: Yes, recently we have been. Higher risk should mean higher potential
reward, but there just isn't enough of a yield spread in the rated market to
warrant the added risk in lower-quality bonds right now. In addition, we have
been focusing heavily on non-rated issues where yields have remained attractive.
We have one of the largest teams of municipal market analysts of any fund group
in the nation.4 With their hard work, we can determine which bonds meet our
strict internal ratings criteria, and we still get paid the higher yield for
buying a "non-rated" security. We feel this can definitely be an advantage for
our shareholders.
1. Source: The Bond Buyer, 01/08/96.
2. Portfolio holdings are subject to change and may not represent future
portfolio composition.
3. Portfolio holdings are subject to change and may notrepresent future
portfolio composition.
Do you anticipate a continued low supply of new issues this year?
Tom: Municipal bonds finance the building and repair of infrastructure across
the country. While the need for these projects clearly exists, nationally there
has been a taxpayer revolt. Across the country, many new Republican governors
have been swept into office on a theme of lower taxes, and many states continue
to face budget pressures. As a result, states and municipalities simply can't
afford to issue new securities. So while the need is there, I think the
economics and politics of the matter bode well for continued low supply (see
fig. 3 on previous page).
That could be good news for our shareholders, because if supply continues to
remain low, stronger investor demand could make municipal securities attractive
investments.
What do you see in the months ahead?
Tom: We think the fundamentals look good for municipal bonds. But regardless of
changing market conditions, we will continue to focus on providing our
shareholders with high current income free from regular federal and, depending
on the fund, state personal income taxes.5
Franklin has become the largest tax-free fund manager in the nation by following
a very straightforward, "plain vanilla" investment philosophy, which has proved
successful in both strong and weak markets.6 Over time, income has provided a
much greater percentage of total return than has capital appreciation, based on
the unmanaged Lehman Brothers 20-Year Municipal Bond Index (see fig. 4). We plan
to maintain our approach and continue to make tax-free income our focus.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking ahead, I think municipal securities will remain an excellent investment
option for many individuals, and our 870,000 tax-free fund shareholders will
continue to find investing in our funds to be one of the most effective and
convenient ways to participate in the municipal securities market.
4. Source: Research and Ratings Review, 08/31/95.
5. For investors subject to federal or state alternative minimum tax, all or a
portion of this income may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
6. Past performance cannot guarantee future results.
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
Fund 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 economy continued to diversify away from cyclical agricultural and
copper industries toward the more stable service, tourism, and manufacturing
sectors. For example, a large number of high-tech companies have relocated to
the state over the past few years, with over 200 firms moving to the Phoenix
area alone. In fact, Intel Corp's $1.3 billion chip production expansion is
expected to increase the company's Phoenix-area employment by roughly 1300
jobs.** Additionally, Phoenix hosted the 1996 Super Bowl, which attracted
thousands of visitors to boost the local economy. It also served to advertise
Phoenix as a place to visit or relocate.
Despite the state's continued growth, we anticipate municipal issuance in
Arizona will maintain its downward trend. During the 1970s and 1980s, Arizona
financed much of the growth needed through the 1990s, particularly for highways
and hospitals. As a result, we think the state's borrowing needs should remain
modest, adding scarcity value to Arizona municipal bonds.
Franklin Arizona Insured Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 34.1%
Education 31.7%
General Obligations 8.6%
Hospitals 8.1%
Industrial 5.1%
Sales Tax 3.0%
Certificates of Participation 2.8%
Housing 2.6%
Miscellaneous 1.4%
Transportation 1.3%
Pre-Refunded 1.3%
For a complete list of portfolio holdings, please see page 43
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.
**Source: Standard & Poor's Creditweek Municipal, 7/10/95.
Performance Summary
We are pleased to report that the Franklin Arizona Insured Tax-Free Income
Fund's share price, as measured by net asset value, increased to $10.36 on
February 29, 1996, from $9.80 on February 28, 1995.
At the end of the reporting period, your fund's distribution rate was 5.10%,
based on an annualization of the current monthly dividend of 4.6 cents ($0.046)
per share and the maximum offering price of $10.82 on February 29, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum combined
federal and Arizona state personal income tax bracket of 42.98%, you would have
to earn 9.07% from a taxable investment of similar quality to match your fund's
tax-free distribution rate.
Franklin Arizona Insured Tax-Free Income Fund
Dividend Distributions 3/01/95 - 2/29/96*
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
September 4.6 cents
October 4.6 cents
November 4.6 cents
December 4.6 cents
January 4.6 cents
February 4.6 cents
Total 55.2 cents
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The chart on the page 9 compares your fund's performance with the Consumer Price
Index (CPI) and the unmanaged Lehman Brothers Municipal Bond Index. Of course,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, nor do they pay commissions or market
spreads to buy and sell bonds. Unlike unmanaged indices, mutual funds are never
100% fully invested because of the need to have cash on hand to redeem shares.
The fund's performance figures also include the maximum initial sales charge,
all fund expenses and account fees. If operating expenses such as those of the
Arizona Insured Tax-Free Income Fund had been applied to this index, the index's
performance would have been lower. In addition, the index includes over 25,000
municipal securities from across the country, while your fund consists primarily
of insured Arizona municipal bonds. Please remember that an index is simply a
measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
Franklin Arizona Insured Tax-Free Income Fund
Period ended February 29, 1996
Since
Inception
1-Year (4/30/93)
Cumulative Total Return1 11.64% 19.32%
Average Annual Total Return2 6.94% 4.82%
Distribution Rate3 5.10%
Equivalent Taxable Distribution Rate4 9.07%
30-Day Standardized Yield5 4.98%
Equivalent Taxable Yield4 8.73%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods. The figures include the current,
maximum 4.25% initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current 4.6 cent per
share monthly dividend and the maximum offering price of $10.82 on February 29,
1996.
4. Equivalent taxable distribution rate and yield assume the 1996 maximum
combined federal and Arizona state personal income tax bracket of 42.98%, based
on the maximum 39.6% federal income tax rate.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 29, 1996.
Note: Prior to July 1, 1994, fund shares were offered at a higher initial sales
charge. Thus, actual total returns for purchasers of shares during that period
would have been somewhat lower than noted above. 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 has agreed in advance to waive a portion of its management
fees, which reduces operating expenses and increases yield, distribution rate
and total return to shareholders. Without these reductions, the fund's
distribution rate and total return would have been lower, and yield for the
period would have been 4.48%. Fee waivers and expense reimbursements may be
discontinued at any time upon notice to the fund's Board of Trustees.
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal income tax
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
Despite Florida's rapid growth to the fourth largest state in the nation, its
debt levels have remained moderate and its financial operations balanced. In
addition, increased diversification characterized Florida's economy during the
reporting period. Emphasis on agriculture and seasonal tourism continued to
decline, while the state's service and trade bases expanded into substantial
insurance, banking and export sectors.
We anticipate Florida's economy will continue to flourish in the coming year.
The state's well-managed financial program and historically steady economic
performance contribute to our positive outlook for the state.
Franklin Florida Insured Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 46.7%
Other Revenue 13.0%
Hospitals 12.2%
Certificates of Participation 8.8%
Transportation 6.1%
Sales Tax 5.6%
Housing 2.3%
General Obligations 2.1%
Education 1.8%
Pre-Refunded 1.4%
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.
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.
Performance Summary
We are pleased to report that the Franklin Florida Insured Tax-Free Income
Fund's share price, as measured by net asset value, increased to $10.02 on
February 29, 1996, from $9.53 on February 28, 1995.
At the end of the reporting period, your fund's distribution rate was 5.05%,
based on an annualization of the current monthly dividend of 4.4 cents ($0.044)
per share and the maximum offering price of $10.46 on February 29, 1996. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, if you are in the maximum federal personal
income tax bracket of 39.6%, you would have to earn 8.36% from a taxable
investment of similar quality to match your fund's tax-free distribution rate.
Franklin Florida Insured Tax-Free Income Fund
Dividend Distributions 3/01/95 - 2/29/96*
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
September 4.4 cents
October 4.4 cents
November 4.4 cents
December 4.4 cents
January 4.4 cents
February 4.4 cents
Total 52.8 cents
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The chart on the page 12 compares your fund's performance with the Consumer
Price Index (CPI) and the unmanaged Lehman Brothers Municipal Bond Index. Of
course, such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, nor do they pay commissions or market
spreads to buy and sell bonds. Unlike unmanaged indices, mutual funds are never
100% fully invested because of the need to have cash on hand to redeem shares.
The fund's performance figures also include the maximum initial sales charge,
all fund expenses and account fees. If operating expenses such as those of the
Florida Insured Tax-Free Income Fund had been applied to this index, the index's
performance would have been lower. In addition, the index includes over 25,000
municipal securities from across the country, while your fund consists primarily
of insured Florida municipal bonds. Please remember that an index is simply a
measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 8 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
Franklin Florida Insured Tax-Free Income Fund
Period ended February 29, 1996
Since
Inception
1-Year (4/30/93)
Cumulative Total Return1 10.95% 15.44%
Average Annual Total Return2 6.27% 3.60%
Distribution Rate3 5.05%
Equivalent Taxable Distribution Rate4 8.36%
30-Day Standardized Yield5 4.85%
Equivalent Taxable Yield4 8.03%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See Note below.
2. Average annual total returns represent the
average annual change in value of an investment over the specified periods. The
figures include the current, maximum 4.25% initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current 4.4 cent per
share monthly dividend and the maximum offering price of $10.46 on February 29,
1996.
4. Equivalent taxable 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
February 29, 1996.
Note: Prior to July 1, 1994, 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 has agreed in advance to waive a portion of its management
fees, which reduces operating expenses and increases yield, distribution rate
and total return to shareholders. Without these reductions, the fund's
distribution rate and total return would have been lower, and yield for the
period would have been 4.50%. Fee waivers and expense reimbursements may be
discontinued at any time upon notice to the fund's Board of Trustees.
FRANKLIN INSURED TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal income taxes
through a portfolio consisting primarily of insured municipal bonds.*
Normal cash flow from interest payments, bond redemptions and selected
securities sales allowed us to participate in the attractive bond yields offered
in the first half of 1995. As the year progressed, however, as interest rates
fell and bond prices began to rise.
During the reporting period, we maintained our conservative investment approach.
We purchased securities based on their income-producing potential, while
avoiding short-term trading to capture capital gains. We also purchased bonds as
close to par (face value) as possible. In addition, the Franklin Insured
Tax-Free Income Fund is well-diversified across all 50 states, reducing the
single-event risk such as earthquakes, hurricanes, or even a major bankruptcy.
Franklin Insured Tax-Free Income Fund
Top 10 State Holdings on February 29, 1996
Based on total long-term investments
% of total
long-term
State investments
Texas 9.52%
Washington 8.27%
New York 6.92%
Massachusetts 6.36%
Colorado 5.35%
Florida 4.97%
Illinois 4.66%
Alaska 4.16%
Arizona 3.13%
New Jersey 3.02%
Franklin Insured Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 26.3%
Pre-Refunded 20.9%
Hospitals 17.5%
Education 8.1%
Transportation 6.3%
Housing 6.0%
General Obligations 5.1%
Certificates of Participation 3.5%
Other Revenue 2.5%
Industrial 1.5%
Sales Tax 1.4%
Miscellaneous 0.4%
Tax Allocation 0.4%
Mark-Roos 0.1%
For a complete list of portfolio holdings, please see page 48
of this report.
Looking forward, we anticipate continued slow to moderate growth and low
interest rates, as a direct result of the low inflation that has characterized
the economy during the past fiscal year. In this environment, insured municipal
bonds should perform well, and our outlook for the fund is positive.
*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 Shares
(Class II Shares Performance Summary starts on page 16.)
We are pleased to report that the Franklin Insured Tax-Free Income Fund's Class
I share price, as measured by net asset value, increased to $12.27 on February
29, 1996, from $11.97 on February 28, 1995.
Franklin Insured Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.9 cents
October 5.9 cents
November 5.9 cents
December 5.9 cents
January 5.9 cents
February 5.9 cents
Total 70.8 cents
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.53%, based on an annualization of the current monthly dividend of
5.9 cents ($0.059) per share and the maximum offering price of $12.81 on
February 29, 1996. This tax-free rate is generally higher than the after-tax
return on a comparable taxable investment. For example, if you are in the
maximum federal personal income tax bracket of 39.6%, you would have to earn
9.16% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1986, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares generally followed the performance of the unmanaged Lehman
Brothers Municipal Bond Index. Of course, such unmanaged market indices have
inherent performance differentials in comparison with any fund. They do not pay
management fees to cover salaries of security analysts or portfolio managers,
nor do they pay commissions or market spreads to buy and sell bonds. Unlike
unmanaged indices, mutual funds are never 100% fully invested because of the
need to have cash on hand to redeem shares. The fund's performance figures also
include the maximum initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Insured Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of uninsured municipal bonds, which generally offer
higher yields than the insured bonds in which the fund concentrates its assets.
Please remember that an index is simply a measure of performance, and one cannot
invest in an index directly. Past performance is not predictive of future
results.
GRAPHIC MATERIAL 10 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Insured Tax-Free Income Fund's Class
II share price, as measured by net asset value, increased to $12.31 on February
29, 1996, from $11.98 on May 1, 1995, the date the fund began offering these
shares.
The distribution rate of the fund's Class II shares was 5.12%, based on an
annualization of the current monthly dividend of 5.3 cents ($0.053) per share
and the offering price of $12.43 on February 29, 1996. This tax-free rate is
generally higher than the after-tax return on a comparable taxable investment.
For example, if you are in the maximum federal personal income tax bracket of
39.6%, you would have to earn 8.48% from a taxable investment of similar quality
to match your fund's tax-free distribution rate.
Franklin Insured Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.8 cents
June 5.3 cents
July 5.3 cents
August 5.3 cents
September 5.3 cents
October 5.3 cents
November 5.3 cents
December 5.3 cents
January 5.3 cents
February 5.3 cents
Total 51.5 cents
GRAPHIC MATERIAL 11 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Insured Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of uninsured municipal bonds, which generally offer
higher yields than the insured bonds in which the fund concentrates its assets.
Please remember that an index is simply a measure of performance, and one cannot
invest in an index directly. Past performance is not predictive of future
results.
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Insured Tax-Free Income Fund
Periods ended February 29, 1996
Since
Inception
Class II Shares
1-Year 5-Year 10-Year (5/1/95)
Cumulative Total Return1
Class I 8.66% 45.85% 109.26%
Class II -- -- -- 7.32%
Average Annual Total Return2
Class I 4.06% 6.90% 7.19%
Aggregate Total Return2
Class II -- -- -- 5.26%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I 5.53% Class I 9.16%
Class II 5.12% Class II 8.48%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.30% Class I 7.12%
Class II 3.86% Class II 6.39%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1.0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2.Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date. It also includes the 1.0% CDSC applicable to shares redeemed within the
first 18 months of investment. Since Class II shares have existed for less than
one year, average annual total returns are not provided. See Note below.
3.Class I shares distribution rate is based on an annualization of the current
5.9 cent per share monthly dividend and the maximum offering price of $12.81 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 5.3 cent per share monthly dividend and the
offering price of $12.43 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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
February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
Fund 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
The Massachusetts economy continued its slow recovery, which began in 1992
following a long and deep recession. Although the Commonwealth maintained its
relatively high debt levels during the reporting period, strong and conservative
financial management resulted in a stable financial position. In fact, adherence
to strict financial policies and four years of balanced financial operations
have greatly reduced the Commonwealth's reliance on borrowing for operations.
During the fiscal year, Massachusetts boasted a broad-based economy, with wealth
and income levels among the highest in the country. The Commonwealth's economy
continued to diversify into several areas in the service sector, including
computer software, engineering, management consulting, biomedical research, and
education. This diversification has led to increased economic stability for the
Commonwealth.
Looking forward, we believe revenues for 1996 appear to be on target, and
borrowing needs should continue to decline as Massachusetts improves its
financial performance. As a result, issuance in the Commonwealth may decrease
further from the low levels witnessed in 1994, giving Massachusetts municipal
bonds an added value. In addition, strong employment gains, anticipated to
average 3.1% annually through 1997, may further improve the Commonwealth's
economy as it diversifies into the service sectors.+
Franklin Massachusetts Insured
Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Hospitals 32.4%
Pre-Refunded 18.3%
Education 16.7%
General Obligations 14.0%
Health Care 5.7%
Housing 5.0%
Utilities 4.0%
Transportation 2.5%
Certificates of Participation 1.4%
For a complete list of portfolio holdings, please see page 70
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.
+Source: Standard & Poor's Creditweek Municipal, 10/30/95
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 22.)
We are pleased to report that the Franklin Massachusetts Insured Tax-Free Income
Fund's Class I share price, as measured by net asset value, increased to $11.65
on February 29, 1996, from $11.34 on February 28, 1995.
Franklin Massachusetts Insured
Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.5 cents
October 5.5 cents
November 5.5 cents
December 5.5 cents
January 5.5 cents
February 5.5 cents
Total 66.0 cents
GRAPHIC MATERIAL 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.42%, based on an annualization of the current monthly dividend of
5.5 cents ($0.055) per share and the maximum offering price of $12.17 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Massachusetts state personal income tax bracket
of 46.8%, you would have to earn 10.19% from a taxable investment of similar
quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1986, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares underperformed the unmanaged Lehman Brothers Municipal Bond
Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Massachusetts Insured Tax-Free Income Fund had been applied
to this index, the index's performance would have been lower. In addition, the
index consists of uninsured municipal bonds from across the country, while your
fund consists primarily of insured Massachusetts municipal bonds. Please
remember that an index is simply a measure of performance, and one cannot invest
in an index directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Massachusetts Insured Tax-Free Income
Fund's Class II share price, as measured by net asset value, increased to $11.69
on February 29, 1996, from $11.36 on May 1, 1995, the date the fund began
offering these shares.
Franklin Massachusetts Insured
Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.5 cents
June 4.9 cents
July 4.9 cents
August 4.9 cents
September 4.9 cents
October 4.9 cents
November 4.9 cents
December 4.9 cents
January 4.9 cents
February 4.9 cents
Total 47.6 cents
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.98%, based on an annualization of the current monthly dividend of
4.9 cents ($0.049) per share and the offering price of $11.81 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Massachusetts state personal income tax bracket of 46.8%, you would
have to earn 9.36% from a taxable investment of similar quality to match your
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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Massachusetts Insured Tax-Free Income
Fund had been applied to this index, the index's performance would have been
lower. In addition, the index consists of uninsured municipal bonds from across
the country, while your fund consists primarily of insured Massachusetts
municipal bonds. Please remember that an index is simply a measure of
performance, and one cannot invest in an index directly. Past performance is not
predictive of future results.
GRAPHIC MATERIAL 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Massachusetts Insured Tax-Free Income Fund
Periods ended February 29, 1996
Since
Inception
Class II Shares
1-Year 5-Year 10-Year (5/1/95)
Cumulative Total Return1
Class I 8.80% 46.02% 98.22%
Class II -- -- -- 7.36%
Average Annual Total Return2
Class I 4.20% 6.93% 6.62%
Aggregate Total Return2
Class II -- -- -- 5.34%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I 5.42% Class I 10.19%
Class II 4.98% Class II 9.36%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.00% Class I 7.52%
Class II 3.56% Class II 6.69%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2.Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.5 cent per share monthly dividend and the maximum offering price of $12.17 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.9 cent per share monthly dividend and the
offering price of $11.81 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Massachusetts state 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
Fund 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 low debt levels and conservative budgeting practices helped its
economy to improve during the reporting period. It appears the state recently
stopped its policy of overspending its appropriations, once a chronic feature of
the state's budgets.
The state's traditional dependence on the auto industry makes its economy
particularly vulnerable in times of recession. However, auto industry employment
continued to stabilize during the reporting period. As corporate restructuring
and capital investment improved, Michigan's auto industry became much more
competitive and regained some its market share lost to over-seas manufacturers.
In addition, Michigan's economy continued to diversify away from the durable
goods manufacturing sectors to trade and services, reducing the effect of
cyclical downturns.
Franklin Michigan Insured Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Pre-Refunded 29.4%
Education 27.3%
Utilities 14.6%
Hospitals 11.0%
General Obligations 7.5%
Transportation 3.5%
Other Revenue 3.5%
Housing 2.2%
Industrial 0.8%
Health Care 0.2%
For a complete list of portfolio holdings, please see page 75
of this report.
Looking forward, we anticipate Michigan's economy should continue to improve,
and financial stability is likely, considering the state's low debt ratios.
*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 Shares
(Class II Shares Performance Summary starts on page 28.)
We are pleased to report that the Franklin Michigan Insured Tax-Free Income
Fund's Class I share price, as measured by net asset value, increased to $12.09
on February 29, 1996, from $11.76 on February 28, 1995.
Franklin Michigan Insured Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.7 cents
October 5.7 cents
November 5.7 cents
December 5.7 cents
January 5.7 cents
February 5.7 cents
Total 68.4 cents
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.42%, based on an annualization of the current monthly dividend of
5.7 cents ($0.057) per share and the maximum offering price of $12.63 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Michigan state personal income tax bracket of
42.3%, you would have to earn 9.39% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1986, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares underperformed the unmanaged Lehman Brothers Municipal Bond
Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Michigan Insured Tax-Free Income Fund had been applied to
this index, the index's performance would have been lower. In addition, the
index consists of uninsured municipal bonds from across the country, while your
fund consists primarily of insured Michigan municipal bonds. Please remember
that an index is simply a measure of performance, and one cannot invest in an
index directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 18 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Michigan Insured Tax-Free Income
Fund's Class II share price, as measured by net asset value, increased to $12.14
on February 29, 1996, from $11.77 on May 1, 1995, the date the fund began
offering these shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.99%, based on an annualization of the current monthly dividend of
5.1 cents ($0.051) per share and the offering price of $12.26 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Michigan state personal income tax bracket of 42.3%, you would have
to earn 8.65% from a taxable investment of similar quality to match your fund's
tax-free distribution rate.
Franklin Michigan Insured Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.7 cents
June 5.1 cents
July 5.1 cents
August 5.1 cents
September 5.1 cents
October 5.1 cents
November 5.1 cents
December 5.1 cents
January 5.1 cents
February 5.1 cents
Total 49.6 cents
GRAPHIC MATERIAL 19 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Michigan Insured Tax-Free Income Fund
had been applied to this index, the index's performance would have been lower.
In addition, the index consists of uninsured municipal bonds from across the
country, while your fund consists primarily of insured Michigan municipal bonds.
Please remember that an index is simply a measure of performance, and one cannot
invest in an index directly. Past performance is not predictive of future
results.
GRAPHIC MATERIAL 20 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Michigan Insured Tax-Free Income Fund
Periods ended February 29, 1996
Since
Inception
Class II Shares
1-Year 5-Year 10-Year (5/1/95)
Cumulative Total Return1
Class I 8.86% 45.75% 106.53%
Class II -- -- -- 7.58%
Average Annual Total Return2
Class I 4.25% 6.89% 7.06%
Aggregate Total Return2
Class II -- -- -- 5.51%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I 5.42% Class I 9.39%
Class II 4.99% Class II 8.65%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.18% Class I 7.24%
Class II 3.75% Class II 6.49%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2.Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.7 cent per share monthly dividend and the maximum offering price of $12.63 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 5.1 cent per share monthly dividend and the
offering price of $12.26 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Michigan state 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
Fund 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
Minnesota exhibited strong financial performance during the fund's fiscal year,
while continuing to diversify its economic base. These factors, particularly the
state's broad-based economy, allowed consistent improvement in Minnesota's
financial figures. In fact, recent employment expansion in computer and business
services, as well as in the financial sector, brought the state's unemployment
rate below 4% in 1995.+
Looking forward, Minnesota's economic diversification and financial
stabilization should continue, and fiscal 1996 estimates indicate continued
growth in revenues. This suggests that the state's borrowing needs might
continue to be modest, which may add scarcity value to Minnesota municipal
bonds. As a result, our outlook is positive for the state, as well as for the
fund.
Franklin Minnesota Insured Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Pre-Refunded 24.2%
Utilities 18.4%
Hospitals 13.9%
Housing 13.7%
Education 13.3%
Health Care 5.5%
General Obligations 5.4%
Other Revenue 2.6%
Tax Allocation 1.5%
Certificates of Participation 1.2%
Transportation 0.3%
For a complete list of portfolio holdings, please see page 84
of this report.
*For investors subject to the federal or state alternative minimum tax, a small
portion of this income may be subject to such tax. Distributions of capital
gains and of ordinary income from accrued market discount, if any, are generally
taxable. The fund seeks to comply with Minnesota requirements for the
pass-through of tax-exempt income.
+Source: Standard & Poor's Creditweek Municipal, 1/15/96
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 34.)
We are pleased to report that the Franklin Minnesota Insured Tax-Free Income
Fund's Class I share price, as measured by net asset value, increased to $12.14
on February 29, 1996, from $11.88 on February 28, 1995.
Franklin Minnesota Insured Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.6 cents
October 5.6 cents
November 5.6 cents
December 5.6 cents
January 5.6 cents
February 5.6 cents
Total 67.2 cents
GRAPHIC MATERIAL 21 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.30%, based on an annualization of the current monthly dividend of
5.6 cents ($0.056) per share and the maximum offering price of $12.68 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Minnesota state personal income tax bracket of
44.7%, you would have to earn 9.58% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1986, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares underperformed the unmanaged Lehman Brothers Municipal Bond
Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Minnesota Insured Tax-Free Income Fund had been applied to
this index, the index's performance would have been lower. In addition, the
index consists of uninsured municipal bonds from across the country, while your
fund consists primarily of insured Minnesota municipal bonds. Please remember
that an index is simply a measure of performance, and one cannot invest in an
index directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 22 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Minnesota Insured Tax-Free Income
Fund's Class II share price, as measured by net asset value, increased to $12.17
on February 29, 1996, from $11.89 on May 1, 1995, the date the fund began
offering these shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.88%, based on an annualization of the current monthly dividend of
5.0 cents ($0.050) per share and the offering price of $12.29 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Minnesota state personal income tax bracket of 44.7%, you would have
to earn 8.82% from a taxable investment of similar quality to match your fund's
tax-free distribution rate.
Franklin Minnesota Insured Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.6 cents
June 5.0 cents
July 5.0 cents
August 5.0 cents
September 5.0 cents
October 5.0 cents
November 5.0 cents
December 5.0 cents
January 5.0 cents
February 5.0 cents
Total 48.6 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Minnesota Insured Tax-Free Income Fund
had been applied to this index, the index's performance would have been lower.
In addition, the index consists of uninsured municipal bonds from across the
country, while your fund consists primarily of insured Minnesota municipal
bonds. Please remember that an index is simply a measure of performance, and one
cannot invest in an index directly. Past performance is not predictive of future
results.
GRAPHIC MATERIAL 24 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Minnesota Insured Tax-Free Income Fund
Periods ended February 29, 1996
Since
Inception
Class II Shares
1-Year 5-Year 10-Year (5/1/95)
Cumulative Total Return1
Class I 8.06% 42.94% 100.51%
Class II -- -- -- 6.67%
Average Annual Total Return2
Class I 3.44% 6.47% 6.79%
Aggregate Total Return2
Class II -- -- -- 4.61%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I 5.30% Class I 9.58%
Class II 4.88% Class II 8.82%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.13% Class I 7.47%
Class II 3.70% Class II 6.69%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.6 cent per share monthly dividend and the maximum offering price of $12.68 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 5.0 cent per share monthly dividend and the
offering price of $12.29 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Minnesota state 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
Fund 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
As it has over the past 10 years, Ohio continued to experience steady economic
growth and diversification during the reporting period. In fact, its stable
financial position and moderate debt burden has contributed to credit upgrades
for a number of the state's obligations.
Ohio's economy, which is historically based in the manufacturing sector, has
expanded into the trade and service sectors in recent years. We believe this
diversification contributed to further financial stability, as the state's
employment mix now closely mirrors the nation's.
Looking forward, we anticipate continued strong economic performance in Ohio.
Its expanding service sector, strong export activity, historically stable real
estate market, and conservative debt practices, all position the state for
further employment and income growth.
Franklin Ohio Insured Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 22.4%
Pre-Refunded 20.1%
Education 16.5%
Hospitals 14.8%
General Obligations 12.1%
Housing 5.9%
Certificates of Participation 3.0%
Industrial 2.7%
Transportation 2.3%
ORB 0.2%
For a complete list of portfolio holdings, please see page 90
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 Shares
(Class II Shares Performance Summary starts on page 40.)
We are pleased to report that the Franklin Ohio Insured Tax-Free Income Fund's
Class I share price, as measured by net asset value, increased to $12.22 on
February 29, 1996, from $11.90 on February 28, 1995.
Franklin Ohio Insured Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.7 cents
October 5.7 cents
November 5.7 cents
December 5.7 cents
January 5.7 cents
February 5.7 cents
Total 68.4 cents
GRAPHIC MATERIAL 25 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.36%, based on an annualization of the current monthly dividend of
5.7 cents ($0.057) per share and the maximum offering price of $12.76 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Ohio state personal income tax bracket of
44.1%, you would have to earn 9.59% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1986, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares underperformed the unmanaged Lehman Brothers Municipal Bond
Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Ohio Insured Tax-Free Income Fund had been applied to this
index, the index's performance would have been lower. In addition, the index
consists of uninsured municipal bonds from across the country, while your fund
consists primarily of insured Ohio municipal bonds. Please remember that an
index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 26 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Ohio Insured Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $12.26 on
February 29, 1996, from $11.90 on May 1, 1995, the date the fund began offering
these shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.94%, based on an annualization of the current monthly dividend of
5.1 cents ($0.051) per share and the offering price of $12.38 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Ohio state personal income tax bracket of 44.1%, you would have to
earn 8.84% from a taxable investment of similar quality to match your fund's
tax-free distribution rate.
Franklin Ohio Insured Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.7 cents
June 5.1 cents
July 5.1 cents
August 5.1 cents
September 5.1 cents
October 5.1 cents
November 5.1 cents
December 5.1 cents
January 5.1 cents
February 5.1 cents
Total 49.6 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Ohio Insured Tax-Free Income Fund had
been applied to this index, the index's performance would have been lower. In
addition, the index consists of uninsured municipal bonds from across the
country, while your fund consists primarily of insured Ohio municipal bonds.
Please remember that an index is simply a measure of performance, and one cannot
invest in an index directly. Past performance is not predictive of future
results.
GRAPHIC MATERIAL 28 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Ohio Insured Tax-Free Income Fund
Periods ended February 29, 1996
Since
Inception
Class II Shares
1-Year 5-Year 10-Year (5/1/95)
Cumulative Total Return1
Class I 8.66% 45.31% 105.74%
Class II -- -- -- 7.43%
Average Annual Total Return2
Class I 4.03% 6.83% 7.02%
Aggregate Total Return2
Class II -- -- -- 5.37%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I 5.36% Class I 9.59%
Class II 4.94% Class II 8.84%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.28% Class I 7.66%
Class II 3.85% Class II 6.89%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See note below.
3. Class I shares distribution rate is based on an annualization of the current
5.7 cent per share monthly dividend and the maximum offering price of $12.76 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 5.1 cent per share monthly dividend and the
offering price of $12.38 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Ohio state 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount Franklin Arizona Insured Tax-Free Income Fund (Note 1)
Long Term Investments 97.4%
Arizona State Power Authority, Power Resources Revenue, Refunding, Hoover Uprating Project,
MBIA Insured,
<C> <C> <C>
$ 900,000 5.375%, 10/01/13 ............................................................................. $ 898,433
100,000 5.25%, 10/01/17 .............................................................................. 97,723
1,000,000 Arizona State University Revenues, Refunding, Series A, MBIA Insured, 5.50%, 07/01/19 ........... 993,410
750,000 Arizona State Waste Water Management Authority, Waste Water Treatment Financial Assistance Revenue,
AMBAC Insured, 5.75%, 07/01/15 ................................................................. 766,845
400,000 Casa Grande Excise Tax Revenue, FGIC Insured, 6.00%, 04/01/10 ................................... 420,048
525,000 Douglas Municipal Property Corp., Municipal Facilities Excise Tax Revenue, MBIA Insured, 5.75%,
07/01/15 ....................................................................................... 535,600
100,000 Flagstaff Street & Highway User Revenue, Junior Lien, FGIC Insured, 5.90%, 07/01/10 ............. 107,418
1,000,000 Gilbert GO, Projects of 1988, Series C, MBIA Insured, 5.50%, 07/01/23 ........................... 988,760
1,000,000 Maricopa County GO, USD No. 69, Paradise Valley, Project of 1994, Series B, MBIA Insured, 5.25%,
07/01/15 ....................................................................................... 975,040
500,000 Maricopa County, IDA, Health Facilities Revenue, Refunding, Evangelist Lutheran Samaritan Project,
AMBAC Insured, 5.35%, 12/01/18 ................................................................. 485,865
700,000 Maricopa County School District No. 3, Tempe Elementary, Refunding, AMBAC Insured, 6.00%, 07/01/13 728,336
700,000 Maricopa County School District No. 11, Peoria Unified, Refunding, AMBAC Insured, 6.10%, 07/01/10 750,057
570,000 Maricopa County School District No. 31, Series A, AMBAC Insured, 6.20%, 07/01/13 ................ 599,543
175,000 Maricopa County School District No. 41, Series A, FGIC Insured, Pre-Refunded, 5.40%, 07/01/13 ... 187,815
Maricopa County School District No. 68, Alhambra Elementary, Refunding & Improvement,
AMBAC Insured,
500,000 5.125%, 07/01/13 ............................................................................. 481,345
100,000 5.625%, 07/01/13 ............................................................................. 104,549
Maricopa County School District No. 98, Fountain Hills,
500,000 AMBAC Insured, 5.75%, 07/01/12 ............................................................... 512,080
235,000 MBIA Insured, 6.20%, 07/01/10 ................................................................ 252,552
500,000 Maricopa County UHSD No. 216, 1988 Project, FGIC Insured, 5.30%, 07/01/11 ....................... 502,725
700,000 Maricopa County USD No. 80, Chandler, Refunding, FGIC Insured, 5.85%, 07/01/13 .................. 718,480
400,000 Maricopa County USD No. 95, Queens Creek, Series A, AMBAC Insured, 5.70%, 07/01/14 .............. 404,620
100,000 Mesa GO, Refunding, MBIA Insured, 5.00%, 07/01/03 ............................................... 103,651
610,000 Mohave County Hospital District No. 1, Refunding, Kingman Regional Medical Center Project,
FGIC Insured, 6.50%, 06/01/15 .................................................................. 649,449
Navajo County PCR, Refunding, Arizona Public Services Co., Series A,
2,785,000 AMBAC Insured, 5.50%, 08/15/28 ............................................................... 2,747,542
1,500,000 MBIA Insured, 5.875%, 08/15/28 ............................................................... 1,514,535
100,000 Northern Arizona University Revenues, Refunding, Series A, AMBAC Insured, 5.75%, 06/01/07 ....... 105,005
100,000 Peoria GO, Projects of 1990, AMBAC Insured, 6.25%, 07/01/12 ..................................... 105,370
1,000,000 Phoenix Civic Improvement Corp., Municipal Facilities Excise Tax Revenue, MBIA Insured, 6.90%,
07/01/21 ....................................................................................... 1,104,400
800,000 Phoenix Civic Improvement Corp., Waste Water Systems Lease Revenue, Refunding, MBIA Insured,
5.00%, 07/01/18 ................................................................................ 745,952
Phoenix Civic Improvement Corp., Water Systems Revenue, Junior Lien,
500,000 AMBAC Insured, 5.50%, 07/01/21 ............................................................... 492,565
1,000,000 FGIC Insured, 5.50%, 07/01/24 ................................................................ 980,220
110,000 Phoenix GO, Refunding, Series B, MBIA Insured, 5.50%, 07/01/16 .................................. 108,929
925,000 Pima County IDA, SFMR, GNMA Secured, 6.625%, 11/01/14 ........................................... 961,260
300,000 Pima County USD No. 1, Tucson Project, Series E, FGIC Insured, 5.40%, 07/01/13 .................. 297,312
100,000 Pima County USD No. 6, Marana School, Series A, FGIC Insured, 5.75%, 07/01/12 ................... 102,308
Puerto Rico Commonwealth GO,
845,000 MBIA Insured, 6.45%, 07/01/17 ................................................................ 911,307
300,000 Refunding, MBIA Insured, 5.25%, 07/01/18 ..................................................... 293,796
800,000 Puerto Rico Electric Power Authority Revenue, Series R, FSA Insured, 6.25%, 07/01/17 ............ 839,016
$ 840,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities, Financing
Authority Hospital Revenue, Hospital Auxilio Mutuo, Series A, MBIA Insured, 6.25%, 07/01/24 .... $ 883,084
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
1,500,000 Refunding, Series D, 5.50%, 01/01/25 ......................................................... 1,459,710
1,500,000 Refunding, Series D, FGIC Insured, 6.25%, 01/01/27 ........................................... 1,571,565
1,000,000 Series C, 5.50%, 01/01/28 .................................................................... 972,120
120,000 Series C, MBIA Insured, 5.75%, 01/01/20 ...................................................... 120,031
250,000 Santa Cruz County USD, No. 1, Nogales, Series B, AMBAC Insured, Pre-Refunded, 6.10%, 07/01/14 ... 277,490
360,000 Sierra Vista Municipal Property Corp. Facilities Revenue, AMBAC Insured, 6.15%, 01/01/15 ........ 377,863
375,000 Tucson Airport, Inc., Authority Revenue, Refunding, MBIA Insured, 5.70%, 06/01/13 ............... 383,610
Tucson GO,
520,000 Series A, MBIA Insured, 5.375%, 07/01/19 ..................................................... 503,506
650,000 Series G, 1984, FGIC Insured, 6.25%, 07/01/18 ................................................ 690,755
100,000 Tucson Water Revenue, Refunding, Series A, FGIC Insured, 5.75%, 07/01/18 ........................ 101,442
University of Arizona COP, Administrative & Packaging Facility, MBIA Insured,
500,000 6.00%, 07/15/16 .............................................................................. 520,305
1,625,000 6.00%, 07/15/23 .............................................................................. 1,704,089
1,000,000 University of Arizona COP, Residence Life Project, Series A, CGIC Insured, 5.80%, 09/01/13 ...... 1,027,670
1,050,000 bUniversity of Arizona Medical Center Corp., Hospital Revenue, Refunding, MBIA Insured, 5.00%, 07/01/21 973,214
200,000 Yavapai County Community College District, Refunding, FGIC Insured, 5.40%, 07/01/10 ............. 203,648
250,000 Yavapai County Elementary School District No. 6, Cottonwood-Oak Creek, 1993 Project, AMBAC Insured,
Series B, 6.70%, 07/01/09 ...................................................................... 278,470
775,000 Yavapai County Elementary School District No. 028, Refunding, Camp Verde, FGIC Insured, 6.00%,
07/01/09 ....................................................................................... 830,374
300,000 Yavapai County USD No. 22, Humboldt, Series A, FGIC Insured, 5.95%, 07/01/14 .................... 310,725
425,000 Yuma and La Paz Counties Community College District, Refunding, Arizona Western College,
AMBAC Insured, 5.40%, 07/01/10 ................................................................. 429,305
-----------------
Total Long Term Investments (Cost $35,771,970) ........................................... 37,192,837
-----------------
cShort Term Investments 3.1%
400,000 Maricopa County, IDA, Hospital Facility Revenue, Samaritan Health Service Hospital, Series B2, MBIA Insured,
Daily VRDN and Put, 3.45% 12/01/08 ............................................................. 400,000
800,000 Phoenix GO, Series 95-2, Daily VRDN and Put, 3.25%, 06/01/20 .................................... 800,000
-----------------
Total Short Term Investments (Cost $1,200,000) ............................................ 1,200,000
-----------------
Total Investments (Cost $36,971,970) 100.5% .......................................... 38,392,837
Liabilities in Excess of Other Assets (.5)% .......................................... (194,041)
-----------------
Net Assets 100.0% .................................................................... $38,198,796
=================
At February 29,1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $36,971,970 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................. $ 1,484,878
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................. (64,011)
----------------
Net unrealized appreciation ................................................................... $ 1,420,867
================
</TABLE>
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
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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).
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount Franklin Florida Insured Tax-Free Income Fund (Note 1)
Long Term Investments 100.9%....................................................................
<C> <C> <C>
$ 500,000 Alachua County Public Improvement Revenue, Refunding, FSA Insured, 5.375%, 08/01/17 ............. $ 486,645
500,000 Alachua Utilities Revenue, Refunding, AMBAC Insured, 5.75%, 04/01/20 ............................ 505,605
100,000 Apopka Utility System Revenue, Refunding, FGIC Insured, 6.00% 12/01/13 .......................... 103,228
2,435,000 Citrus County PCR, Refunding, Florida Power Co., MBIA Insured, 6.625%, 01/01/27 ................. 2,652,250
1,000,000 Clay County Utilities System Revenue, Series B, FGIC Insured, 5.25%, 11/01/13 ................... 973,000
1,200,000 Cocoa Beach Improvement Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/20 ...................... 1,168,104
1,590,000 Florida HFA, Landings Boot Ranch, Series K, AMBAC Insured, 6.00%, 11/01/25 ...................... 1,581,112
1,000,000 Florida State Board of Education GO, Capital Outlay, Series E, MBIA Insured, 5.80%, 06/01/24 .... 1,019,950
1,000,000 Florida State Correctional Privatization Community COP, Correctional Facilities, Bay County, MBIA Insured,
6.00%, 08/01/15 ................................................................................ 1,037,550
1,000,000 Gainesville Public Improvements, Guaranteed, Refunding, AMBAC Insured, 5.50%, 08/01/17 .......... 994,960
2,000,000 Hernando County Water and Sewer Revenue, Refunding & Improvement, FGIC Insured, 6.00%, 06/01/19 . 2,065,320
1,500,000 Hillsborough County IDA, IDR, University Community Hospital, MBIA Insured, 5.80%, 08/15/24 ...... 1,526,970
1,500,000 Hillsborough County IDA, PCR, Refunding, Tampa Electric Co. Project, MBIA Insured, 6.25%, 12/01/34 1,598,940
2,000,000 Hillsborough County, Port District Special Reference Revenue, Refunding, Tampa Port Authority,
FSA Insured, 6.00%, 06/01/20 ................................................................... 2,062,480
1,000,000 Jacksonville Sales Tax Revenue, River City Renaissance Project, FGIC Insured, 5.375%, 10/01/18 .. 978,840
1,000,000 Jacksonville Water & Sewer Revenue, United Water Project, AMBAC Insured, 6.35%, 08/01/25 ........ 1,060,790
1,100,000 Kissimmee Utility Authority Electric System Revenue, Refunding & Improvement, FGIC Insured, 5.50%,
10/01/15 ....................................................................................... 1,094,731
1,415,000 Lake Clarke Shores, Utility Systems Revenue, Refunding & Improvement, FGIC Insured, 5.80%, 10/01/18 1,452,045
1,275,000 Lake Mary Public Improvement Revenue, FGIC Insured, 5.25%, 09/01/15 ............................. 1,216,643
2,490,000 bLakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding, MBIA Insured,
5.25%, 11/15/16 ................................................................................ 2,404,469
500,000 Lakeland Utility Tax Revenue, Refunding & Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 .. 521,035
3,290,000 Lee County Capital and Transportation Facilities Revenue, Refunding, Series A, MBIA Insured, 5.55%,
10/01/18 ....................................................................................... 3,292,238
2,000,000 Lee County Solid Waste Systems Revenue, MBIA Insured, 5.375%, 10/01/15 .......................... 1,926,100
500,000 Lee County Transportation Facilities Revenue, MBIA Insured, 5.75%, 10/01/27 ..................... 504,600
1,000,000 Martin County Consolidated Utilities Systems Revenue, Refunding & Improvement, FGIC Insured, 6.00%,
10/01/24 ....................................................................................... 1,038,000
1,000,000 Martin County Improvement Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/14 .................... 1,046,160
Martin County Water and Waste Water System Revenue, FGIC Insured,
500,000 Martin Downs System, 5.625%, 10/01/13 ........................................................ 504,110
900,000 Refunding, Series A, 5.70%, 10/01/23 ......................................................... 903,240
2,000,000 Miramar Waste Water Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25 ............... 2,217,680
1,000,000 Okeechobee Utility Systems Authority Revenue, Acquisition and Improvement, Refunding, MBIA Insured,
5.60%, 10/01/25 ................................................................................ 1,000,790
1,300,000 Orange County Capital Improvement Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/22 ............ 1,342,094
Orange County Health Facilities Authority Revenue,
2,400,000 Refunding, Orlando Regional Healthcare Hospital, Series A, MBIA Insured, 6.00%, 11/01/24 ..... 2,486,568
1,000,000 Sunbelt Adventist Health, Series B, CGIC Insured, 6.75%, 11/15/21 ............................ 1,090,380
1,000,000 Orange County Public Services Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ........................ 1,040,590
Orange County Sales Tax Revenue, FGIC Insured,
500,000 6.125%, 01/01/19 ............................................................................. 516,095
1,000,000 5.375%, 01/01/24 ............................................................................. 956,170
1,000,000 Orlando Utilities Commission, Water and Electric Revenue, Series A, MBIA Insured, 5.50%, 10/01/26 982,520
1,900,000 Osceola County School Board COP, Series A, AMBAC Insured, 6.00%, 06/01/19 ....................... 1,970,414
1,225,000 Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured, 6.10%, 04/01/17 ... 1,278,814
1,000,000 Palm Beach County, Criminal Justice Facilities Revenue, FGIC Insured, 6.00%, 06/01/15 ........... 1,041,030
1,250,000 Pinellas County Sewer Revenue, FGIC Insured, 6.00%, 10/01/24 .................................... 1,294,788
4,000,000 Port Orange Water and Sewer Revenue, Refunding, Junior Lien, AMBAC Insured, 5.25%, 10/01/21 ..... 3,815,920
1,000,000 Puerto Rico Commonwealth GO, FSA Insured, 6.00%, 07/01/22 ....................................... 1,028,900
$ 1,000,000 Puerto Rico Electric Power Authority Revenue, Series P, CGIC Insured, Pre-Refunded, 7.00%, 07/01/21 $ 1,153,440
Sarasota County Utility System Revenue, FGIC Insured,
500,000 6.50%, 10/01/14 .............................................................................. 557,180
100,000 Refunding, 5.50%, 10/01/22 ................................................................... 98,757
500,000 Sarasota-Manatee Airport Authority Revenue, Refunding, MBIA Insured, 5.625%, 08/01/14 ........... 504,875
555,000 Sebring Water and Waste Water Revenue, AMBAC Insured, 5.50%, 01/01/23 ........................... 548,051
Seminole County School Board COP, Series A, MBIA Insured,
1,000,000 6.125%, 07/01/14 ............................................................................. 1,055,080
1,000,000 6.125%, 07/01/19 ............................................................................. 1,051,040
1,000,000 St. Lucie County Utilities System Revenue, Refunding, FGIC Insured, ETM, 5.50%, 10/01/15 ........ 1,018,010
410,000 St. Petersburg Beach GO, AMBAC Insured, 5.25%, 10/01/13 ......................................... 398,975
Stuart Utilities Revenue, FGIC Insured,
500,000 6.70%, 10/01/14 .............................................................................. 553,675
500,000 6.80%, 10/01/24 .............................................................................. 556,795
490,000 Titusville, Water and Sewer Revenue, MBIA Insured, 6.20%, 10/01/14 .............................. 522,458
200,000 University of Florida, University Housing Revenues, MBIA Insured, 5.50%, 07/01/23 ............... 197,476
1,250,000 Vero Beach Electric Revenue, Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 ................ 1,215,100
1,000,000 Volusia County Health Facilities Authority Revenue, Hospital Facilities, Memorial Health, Refunding &
Improvement, AMBAC Insured, 5.75%, 11/15/20 .................................................... 1,008,640
500,000 West Melbourne Water and Sewer Revenue, Refunding & Improvement, FGIC Insured, 6.75%, 10/01/14 .. 568,520
1,500,000 West Palm Beach Utility Systems Revenue, Series B, FGIC Insured, 5.40%, 10/01/23 ................ 1,460,085
----------------
Total Long Term Investments (Cost $68,177,035) ............................................ 70,250,024
----------------
cShort Term Investments .3%
200,000 Hillsborough County, IDA, PCR, Refunding, Tampa Electric Co. Project, Daily VRDN and Put, 3.35%,
05/15/18 (Cost $200,000) ....................................................................... 200,000
----------------
Total Investments (Cost $68,377,035) 101.2% .......................................... 70,450,024
Liabilities in Excess of Other Assets (1.2)% ......................................... (866,671)
----------------
Net Assets 100.0% .................................................................... $69,583,353
================
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $68,377,035 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................. $ 2,476,081
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (403,092)
----------------
Net unrealized appreciation ................................................................... $ 2,072,989
================
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
ETM - Escrow to Maturity
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
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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).
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount Franklin Insured Tax-Free Income Fund (Note 1)
Long Term Investments 100.4%.................................................................
Alabama 2.0%
Alabama HFA, SFMR,
<C> <C> <C>
$ 4,600,000 HMR Program, Series A-1, GNMA Secured, 7.80%, 10/01/20 ................................... $ 4,806,172
1,340,000 Series 1986-A, MBIA Insured, 7.125%, 10/01/14 ............................................ 1,373,487
1,000,000 Alabama State Board Educational Revenue, Southern Union State Junior College, MBIA Insured,
6.50%, 07/01/12 ............................................................................. 1,082,520
Alabama Water Pollution Control Authority, Revolving Fund Loan, AMBAC Insured,
100,000 6.25%, 08/15/14 .......................................................................... 103,911
2,000,000 Series A, 5.60%, 08/15/16 ................................................................ 2,005,240
1,655,000 Auburn Governmental Utility Services Corp., Waste Water Revenue, Merscot-Auburn L.P.,
FGIC Insured, 7.30%, 01/01/12 ............................................................... 1,788,261
Daphne Utilities Board, Water, Gas and Sewer Revenue, FGIC Insured,
4,030,000 Refunding, Series 1990-B, 7.30%, 06/01/10 ................................................ 4,412,608
2,000,000 Series B, Capital Improvement Bonds, 7.35%, 06/01/20 ..................................... 2,173,700
1,100,000 Druit Community Hospital Health Care Authority, Facilities Revenue, MBIA Insured, Pre-Refunded,
7.875%, 06/01/07 ............................................................................ 1,178,133
2,285,000 Houston County Health Care Authority, Hospital Revenue, Refunding, Alabama Medical Center,
MBIA Insured, 5.50%, 10/01/19 ............................................................... 2,220,243
300,000 Huntsville Health Care Facilities Authority Revenue, Series A, MBIA Insured, 6.375%, 06/01/22 315,228
1,500,000 Marshall County Limited Obligation, AMBAC Insured, Pre-Refunded, 7.00%, 02/01/12 ............. 1,698,105
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 ................................................ 548,580
1,960,000 Phenix City GO, Refunding, AMBAC Insured, 5.75%, 03/01/13 .................................... 1,993,849
4,000,000 University of Alabama, University Hospital Revenues, Refunding, Huntsville, Series A, MBIA Insured,
5.50%, 05/01/18 ............................................................................. 3,944,240
5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant Co., Series C, MBIA Insured,
6.05%, 05/01/23 ............................................................................. 5,083,750
----------------
34,728,027
----------------
Alaska 4.2%
Alaska Energy Authority Power Revenue, Bradley Lake Hydro Project,
5,795,000 MBIA Insured, 7.25%, 07/01/21 ............................................................ 6,346,510
5,000,000 Series 1, BIG Insured, 7.25%, 07/01/09 ................................................... 5,442,450
4,765,000 Series 1, BIG Insured, 7.25%, 07/01/16 ................................................... 5,157,636
3,205,000 Series 1, BIG Insured, 6.25%, 07/01/21 ................................................... 3,273,843
18,500,000 Alaska Energy Utilities Revenue, City and Boro of Sitka, Refunding, CGIC Insured, 6.75%, 07/01/20 20,053,815
6,000,000 Alaska State HFC, Refunding, Series A, MBIA Insured, 5.875%, 12/01/30 ........................ 5,864,700
5,000,000 Anchorage Electric Utility Revenue, Refunding, Senior Lien, Series A, MBIA Insured, 7.125%,
06/01/06 .................................................................................... 5,498,300
Anchorage GO,
2,765,000 General Purpose, AMBAC Insured, Pre-Refunded, 7.30%, 08/01/10 ............................ 3,100,422
5,000,000 Refunding, AMBAC Insured, 7.20%, 06/01/17 ................................................ 5,440,700
3,505,000 Refunding, AMBAC Insured, 6.25%, 06/01/23 ................................................ 3,606,750
350,000 Series A, FGIC Insured, Pre-Refunded, 7.75%, 05/01/06 .................................... 359,440
5,100,000 Anchorage Water Revenue, Refunding, Senior Lien, MBIA Insured, 7.25%, 08/01/14 ............... 5,484,642
1,035,000 Ketchikan GO, AMBAC Insured, 5.50%, 11/15/13 ................................................. 1,019,951
500,000 University of Alaska COP, Series 1990, CGIC Insured, 7.375%, 10/01/07 ........................ 556,820
250,000 University of Alaska Revenues, Series B, AMBAC Insured, 6.50%, 10/01/17 ...................... 262,495
----------------
71,468,474
----------------
Arizona 3.1%
Arizona State Municipal Financing Program, COP, BIG Insured,
$ 2,250,000 Phoenix Water, Series 10, Pre-Refunded, 7.90%, 08/01/17 .................................. $ 2,407,545
6,000,000 Series 1986-20, ETM 08/01/07, 7.70%, 08/01/10 ............................................ 7,267,440
10,000,000 Series 1986-26, 7.70%, 08/01/05 .......................................................... 10,827,700
2,200,000 Chandler Water and Sewer Revenue, Refunding, FGIC Insured, 7.00%, 07/01/12 ................... 2,414,676
Cochise County USD No. 68, Sierra Vista, FGIC Insured,
500,000 Refunding, 7.50%, 07/01/10 ............................................................... 614,505
3,000,000 Series B, Pre-Refunded, 7.625%, 07/01/10 ................................................. 3,433,470
300,000 Maricopa County IDA, Hospital Facility Revenue, Samaritan Health Services, Series A, Refunding,
MBIA Insured, 7.00%, 12/01/16 ............................................................... 361,533
Maricopa County USD No. 80, Chandler, FGIC Insured, Pre-Refunded,
775,000 7.20%, 07/01/07 .......................................................................... 874,076
825,000 7.20%, 07/01/08 .......................................................................... 930,468
500,000 7.25%, 07/01/09 .......................................................................... 564,900
1,000,000 Maricopa County USD No. 98, Fountain Hills, Series A, FGIC Insured, Pre-Refunded, 7.10%,
07/01/10 .................................................................................... 1,105,880
1,000,000 Maricopa UHSD No. 216, Refunding & Improvement, FGIC Insured, 6.70%, 07/01/11 ................ 1,108,240
1,000,000 Mesa IDA, Health Care Facilities Revenue, Refunding, Western Health Network, Inc., Series B-2,
BIG Insured, 7.50%, 01/01/08 ................................................................ 1,086,760
500,000 Mohave County USD No. 1, Lake Havasu Project, Series 1991-B, AMBAC Insured, 5.375%,
07/01/11 .................................................................................... 504,150
2,700,000 Phoenix Civic Improvement Corp., Waste Water Systems Lease Revenue, Refunding, MBIA Insured,
5.00%, 07/01/18 ............................................................................. 2,517,588
890,000 Phoenix GO, Refunding, Series B, MBIA Insured, 5.50%, 07/01/16 ............................... 881,331
Pima County Sewer Revenue, FGIC Insured,
270,000 6.75%, 07/01/15 .......................................................................... 296,276
230,000 Pre-Refunded, 6.75%, 07/01/15 ............................................................ 258,952
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
1,150,000 Refunding, Series A, FGIC Insured, 5.50%, 01/01/19 ....................................... 1,139,570
10,000,000 Refunding, Series C, MBIA Insured, 5.00%, 01/01/13 ....................................... 9,518,200
300,000 Series A, MBIA Insured, 6.50%, 01/01/22 .................................................. 317,367
5,000,000 Tucson Local Development Corp., Leasehold Revenue, Series F, FGIC Insured, Pre-Refunded, 7.30%,
07/01/10 .................................................................................... 5,412,150
----------------
53,842,777
----------------
Arkansas .3%
Arkansas State Development Finance Authority Water Revenue, Series A, MBIA Insured,
1,400,000 Pre-Refunded, 7.00%, 06/01/14 ............................................................ 1,586,704
2,000,000 Refunding, 6.50%, 07/01/10 ............................................................... 2,215,160
25,000 Pulaski County Health Facilities Board, Hospital Revenue, St. Vincent's Infirmary, MBIA Insured,
Pre-Refunded, 10.00%, 09/01/12 .............................................................. 29,750
500,000 Saline County Hospital Revenue, Connie Lee Insured, 6.00%, 09/01/19 .......................... 512,935
----------------
4,344,549
----------------
California 2.6%
3,750,000 California State Public Works, Board Lease Revenue, University of California Projects, Series A,
AMBAC Insured, 6.40%, 12/01/16 .............................................................. 4,044,600
2,000,000 Concord RDA, Tax Allocation, Central Concord Redevelopment Project, Refunding, Senior Lien,
AMBAC Insured, 5.25%, 07/01/19 .............................................................. 1,896,840
15,000,000 eCorona COP, Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/20 ............... 20,827,200
1,515,000 Lancaster RDA, Refunding, Residential Redevelopment, MBIA Insured, 6.10%, 08/01/19 ........... 1,558,541
Los Angeles Department of Water and Power, Electric Plant Revenue, FGIC Insured,
$ 2,500,000 5.375%, 02/15/34 ......................................................................... $ 2,355,825
2,200,000 Crossover Refunding, Second Issue, 5.25%, 11/15/26 ....................................... 2,057,044
2,535,000 Northern California Public Power Agency Revenue, Refunding, Hydroelectric Project No. 1, Series A,
MBIA Insured, 5.50%, 07/01/23 ............................................................... 2,464,958
250,000 Oakland RDA, Refunding, Central District Redevelopment, AMBAC Insured, 5.50% 02/01/14 ........ 252,830
1,000,000 San Diego Regional Building Authority, Lease Revenue, Refunding, San Miguel Fire Protection,
Series A, MBIA Insured, 5.65%, 01/01/20 ..................................................... 1,003,350
1,000,000 Santee Public Financing Authority Revenue, Redevelopment, Refinancing, City Hall Project,
MBIA Insured, 5.45%, 02/01/14 ............................................................... 988,680
2,250,000 Stockton, East Water District, 1992 Project, Series A, AMBAC Insured, 6.40%, 04/01/22 ........ 2,409,705
4,630,000 Suisun-Solano Water Authority Revenue, Refunding, CGIC Insured, 5.55%, 05/01/17 .............. 4,629,583
----------------
44,489,156
----------------
Colorado 5.4%
3,500,000 Adams and Weld Counties GO, Brighton School District No. 27-J, MBIA Insured, 6.30%, 12/01/12 . 3,716,335
1,000,000 Arapahoe County Building Finance Corp., COP, CGIC Insured, 7.50%, 12/01/10 ................... 1,113,570
8,695,000 Arapahoe County COP, Refunding, CGIC Insured, 6.625%, 12/01/16 ............................... 9,488,593
1,500,000 Castle Pines Metropolitan District, Refunding & Improvement, Series 1990, CGIC Insured, 7.625%,
12/01/15 .................................................................................... 1,682,460
Colorado Health Facilities Authority Revenue,
2,500,000 Children's Hospital Association Project, MBIA Insured, 5.25%, 10/01/26 ................... 2,355,100
1,174,000 Community Provider Project, Series 1991-A, CGIC Insured, 7.25%, 07/15/17 ................. 1,283,992
1,750,000 Refunding, Sisters of Charity Health Care, Series A, AMBAC Insured, 6.00%, 05/15/22 ...... 1,789,760
3,000,000 Rose Medical Center, MBIA Insured, Pre-Refunded, 7.00%, 08/15/21 ......................... 3,429,060
Colorado Post Secondary Educational Facilities Authority Revenue, Connie Lee Insured,
1,000,000 6.625%, 06/01/13 ......................................................................... 1,057,410
1,000,000 Refunding, University of Denver Project, 6.00%, 03/01/10 ................................. 1,035,790
2,700,000 University of Denver Project, 6.25%, 03/01/12 ............................................ 2,827,251
2,700,000 University of Denver Project, 6.25%, 03/01/18 ............................................ 2,806,218
1,000,000 Colorado Springs Utilities Revenue, Refunding & Improvement, Series A, MBIA Insured, 5.125%,
11/15/18 .................................................................................... 947,910
Colorado State Board of Agriculture Revenue, University of Aux Facilities, Refunding & Improvement,
MBIA Insured,
800,000 6.40%, 03/01/11 .......................................................................... 855,584
1,000,000 6.40%, 03/01/17 .......................................................................... 1,058,900
2,000,000 Colorado Water Resources and Power Development Authority Revenue, Series A, FGIC Insured,
6.70%, 11/01/12 ............................................................................. 2,166,780
Denver City and County Airport Revenue, MBIA Insured,
4,940,000 Series A, 5.60%, 11/15/20 ................................................................ 4,842,435
4,000,000 Series B, 5.75%, 11/15/17 ................................................................ 3,931,480
1,500,000 Denver City and County Board, Water Commissioner, COP, FGIC Insured, 6.625%,11/15/11 ......... 1,623,705
3,000,000 Denver City and County Hospital Revenue, Children's Hospital Association Project, FGIC Insured,
6.00%, 10/01/15 ............................................................................. 3,099,030
2,000,000 Denver City and County Revenue, Mercy Medical Center Project, MBIA Insured, Pre-Refunded,
7.75%, 05/01/14 ............................................................................. 2,196,540
1,295,000 Denver City and County SFMR, GNMA Secured, Series A, 8.125%, 12/01/20 ........................ 1,347,927
2,000,000 Douglas County School District No. 1, Douglas and Elbert Counties COP, Series D, FGIC Insured,
6.80%, 12/01/11 ............................................................................. 2,197,780
910,000 El Paso County SFMR, Series 1990-A, GNMA Secured, 8.00%, 09/01/22 ............................ 957,811
3,600,000 Garfield, Pitkin and Eagle Counties, Reorganized School District No. 1, MBIA Insured, Pre-Refunded,
6.60%, 12/15/14 ............................................................................. 4,115,376
$ 2,000,000 Goldsmith Metropolitan District, Refunding, MBIA Insured, 6.125%, 12/01/12 ................... $ 2,088,820
1,000,000 Havana Water and Sanitary District Sewer Revenue, CGIC Insured, Pre-Refunded, 7.375%, 09/15/14 1,088,680
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 .................................... 2,088,460
Jefferson County COP, MBIA Insured,
2,000,000 Pre-Refunded, 7.125%, 12/01/10 ........................................................... 2,294,620
5,000,000 Refunding, 6.65%, 12/01/08 ............................................................... 5,492,950
5,000,000 Jefferson County School District No. R-1, AMBAC Insured, 6.25%, 12/15/12 ..................... 5,293,300
450,000 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ................... 484,164
3,000,000 La Plata County School District No. R-9, Durango City, FGIC Insured, 6.55%, 11/01/12 ......... 3,249,960
1,000,000 Morgan County PCR, Refunding, First Mortgage, Public Service Co., Series A, MBIA Insured, 5.50%,
06/01/12 .................................................................................... 1,001,210
1,600,000 Parker Water and Sanitation District, Water and Sewer Revenue, Refunding, FGIC Insured, 6.20%,
10/01/15 .................................................................................... 1,677,408
2,400,000 Pueblo School District No. 60, Project A, COP, MBIA Insured, Pre-Refunded, 7.25%, 12/01/09 ... 2,679,984
2,500,000 Regional Transportation District, Sales Tax Revenue, Refunding & Improvement, FGIC Insured,
6.25%, 11/01/12 ............................................................................. 2,641,975
----------------
92,008,328
----------------
Connecticut .6%
Connecticut Health and Educational Facilities Authority Revenue,
2,000,000 Danbury Hospital, Series E, MBIA Insured, 6.50%, 07/01/14 ................................ 2,164,360
1,000,000 Day Kimball Hospital, Series A, FSA Insured, 5.375%, 07/01/26 ............................ 968,680
2,000,000 Trinity College, Series D, FGIC Insured, 6.125%, 07/01/24 ................................ 2,095,660
2,900,000 Yale-New Haven Hospital, Issue I, MBIA Insured, 7.10%, 07/01/25 .......................... 3,197,337
2,000,000 New Haven Air Rights Parking Facility Revenue, Refunding, MBIA Insured, 6.50%, 12/01/15 ...... 2,173,800
----------------
10,599,837
----------------
Delaware .3%
1,000,000 Delaware State EDA, PCR, Refunding, Series B, AMBAC Insured, 6.75%, 05/01/19 ................. 1,083,120
2,900,000 Delaware State Health Facilities Authority Revenue, Refunding, Medical Center, MBIA Insured,
7.00%, 10/01/15 ............................................................................. 3,132,087
250,000 Delaware Transportation Authority System Revenue, MBIA Insured, Pre-Refunded, 7.75%, 07/01/08 275,165
----------------
4,490,372
----------------
District of Columbia .2%
910,000 District of Columbia HFA, RMR, Series 1986-1, FGIC Insured, 7.75%, 09/01/16 .................. 942,132
2,000,000 District of Columbia Revenue, Howard University, Series A, MBIA Insured, 8.00%, 10/01/17 ..... 2,154,060
----------------
3,096,192
----------------
Florida 5.0%
1,800,000 Cape Coral, Franchise Fees Revenue, AMBAC Insured, 5.40%, 12/01/13 ........................... 1,781,604
2,750,000 Dade County Health Facilities Authority, Hospital Revenue, Mt. Sinai Medical Center Project,
CGIC Insured, Pre-Refunded, 8.40%, 12/01/17 ................................................. 3,022,003
200,000 Dade County Seaport Revenue, Refunding, Series E, MBIA Insured, 8.00%, 10/01/08 .............. 251,836
15,000 Dade County, Series DD, MBIA Insured, 7.75%, 10/01/18 ........................................ 15,588
725,000 Florida HFA, SFMR, Series 1, FGIC Insured, 8.00%, 12/15/13 ................................... 749,512
2,000,000 Florida North Port Utility Revenue, FGIC Insured, 6.20%, 10/01/12 ............................ 2,119,780
13,500,000 bFlorida State Board of Education, Capital Outlay, Public Education, Series 1994-C, MBIA Insured,
5.60%, 06/01/20 ............................................................................. 13,498,650
200,000 Florida State Municipal Power Agency Revenue, Refunding, Stanton Project, MBIA Insured, 6.00%,
10/01/15 .................................................................................... 205,074
Florida Turnpike Authority Revenue, Series A,
$ 3,000,000 AMBAC Insured, Pre-Refunded, 7.20%, 07/01/11 ............................................. $ 3,465,300
710,000 FGIC Insured, 6.35%, 07/01/22 ............................................................ 753,360
1,290,000 FGIC Insured, Pre-Refunded, 6.35%, 07/01/22 .............................................. 1,440,995
25,000 Fort Myers Utility Revenue, Refunding, Series A, BIG Insured, 6.00%, 10/01/19 ................ 25,464
1,000,000 Hillsborough County IDAR, PCR, Refunding, MBIA Insured, 6.25%, 12/01/34 ...................... 1,065,960
3,000,000 Hillsborough County IDAR, University Community Hospital, MBIA Insured, 5.80%, 08/15/24 ....... 3,053,940
3,865,000 Hillsborough County Port District, Special Revenue, Refunding, FSA Insured, 6.00%, 06/01/20 .. 3,985,743
2,000,000 bLakeland Hospital System Revenue, Refunding, Lakeland Regional Medical Center Project, Series B,
MBIA Insured, 5.25%, 11/15/25 ............................................................... 1,888,040
2,000,000 Lee County Solid Waste Systems Revenue, MBIA Insured, 5.375%, 10/01/15 ....................... 1,926,100
100,000 Miami, Refunding, MBIA Insured, Pre-Refunded, 7.40%, 04/01/05 ................................ 111,658
2,800,000 Naples Hospital Revenue, Refunding, Naples Community Hospital, Inc. Project, MBIA Insured,
5.25%, 10/01/09 ............................................................................. 2,806,132
1,000,000 Opa-Locka Capital Improvement Revenue, Refunding, FGIC Insured, 6.125%, 01/01/24 ............. 1,045,300
960,000 Orange City Utilities System Revenue, Refunding & Improvement, AMBAC Insured, Pre-Refunded,
7.20%, 10/01/17 ............................................................................. 1,057,901
100,000 Orange County Capital Improvement Revenue, Series B, MBIA Insured, Pre-Refunded, 7.70%,
10/01/18 .................................................................................... 111,282
1,000,000 Orange County Health Facilities Authority, Hospital Revenue, Orlando Regional Health Care,
Series A, Refunding, MBIA Insured, 6.00%, 11/01/24 .......................................... 1,036,070
15,000,000 Orange County Sales Tax Revenue, Series B, FGIC Insured, 5.375%, 01/01/24 .................... 14,342,550
Orlando and Orange County Expressway Authority Revenue, FGIC Insured,
100,000 Junior Lien, 6.50%, 07/01/10 ............................................................. 113,331
225,000 Junior Lien, 6.50%, 07/01/12 ............................................................. 253,701
2,765,000 Refunding, Senior Lien, 5.25%, 07/01/23 .................................................. 2,633,856
1,000,000 Osceola School Board COP, Refunding, Series A, AMBAC Insured, 5.50%, 06/01/19 ................ 981,890
1,000,000 Osceola County Transportation Revenue, Parkway Project, MBIA Insured, 6.10%, 04/01/17 ........ 1,043,930
4,000,000 Palm Beach County Solid Waste Authority Revenue, BIG Insured, 8.375%, 07/01/10 ............... 4,332,880
1,000,000 Panama City Water and Sewer Revenue, Refunding & Improvement, AMBAC Insured, 5.625%,
06/01/19 .................................................................................... 1,002,180
1,000,000 Polk County IDAR, Winter Haven Hospital, Series 2, MBIA Insured, 6.25%, 09/01/15 ............. 1,064,750
Port Orange Water and Sewer Revenue, Refunding, Junior Lien, AMBAC Insured,
635,000 5.375%, 10/01/12 ......................................................................... 630,498
2,700,000 Refunding, 5.25%, 10/01/21 ............................................................... 2,575,746
3,500,000 Reedy Creek Improvement District, Utilities Revenue, Refunding, Series 1, MBIA Insured, 5.00%,
10/01/19 .................................................................................... 3,261,475
1,970,000 Royal Palm Beach Utilities System Revenue, Series B, AMBAC Insured, Pre-Refunded, 8.875%,
10/15/15 .................................................................................... 2,168,300
2,010,000 Sarasota-Manatee Airport Authority Revenue, Refunding, MBIA Insured, 5.625%, 08/01/14 ........ 2,029,598
250,000 Sumter County School District Revenue, Multi-District Loan Program, CGIC Insured, 7.15%, 11/01/15 304,290
2,000,000 Tamarac Water and Sewer Utility Revenue, AMBAC Insured, Pre-Refunded, 8.25%, 10/01/11 ........ 2,095,420
1,200,000 Temple Terrace Water and Sewer Revenue, FGIC Insured, 6.25%, 10/01/12 ........................ 1,267,956
----------------
85,519,643
----------------
Georgia 1.4%
2,860,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded, 8.00%,
09/01/15 .................................................................................... 3,191,131
1,535,000 Brunswick Water and Sewer Revenue, Refunding & Improvement, MBIA Insured, 6.10%, 10/01/14 .... 1,663,710
Burke County Development Authority, PCR, Georgia Power Co., Vogtle Project, MBIA Insured,
2,800,000 bFirst Series, Senior Lien, Secured, 5.75%, 09/01/23 ..................................... 2,780,848
2,000,000 Seventh Series, 6.625%, 10/01/24 ......................................................... 2,138,540
$ 1,000,000 Cherokee County Water and Sewage Revenue, Refunding, MBIA Insured, 6.90%, 08/01/18 ........... $ 1,097,780
1,500,000 Columbia County Water and Sewage Revenue, Refunding, AMBAC Insured, 6.25%, 06/01/12 .......... 1,576,725
1,060,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A, MBIA Insured,
6.50%, 07/01/24 ............................................................................. 1,083,988
Fulton de Kalb Hospital Authority Revenue, COP,
200,000 Grady Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.90%, 01/01/15 ............ 225,670
2,000,000 Refunding, MBIA Insured, 5.50%, 01/01/20 ................................................. 1,948,040
5,000,000 Georgia Municipal Electric Authority, Power Revenue, Series EE, AMBAC Insured, 6.65%, 01/01/21 5,159,550
Marietta Development Authority Revenue, Life College,
1,000,000 CGIC Insured, Pre-Refunded, 7.20%, 12/01/09 .............................................. 1,125,400
1,085,000 Refunding, First Mortgage, Series A, FSA Insured, 5.80%, 09/01/19 ........................ 1,094,038
10,000 Metropolitan Atlanta Rapid Transit Authority, Sales Tax Revenue, Series J, FGIC Insured,
Pre-Refunded, 8.00%, 07/01/18 ............................................................... 11,096
----------------
23,096,516
----------------
Hawaii 1.2%
Hawaii County GO, Refunding & Improvement, Series A, FGIC Insured,
1,000,000 5.60%, 05/01/12 .......................................................................... 1,041,050
1,000,000 5.60%, 05/01/13 .......................................................................... 1,042,640
5,000,000 Hawaii State Airports System Revenue, Second Series, FGIC Insured, 7.50%, 07/01/20 ........... 5,585,600
Hawaii State Department of Budget and Finance, Special Purposes Mortgage Revenue,
3,000,000 Hawaii Electric Co., MBIA Insured, 6.55%, 12/01/22 ....................................... 3,228,990
335,000 Refunding, Queens Medical Center Project, FGIC Insured, 6.50%, 07/01/12 .................. 346,748
4,000,000 Refunding, St. Francis Medical Centers, CGIC Insured, 6.50%, 07/01/22 .................... 4,294,200
Hawaii State Harbor Capital Improvement Revenue, FGIC Insured,
535,000 6.40%, 07/01/05 .......................................................................... 583,562
605,000 6.40%, 07/01/06 .......................................................................... 659,916
610,000 6.40%, 07/01/07 .......................................................................... 660,179
820,000 Honolulu, City and County, MFHR, Hale Pauahi Project, Series A, FHA Mortgage Insured,
MBIA Insured, Pre-Refunded, 8.70%, 12/01/28 ................................................. 855,375
Kauai County GO, Refunding, MBIA Insured, Pre-Refunded,
385,000 7.40%, 08/01/06 .......................................................................... 417,017
415,000 7.45%, 08/01/07 .......................................................................... 449,985
445,000 7.45%, 08/01/08 .......................................................................... 482,514
----------------
19,647,776
----------------
Idaho .1%
1,000,000 Idaho State University at Boise Revenues, Student Fee, MBIA Insured, 6.50%, 04/01/19 ......... 1,109,510
----------------
Illinois 4.7%
40,000 Aurora, Series B, MBIA Insured, Pre-Refunded, 7.25%, 01/01/19 ................................ 43,791
575,000 Aurora SFMR, GNMA Secured, AMBAC Insured, 7.80%, 12/01/15 .................................... 595,200
270,000 Bloomingdale Waterworks and Sewer Revenue, MBIA Insured, 7.80%, 05/01/06 ..................... 276,947
1,350,000 Cary Waterworks and Sewerage Revenue, Series A, MBIA Insured, 6.40%, 05/01/17 ................ 1,403,312
100,000 Central Lake County Joint Action Water Agency, Interim Revenue, Series A, AMBAC Insured,
Pre-Refunded, 7.00%, 05/01/19 ............................................................... 112,046
320,000 Chicago Board of Education Lease, Series A, Refunding, MBIA Insured, 6.25%, 01/01/09 ......... 351,760
Chicago Central Public Library, Series B, AMBAC Insured,
1,800,000 6.70%, 01/01/06 .......................................................................... 2,007,216
1,800,000 6.75%, 01/01/07 .......................................................................... 2,006,856
100,000 Chicago Heights, MBIA Insured, Pre-Refunded, 7.40%, 12/01/03 ................................. 114,786
Chicago Public Building Commission Revenue, Community College District No. 508,
$ 1,600,000 Series A, MBIA Insured, ETM 01/01/04, 7.70%, 01/01/08 .................................... $ 1,732,672
4,000,000 Series B, BIG Insured, ETM 01/01/03, 8.75%, 01/01/07 ..................................... 4,234,280
100,000 Chicago Waste Water Transmission Revenue, AMBAC Insured, Pre-Refunded, 7.20%, 11/15/19 ....... 112,057
1,500,000 Cicero GO, CGIC Insured, 6.90%, 12/01/12 ..................................................... 1,656,345
Cook County Community College District No. 508, COP, FGIC Insured,
7,470,000 8.50%, 01/01/02 .......................................................................... 9,010,239
5,000,000 8.75%, 01/01/05 .......................................................................... 6,431,350
225,000 Cook County, Series B, FGIC Insured, 5.50%, 11/15/22 ......................................... 216,459
4,935,000 Decatur Hospital Revenue, Decatur Memorial Hospital, Series B, MBIA Insured, 6.85%, 10/01/16 . 5,291,702
750,000 Des Plains Hospital Facility Revenue, Refunding, Holy Family Hospital, AMBAC Insured, 9.25%,
01/01/14 .................................................................................... 767,790
2,000,000 Evergreen Park, Village of, Hospital Facility Revenue, Refunding, Little Co. of Mary Hospital, Inc.,
MBIA Insured, 7.75%, 02/15/09 ............................................................... 2,142,740
500,000 Franklin Park Alternate Revenue, AMBAC Insured, Pre-Refunded, 6.85%, 07/01/22 ................ 576,810
Illinois Health Facilities Authority Revenue,
4,452,000 Community Provider Pooled Loan Program, Series A, CGIC Insured, 7.35%, 08/15/10 .......... 5,033,654
63,000 Community Provider Pooled Loan Program, Series B, MBIA Insured, Pre-Refunded, 7.90%,
08/15/03 ................................................................................ 65,565
2,660,000 Methodist Health Services Corp., Series G, BIG Insured, 8.00%, 08/01/15 .................. 2,930,788
4,280,000 Michael Reese Hospital, Series A, CGIC Insured, ETM 02/15/00, 7.60%, 02/15/05 ............ 5,013,763
390,000 Refunding, Series B, MBIA Insured, ETM 08/15/01, 7.90%, 08/15/03 ......................... 464,377
47,000 Series 1990, CGIC Insured, 7.75%, 08/15/10 ............................................... 59,620
2,583,000 Series 1990, CGIC Insured, ETM 08/15/10, 7.75%, 08/15/10 ................................. 2,914,244
2,375,000 Series B, MBIA Insured, 7.90%, 08/15/03 .................................................. 2,459,978
1,000,000 Silver Cross Hospital, MBIA Insured, 7.00%, 08/15/21 ..................................... 1,080,660
7,000,000 University of Chicago Hospital Project, BIG Insured, Pre-Refunded, 8.10%, 08/01/14 ....... 7,560,700
5,750,000 Illinois State COP, CGIC Insured, 6.95%, 07/01/13 ............................................ 6,316,490
Joliet GO, Series 1987, BIG Insured, Pre-Refunded,
560,000 8.00%, 01/01/09 .......................................................................... 602,174
605,000 8.00%, 01/01/10 .......................................................................... 650,563
650,000 8.00%, 01/01/11 .......................................................................... 698,952
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 ....................... 219,534
300,000 Macon County and Decatur COP, Decatur Public Building Commission, FGIC Insured, 6.50%,
01/01/06 .................................................................................... 336,294
2,000,000 Onterie Center Project, HFC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 7.05%,
07/01/27 .................................................................................... 2,116,900
300,000 Regional Transportation Authority, Series A, AMBAC Insured, 7.20%, 11/01/20 .................. 359,166
2,040,000 Southwestern Development Authority, Capital Improvement Revenue, McKendre College Project,
CGIC Insured, 7.375%, 02/01/11 .............................................................. 2,172,151
----------------
80,139,931
----------------
Indiana 1.6%
1,000,000 Carroll County Consolidated School Building Corp., Refunding, First Mortgage, AMBAC Insured,
7.625%, 01/01/04 ............................................................................ 1,073,160
Fort Wayne Hospital Authority Revenue, Ancillary System, Inc.,
250,000 Parkview Memorial Hospital Project, Series A, FGIC Insured, 7.50%, 11/15/11 .............. 275,163
2,000,000 Refunding, Series C, BIG Insured, Pre-Refunded, 8.125%, 07/01/18 ......................... 2,268,680
Indiana Health Facility Financing Authority Hospital Revenue, MBIA Insured,
3,500,000 Community Hospitals of Indiana, Pre-Refunded, 7.00%, 07/01/21 ............................ 4,000,815
250,000 Refunding & Improvement, Community Hospital Project, 6.40%, 05/01/12 ..................... 263,260
$ 10,000,000 Indianapolis Airport Authority, International Airport Revenue, BIG Insured, 8.30%, 07/01/18 .. $ 10,922,300
500,000 Indianapolis Gas Utility Revenue, Refunding, Series B, FGIC Insured, 4.00%, 06/01/15 ......... 401,415
500,000 Jasper County PCR, Refunding, Northern Indiana Public Service, MBIA Insured, 7.10%, 07/01/17 . 541,985
6,000,000 Monroe County Hospital Authority Revenue, Refunding, Bloomington Hospital Project, BIG Insured,
7.125%, 05/01/11 ............................................................................ 6,343,140
1,500,000 Patoka Lake Regional Water and Sewer District, Waterworks Revenue, Series A, AMBAC Insured,
6.45%, 01/01/15 ............................................................................. 1,579,125
185,000 Rockport PCR, Refunding, Michigan Power Co., Series B, FGIC Insured, 7.60%, 03/01/16 ......... 208,896
----------------
27,877,939
----------------
Iowa .8%
4,040,000 Davenport Hospital Facility Revenue, Mercy Hospital Project, MBIA Insured, 6.625%, 07/01/14 .. 4,348,090
200,000 Davenport Hospital Revenue, St. Lukes Hospital, Series A, AMBAC Insured, 7.40%, 07/01/20 ..... 221,662
5,025,000 Des Moines Urban Renewal and Tax Increment Revenue, Refunding, FGIC Insured, 7.90%,
06/01/14 .................................................................................... 5,168,916
2,145,000 Greater Iowa Housing Assistance Corp., Mortgage Revenue, Refunding, Logan Park Project,
Series B, MBIA Insured, 6.50%, 01/01/24 ..................................................... 2,199,912
1,000,000 Iowa Finance Authority Revenue, Correctional Facility Program, Series A, AMBAC Insured, 5.50%,
06/15/15 .................................................................................... 1,004,230
----------------
12,942,810
----------------
Kansas .5%
3,350,000 Burlington PCR, Refunding, Kansas Gas & Electric Co. Project, MBIA Insured, 7.00%, 06/01/31 .. 3,753,005
1,415,000 Cowley and Shawnee Counties, SFMR, GNMA Secured, AMBAC Insured, 7.35%, 12/01/11 .............. 1,494,226
2,000,000 Wichita Hospital Revenue, Refunding & Improvement, St. Francis, MBIA Insured, 6.25%, 10/01/10 2,132,260
1,000,000 Wichita Water and Sewer Utility Revenue, Refunding & Improvement, Series B, FGIC Insured, 6.00%,
10/01/12 .................................................................................... 1,030,580
----------------
8,410,071
----------------
Kentucky 1.1%
2,000,000 Danville Multi-City Lease Revenue, Sewer and Drain System, MBIA Insured, Pre-Refunded, 6.75%,
03/01/11 .................................................................................... 2,270,220
1,000,000 Jefferson County Health Facilities Revenue, Jewish Hospital Services, Inc., AMBAC Insured, 6.55%,
05/01/22 .................................................................................... 1,068,840
Kentucky Economic Development Financing Authority,
2,000,000 Hospital Facilities Revenue, Baptist Healthcare System, Refunding, MBIA Insured, 5.00%,
08/15/24 ................................................................................ 1,814,380
2,375,000 Hospital Facilities Revenue, St. Elizabeth Medical Center Project, Series A, FGICInsured, 6.00%,
12/01/22 ................................................................................ 2,454,515
1,000,000 Medical Center Revenue, Refunding & Improvement, Ashland Hospital Corp.,Series A,
FSA Insured, 6.125%, 02/01/12 ........................................................... 1,044,910
115,000 Kentucky HFC, MFMR, Series A, BIG Insured, 8.875%, 07/01/19 .................................. 117,617
6,000,000 Louisville and Jefferson County Regional Airport Authority, Airport System Revenue, Louisville
International Airport, Series A, MBIA Insured, 5.625%, 07/01/25 ............................. 5,803,020
Louisville and Jefferson County Metropolitan Sewer District Revenue,
2,000,000 AMBAC Insured, 6.75%, 05/15/25 ........................................................... 2,191,300
100,000 Pre-Refunded, FGICInsured, 7.35%, 05/01/19 ............................................... 113,366
2,000,000 Northern Kentucky University COP, Student Housing Facilities, CGIC Insured, 7.25%, 01/01/12 .. 2,188,640
----------------
19,066,808
----------------
Louisiana .5%
$ 100,000 Alexandria Utilities Revenue, FGIC Insured, Pre-Refunded, 8.15%, 05/01/06 .................... $ 107,916
Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Memorial Hospital
Project, BIG Insured, Pre-Refunded,
1,000,000 8.40%, 12/01/12 .......................................................................... 1,096,220
850,000 7.50%, 12/01/18 .......................................................................... 903,839
15,000 East Baton Rouge Parish, Sales and Use Tax Public Improvement, MBIA Insured, 7.25%, 02/01/12 . 15,974
1,700,000 Jefferson Sales Tax District, Special Sales Tax Revenue, Refunding, Series A, BIG Insured,
Pre-Refunded, 8.00%, 07/01/05 ............................................................... 1,901,008
300,000 Lafayette Public Improvement, Sales Tax Revenue, Refunding, FGIC Insured, Pre-Refunded, 8.00%,
03/01/08 .................................................................................... 329,178
3,000,000 Louisiana Public Facilities Authority Revenue, College and University of Loyola, FGIC Insured,
Pre-Refunded, 8.50%, 12/01/09 ............................................................... 3,168,960
150,000 Louisiana Regional Transit Authority Revenue, Refunding, FGIC Insured, 8.00%, 12/01/13 ....... 165,738
400,000 Louisiana State, Refunding, Series B, MBIA Insured, 5.625%, 08/01/13 ......................... 412,332
500,000 New Orleans Public Improvement, FGIC Insured, Pre-Refunded, 7.50%, 09/01/21 .................. 585,130
----------------
8,686,295
----------------
Maine .7%
Ellsworth, GO, MBIA Insured,
635,000 5.25%, 11/01/12 .......................................................................... 615,760
655,000 5.25%, 11/01/13 .......................................................................... 630,870
2,000,000 Maine Health and Higher Educational Facilities Authority Hospital Revenue, Eastern Maine
Health Care, FGIC Insured, 6.625%, 10/01/11 ................................................. 2,171,340
2,000,000 Maine Health and Higher Educational Facilities Authority Revenue, Series B, FSA Insured, 7.00%,
07/01/24 .................................................................................... 2,217,760
2,015,000 Maine Health and Higher Educational Facilities Authority Revenue, Series C, FSA Insured, 6.20%,
07/01/25 .................................................................................... 2,091,187
Maine State Turnpike Authority Revenue, MBIA Insured,
525,000 6.00%, 07/01/14 .......................................................................... 543,743
2,500,000 6.00%, 07/01/18 .......................................................................... 2,579,325
Old Orchard Beach, MBIA Insured,
1,180,000 6.65%, 09/01/11 .......................................................................... 1,301,328
535,000 6.65%, 09/01/12 .......................................................................... 587,826
----------------
12,739,139
----------------
Maryland .5%
Maryland State Health and Higher Educational Facilities Authority Revenue,
2,000,000 Montgomery General Hospital, Connie Lee Insured, 5.625%, 07/01/18 ........................ 1,981,000
3,000,000 University of Maryland Medical System, Refunding, FGIC Insured, 5.00%, 07/01/20 .......... 2,784,750
200,000 University of Maryland Medical System, Series B, FGIC Insured, ETM 07/01/12, 7.00%,
07/01/22 ................................................................................ 244,660
Maryland State Housing and Community Development Administration Department, Infrastructure
Financing, Series A, AMBAC Insured,
2,000,000 6.625%, 06/01/12 ......................................................................... 2,191,360
820,000 6.70%, 06/01/22 .......................................................................... 868,741
----------------
8,070,511
----------------
Massachusetts 6.4%
3,700,000 Boston Water and Sewer Commission Revenue, Series A, FGIC Insured, 6.00%, 11/01/21 ........... 3,781,326
100,000 Massachusetts Bay Transportation Authority, Series A, MBIA Insured, Pre-Refunded, Series A,
MBIA Insured, Pre-Refunded, 7.625%, 03/01/15 ................................................ 114,152
4,455,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue, Refunding,
Series A, AMBAC Insured, 6.00%, 07/01/18 .................................................... 4,548,332
$ 1,000,000 Massachusetts State College Building Authority Project Revenue, Refunding, Series A, MBIA Insured,
Pre-Refunded, 7.25%, 05/01/16 ............................................................... $ 11,026,290
Massachusetts State Health and Educational Facilities Authority Revenue,
1,500,000 Berkshire Health Systems, Series A, MBIA Insured, Pre-Refunded, 6.75%, 10/01/19 .......... 1,605,495
1,500,000 Beverly Hospital, Series E, MBIA Insured, Pre-Refunded, 7.70%, 07/01/20 .................. 1,730,475
1,100,000 Capital Asset Program F-1, MBIA Insured, 7.30%, 10/01/18 ................................. 1,233,925
12,555,000 Fallon Health Care System, Series A, CGIC Insured, 6.75%, 06/01/20 ....................... 13,718,723
7,115,000 bLahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 07/01/23 ................... 6,815,032
9,220,000 Massachusetts General Hospital, Series F, AMBAC Insured, 6.25%, 07/01/20 ................. 9,636,099
1,000,000 Massachusetts Medical Center, Series A, AMBAC Insured, 7.10%, 07/01/21 ................... 1,127,380
Massachusetts State Health and Educational Facilities Authority Revenue, (cont.)
1,085,000 Mclean Hospital, Series C, FGIC Insured, 6.625%, 07/01/15 ................................ 171,377
15,400,000 New England Medical Center Hospitals, Series F, FGIC Insured, 6.625%, 07/01/25 ........... 16,591,652
4,320,000 bNew England Medical Center Hospitals, Series G, MBIA Insured, 5.375%, 07/01/24 .......... 4,135,104
8,500,000 North Eastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ........................ 9,247,830
2,000,000 Refunding, Stonehill College, Series E, MBIA Insured, 6.60%, 07/01/20 .................... 2,158,820
5,250,000 Refunding, Valley Regional Health Systems, Series C, Connie Lee Insured, 6.375%, 07/01/14 5,527,305
2,000,000 Refunding, Youville Hospital, Series B, MBIA Insured, 6.00%, 02/15/25 .................... 2,069,540
Massachusetts State Industrial Finance Agency Revenue,
3,000,000 Babson College, Series A, MBIA Insured, 6.50%, 10/01/22 .................................. 3,239,970
5,000,000 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 ............................. 5,403,700
5,000,000 Jewish Philanthropies, Series A, AMBAC Insured, 6.375%, 02/01/15 ......................... 5,393,750
4,000,000 Massachusetts State Port Authority Revenue, Refunding, Series A, FGIC Insured, 6.00%, 07/01/23 4,117,520
2,000,000 Monson GO, School District, Series 1990, MBIA Insured, Pre-Refunded, 7.70%, 10/15/10 ......... 2,323,560
2,300,000 Palmer GO, Series B, AMBAC Insured, Pre-Refunded, 7.70%, 10/01/10 ............................ 2,669,656
----------------
109,387,013
----------------
Michigan .8%
100,000 Chippewa Valley School Building and Site, FGIC Insured, Pre-Refunded, 6.375%, 05/01/06 ....... 110,701
4,000,000 Detroit Sewerage Disposal Revenue, FGIC Insured, Pre- Refunded, 6.625%, 07/01/21 ............. 4,511,880
1,040,000 Howell Public Schools, Refunding, AMBAC Insured, 5.375%, 05/01/20 ............................ 1,003,798
2,000,000 Kalamazoo Hospital Finance Authority, Hospital Facilities Revenue, Refunding & Improvement,
Bronson Methodist Church, Series A, MBIA Insured, 6.375%, 05/15/17 .......................... 2,111,460
1,000,000 Michigan State HDA, Rental Housing Revenue, Series A, Refunding, AMBAC Insured, 5.90%,
04/01/23 .................................................................................... 995,920
350,000 Michigan State HDA, SFMR, Series 1986-A, FGIC Insured, 8.00%, 10/01/06 ....................... 359,496
2,500,000 Michigan State Hospital Finance Authority Revenue, Refunding, St. John Hospital, Series A,
AMBAC Insured, 6.00%, 05/15/13 .............................................................. 2,590,850
Michigan State Strategic Fund Limited Obligation Revenue, Refunding, Detroit Edison Co. Project,
200,000 FGIC Insured, 6.875%, 12/01/21 ........................................................... 217,004
250,000 Series BB, AMBAC Insured, 7.00%, 05/01/21 ................................................ 302,690
2,400,000 Warren Consolidated School District, Refunding, Series II, FGIC Insured, 5.25%, 05/01/21 ..... 2,277,887
----------------
14,481,686
----------------
Minnesota 1.6%
2,000,000 Eden Prairie, Oympic Ridge Project, Series A, GNMA Secured, 6.25%, 01/20/31 .................. 2,036,740
4,000,000 Minneapolis-St. Paul Housing Finance Board, MFMR, GNMA Secured, Mortgage Loan, Riverside
Plaza Project, 8.20%, 12/20/18 .............................................................. 4,188,160
200,000 Northern Municipal Power Agency, Minnesota Electric System Revenue, Refunding, Series B,
AMBAC Insured, 5.50%, 01/01/18 .............................................................. 197,728
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 ......................................... 7,852,156
1,200,000 Washington County Governmental Housing, Scandia II, Series B, FGIC Insured, 6.30%, 07/01/24 .. 1,273,547
$ 2,415,000 Washington County, Raymie Johnson Apartments, Series C, Refunding, FGIC Insured, 6.30%,
01/01/20 .................................................................................... $ 2,563,014
8,775,000 Western Minnesota Municipal Power Agency, Power Supply Revenue, Series A, MBIA Insured,
6.125%, 01/01/16 ............................................................................ 8,625,912
----------------
26,737,257
----------------
Mississippi .1%
Harrison County Correctional Facilities Finance Authority, Special Obligation Revenue, FGIC Insured,
Pre-Refunded,
1,000,000 8.30%, 09/01/05 .......................................................................... 1,087,260
1,000,000 8.30%, 09/01/06 .......................................................................... 1,087,260
200,000 Harrison County Waste Water Management District Revenue, Refunding, Waste Water Treatment
Facilities, Series A, FGIC Insured, 8.50%, 02/01/13 ......................................... 274,172
20,000 Mississippi HFC, SFMR, Refunding, Series A, FGIC Insured, 7.70%, 10/15/08 .................... 20,706
----------------
2,469,398
----------------
Missouri 2.7%
2,000,000 Branson Reorganization School District No. R-4, Refunding & Improvement, CGIC Insured,
Pre-Refunded, 6.20%, 03/01/06 ............................................................... 2,128,580
1,000,000 Cape Girardeau County IDA, Health Care Facilities Revenue, Refunding, Southeast Missouri Hospital
Association, MBIA Insured, 5.25%, 06/01/16 .................................................. 961,350
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 ....................................... 4,384,640
2,000,000 Missouri Economic Development, Export and Infrastructure Board Lease Revenue, Mental Health
Office, Building Division, CGIC Insured, 6.30%, 12/01/08 .................................... 2,163,060
1,520,000 Missouri HDC, Series 1990-B, GNMA Secured, 7.75%, 06/01/22 ................................... 1,591,470
1,000,000 Missouri Health and Educational Facilities Authority, Health Facilities Revenue, Heartland Health
System Project, AMBAC Insured, 6.35%, 11/15/17 .............................................. 1,084,320
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 ......................................... 8,275,875
1,000,000 Missouri School Board Lease Association, COP, Series R-III, School District Project, MBIA Insured,
6.875%, 03/01/11 ............................................................................ 1,068,690
8,575,000 Sikeston Electric Revenue, Refunding, MBIA Insured, Pre-Refunded, 6.25%, 06/01/22 ............ 9,612,318
2,850,000 St. Charles County Public Facilities Authority Leasehold Revenue, FGIC Insured, 6.375%, 03/15/07 3,081,648
2,000,000 St. Louis Airport Revenue, Refunding & Improvement, Lambert-St. Louis International Airport,
FGIC Insured, 6.125%, 07/01/15 .............................................................. 2,086,440
610,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19 ............................ 643,617
2,025,000 St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding & Improvement, FGIC Insured,
6.25%, 02/15/12 ............................................................................. 2,154,600
2,000,000 St. Louis Public School District Building Corp., Leasehold Revenue, Series A, FGIC Insured, 7.40%,
04/01/09 .................................................................................... 2,045,280
2,950,000 St. Louis School District GO, Refunding, FGIC Insured, 6.00%, 04/01/12 ....................... 3,091,571
1,250,000 Washington GO, Pauwels Transformers Project, Series A, FGIC Insured, 7.60%, 12/01/09 ......... 1,325,850
----------------
45,699,309
----------------
Montana 1.5%
Forsyth PCR, Refunding,
4,475,000 Puget Sound Power and Light Project, AMBAC Insured, 6.80%, 03/01/22 ...................... 4,868,934
5,000,000 Washington Water Co., Series A, MBIA Insured, 7.125%, 12/01/13 ........................... 5,431,900
750,000 Helena Water Revenue, Series C, FGIC Insured, 6.65%, 11/01/12 ................................ 817,995
Montana State Board, Workers Compensation Investment Program,
6,105,000 6.875%, 06/01/20 ......................................................................... 6,690,836
2,395,000 ETM 06/01/20, 6.875%, 06/01/20 ........................................................... 2,719,642
$ 1,000,000 Montana State University Revenue, Higher Education Facilities, Acquisition and Improvement,
Series C, MBIA Insured, 6.00%, 11/15/14 ..................................................... $ 1,001,000
3,000,000 Montana Water System Revenue, Butte-Silver Bow Project, FGIC Insured, 6.50%, 11/01/14 ........ 3,254,100
----------------
24,784,407
----------------
Nebraska 1.2%
2,500,000 Cass County School District No. 001, Plattsmouth Community Schools, FGIC Insured, 6.35%,
12/01/19 .................................................................................... 2,596,775
5,940,000 Douglas County Hospital Authority Revenue, No. 2, Health Facilities, Catholic Health Facility, Series C,
MBIA Insured, 5.50%, 11/15/21 ............................................................... 5,772,373
2,500,000 Lancaster County Hospital Authority Revenue, Bryan Memorial Hospital Project No. 1, MBIA Insured,
6.70%, 06/01/22 ............................................................................. 2,735,050
2,000,000 Lincoln Hospital Revenue, Refunding, Lincoln General Hospital, Series A, CGIC Insured, 6.20%,
12/01/14 .................................................................................... 2,090,240
Municipal Energy Agency of Nebraska, Power Supply System Revenue, Refunding, Series A,
AMBAC Insured,
2,000,000 6.00%, 04/01/15 .......................................................................... 2,073,460
1,350,000 6.00%, 04/01/17 .......................................................................... 1,390,797
Nebraska Investment Finance Authority, SFMR, Refunding,
565,000 Series 1, GNMA Secured, MBIA Insured, 8.125%, 08/15/38 ................................... 589,549
3,470,000 Series B, FGIC Insured, 8.00%, 07/15/17 .................................................. 3,667,165
345,000 Series R1-A, FGIC Insured, 8.00%, 07/15/17 ............................................... 357,085
----------------
21,272,494
----------------
Nevada .8%
5,000,000 Clark County Passenger Facility Charge Revenue, Macarren International Airport, Series A,
MBIA Insured, 6.00%, 07/01/17 ............................................................... 5,085,800
4,000,000 Clark County School District, Series A, MBIA Insured, 7.00%, 06/01/10 ........................ 4,784,840
250,000 Clark County, Series A, AMBAC Insured, 6.50%, 06/01/17 ....................................... 282,763
1,250,000 North Las Vegas, FGIC Insured, Pre-Refunded, 7.125%, 04/01/11 ................................ 1,416,350
10,000 Reno Hospital Revenue, Refunding, St. Mary's Regional Medical Center, Series A, MBIA Insured,
7.75%, 07/01/07 ............................................................................. 10,893
1,695,000 Sparks Public Safety, GO, AMBAC Insured, Pre-Refunded, 7.50%, 10/01/09 ....................... 1,913,943
----------------
13,494,589
----------------
New Hampshire .4%
New Hampshire Higher Educational and Health Facilities Authority Revenue,
2,000,000 Concord Hospital, FGIC Insured, 7.00%, 10/01/12 .......................................... 2,183,180
4,000,000 Refunding, University System, MBIA Insured, 6.25%, 07/01/20 .............................. 4,192,360
----------------
6,375,540
----------------
New Jersey 3.0%
6,000,000 Camden County Municipal Utilities Authority, Sewer Revenue, FGIC Insured, 8.25%, 12/01/17 .... 6,540,960
3,000,000 Essex County Improvement Authority Lease, Jail and Youth House Projects, AMBAC Insured, 7.00%,
12/01/24 .................................................................................... 3,422,460
2,525,000 Essex County Improvement Authority Revenue, Garden State Cancer Center Project, AMBAC Insured,
6.00%, 12/01/20 ............................................................................. 2,630,646
90,000 Hoboken Union City, Weehawken Sewer Authority Revenue, MBIA Insured,Pre-Refunded, 7.25%,
08/01/19 .................................................................................... 100,795
5,000,000 Hudson County Correctional Facility, COP, BIG Insured, Pre-Refunded, 7.60%, 12/01/21 ......... 5,572,600
Lacey Municipal Utilities Authority Water Revenue, MBIA Insured,
2,500,000 6.10%, 12/01/23 .......................................................................... 2,613,600
3,255,000 6.25%, 12/01/24 .......................................................................... 3,442,521
1,500,000 Refunding, Series A, 5.50%, 12/01/19 ..................................................... 1,490,025
$ 1,700,000 Mantua Township, New Jersey School District COP, MBIA Insured, Pre-Refunded, 7.25%, 06/30/10 . $ 1,934,770
2,000,000 Mount Laurel Township Municipal Utilities Authority System Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 07/01/15 ............................................................... 2,108,180
5,750,000 New Jersey EDA, Water Facilities Revenue, Elizabethtown Water Co. Project, MBIA Insured, 5.60%,
12/01/25 .................................................................................... 5,603,203
3,000,000 New Jersey EDA Revenue, Clara Maass Health System, FSA Insured, 5.00%, 07/01/25 .............. 2,762,160
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 1,454,747
2,000,000 Community Medical Center, Series D, MBIA Insured, 6.00%, 07/01/19 ........................ 2,051,740
2,860,000 Jersey Shore Memorial Hospital, Series B, AMBAC Insured, Pre-Refunded, 8.00%, 07/01/18 ... 3,173,342
2,600,000 Jersey Shore Memorial Hospital, Series C, MBIA Insured, Pre-Refunded, 7.875%, 07/01/12 ... 2,795,182
3,000,000 Muhlenberg Regional Medical Center, Series B, AMBAC Insured, 8.00%, 07/01/18 ............. 3,297,600
485,000 New Jersey HFA, Home Buyer Revenue, Series C, MBIA Insured, 7.375%, 10/01/17 ................. 506,607
300,000 New Jersey State Turnpike Authority Revenue, Refunding, Series C, AMBAC Insured, 6.50%,
01/01/16 .................................................................................... 337,077
100,000 North Bergen Township Municipal Utilities Authority Sewer Revenue, FGIC Insured, Pre-Refunded,
7.625%, 12/15/19 ............................................................................ 108,740
----------------
51,946,955
----------------
New Mexico .7%
3,600,000 Albuquerque Airport Revenue, Series B, AMBAC Insured, 7.00%, 07/01/16 ........................ 3,658,680
5,000,000 Farmington PCR, Refunding, Public Service Co. of New Mexico, Series A, AMBAC Insured, 6.375%,
12/15/22 .................................................................................... 5,279,450
2,000,000 Gallup PCR, Refunding, Plains Electric Generation, MBIA Insured, 6.65%, 08/15/17 ............. 2,150,360
1,440,000 New Mexico Mortgage Finance Authority, SFMR, Series 1987-C, FGIC Insured, 8.625%, 07/01/17 ... 1,498,925
----------------
12,587,415
----------------
New York 6.9%
900,000 Central Square School District, FGIC Insured, 6.50%, 06/15/10 ................................ 1,013,877
2,900,000 MAC for the City of New York, Series 61, MBIA Insured, 6.875%, 07/01/07 ...................... 3,046,885
1,585,000 Metropolitan Transportation Authority Service Contract, Refunding, Series K, AMBAC Insured,
Pre-Refunded, 7.50%, 07/01/17 ............................................................... 1,746,829
New York City GO,
1,000,000 Series B, FGIC Insured, Pre-Refunded, 7.25%, 08/01/11 .................................... 1,080,600
105,000 Series C, Subseries C-1, MBIA Insured, 6.625%, 08/01/12 .................................. 115,638
New York City Municipal Water Finance Authority, Water and Sewer System Revenue,
2,500,000 Refunding, Series B, AMBAC Insured, 5.375%, 06/15/19 ..................................... 2,417,625
430,000 Series A, FGIC Insured, 6.75%, 06/15/14 .................................................. 463,484
2,000,000 Series A, MBIA Insured, Pre-Refunded, 7.25%, 06/15/15 .................................... 2,269,920
5,000,000 Series B, FGIC Insured, Pre-Refunded, 7.625%, 06/15/17 ................................... 5,493,450
2,340,000 Series B, MBIA Insured, 5.375%, 06/15/19 ................................................. 2,262,897
5,000,000 Series C, AMBAC Insured, 6.20%, 06/15/21 ................................................. 5,258,300
10,000,000 Series C, AMBAC Insured, 6.50%, 06/15/21 ................................................. 10,387,700
4,030,000 Series F, MBIA Insured, 5.75%, 06/15/20 .................................................. 4,060,668
New York State Dormitory Authority Revenues,
4,000,000 Brooklyn Law School, CGIC Insured, 6.40%, 07/01/11 ....................................... 4,306,360
8,655,000 City University System, Series C, FGIC Insured, Pre-Refunded, 7.00%, 07/01/14 ............ 9,802,913
6,105,000 Pooled Capital Program, FGIC Insured, 7.80%, 12/01/05 .................................... 6,568,431
1,500,000 Refunding, Mt. Sinai School of Medicine, MBIA Insured, 6.75%, 07/01/15 ................... 1,631,760
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 .................................................... 1,037,000
3,500,000 New York State Energy Research and Development Authority Facilities Revenue, Refunding, Series B,
MBIA Insured, 5.25%, 08/15/20 ............................................................... 3,328,885
New York State Energy Research and Development Authority, PCR,
$ 2,000,000 Central Hudson Gas, Series A, FGIC Insured, 7.375%, 10/01/14 ............................. $ 2,228,280
3,500,000 Refunding, Niagara Mohawk Power Corp., Series A, FGIC Insured, 6.625%, 10/01/13 .......... 3,769,815
5,000,000 Refunding, Rochester Gas & Electric Project, Series B, MBIA Insured, 6.75%, 01/15/27 ..... 5,367,650
5,000,000 Refunding, Rochester Gas & Electric Project, Series B, MBIA Insured, 6.50%, 05/15/32 ..... 5,291,950
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 3,335,730
7,485,000 Presbyterian Hospital, Series A, MBIA Insured, FHA Guaranteed, 5.375%, 02/15/25 .......... 7,223,998
5,000,000 St. Lukes Hospital, Series B, MBIA Insured, Pre-Refunded, 7.45%, 02/15/29 ................ 5,689,350
2,385,000 St. Lukes-Roosevelt Hospital, Mortgage, Series A, MBIA Insured, FHA Guaranteed, 5.625%,
08/15/18 ................................................................................ 2,359,433
6,635,000 New York State Tollway Authority, General Revenue, Series B, MBIA Insured, 5.00%, 01/01/20 ... 6,155,356
9,000,000 Niagara Frontier Transportation Authority, Airport Revenue, Greater Buffalo International Airport,
Series A, AMBAC Insured, 6.25%, 04/01/24 .................................................... 9,332,910
2,000,000 Suffolk County Water Authority, Waterworks Revenue, Refunding, Series B, AMBACInsured, 5.625%,
06/01/16 .................................................................................... 1,993,820
----------------
119,041,514
----------------
North Carolina
North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, MBIA Insured,
80,000 6.50%, 01/01/10 .......................................................................... 84,784
20,000 ETM 01/01/07, 6.50%, 01/01/10 ............................................................ 22,794
500,000 Refunding, 5.75%, 01/01/20 ............................................................... 496,105
----------------
603,683
----------------
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 ................................ 168,138
300,000 North Dakota State Building Authority Revenue, Refunding, Series A, AMBAC Insured, 6.75%,
06/01/11 .................................................................................... 321,906
----------------
490,044
----------------
Ohio 2.2%
2,000,000 Akron Waterworks Mortgage Revenue, AMBAC Insured, Pre-Refunded, 6.55%, 03/01/12 .............. 2,242,060
5,000,000 Clermont County, Refunding, Building and Road Improvement, AMBAC Insured, 5.60%, 09/01/14 .... 5,025,500
Cleveland Waterworks First Mortgage Revenue, Series 1992-F, AMBAC Insured,
3,000,000 6.50%, 01/01/11 .......................................................................... 3,234,810
2,750,000 Pre-Refunded, 6.50%, 01/01/21 ............................................................ 3,093,805
1,080,000 Cuyahoga County Hospital Revenue, Metrohealth Systems Project, MBIA Insured, 6.00%, 02/15/19 . 1,097,723
3,000,000 Lucas County Hospital Revenue, St. Vincent Medical Center, MBIA Insured, 6.625%, 08/15/22 .... 3,407,160
12,720,000 Montgomery County Hospital Facilities Revenue, Refunding, Kettering Medical Center Facilities,
MBIA Insured, 7.50%, 04/01/14 ............................................................... 13,674,636
4,195,000 Ohio HFA, SFMR, Series D, GNMA Secured, 7.05%, 09/01/16 ...................................... 4,372,868
1,750,000 Ohio Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 .................... 1,848,228
----------------
37,996,790
----------------
Oklahoma 2.0%
805,000 Grady County Home Finance Authority, SFMR, Refunding, Series A, FGIC Insured, 6.70%, 01/01/12 844,083
3,300,000 Jenks Public Works Authority Revenue, Refunding, AMBAC Insured, 7.80%, 07/01/11 .............. 3,592,182
1,000,000 Langston University COP, Student Housing Project, MBIA Insured, 5.125%, 02/01/17 ............. 936,010
300,000 McGee Creek Authority Water Revenue, MBIA Insured, 6.00%, 01/01/23 ........................... 322,203
5,000,000 Moore Public Works Authority Revenue, Refunding, AMBAC Insured, 7.60%, 07/01/06 .............. 5,532,900
1,130,000 Muskogee, SFMR, HFA, FGIC Insured, 7.60%, 12/01/10 ........................................... 1,172,838
2,000,000 Oklahoma State Turnpike Authority Revenue, Series A, AMBAC Insured, 6.00%, 01/01/12 .......... 2,095,780
$ 1,255,000 Owasso Public Works Authority, Public Improvement Revenue, CGIC Insured, 7.40%, 11/01/07 ..... $ 1,348,673
Pottawatomie County Development Authority Water Revenue, North Deer Creek Reservoir Project,
AMBAC Insured,
5,000,000 5.90%, 07/01/26 .......................................................................... 5,053,050
250,000 Pre-Refunded, 7.375%, 07/01/26 ........................................................... 285,233
3,275,000 Tulsa Airport Improvements Trust, General Revenue Consolidated, MBIA Insured, Pre-Refunded,
7.50%, 06/01/08 ............................................................................. 3,512,732
Tulsa County HFAR, GNMA Secured,
4,925,000 Series A, 8.30%, 12/01/19 ................................................................ 5,222,076
355,000 Series D, 6.95%, 12/01/22 ................................................................ 369,143
3,270,000 Tulsa Industrial Authority Revenue, Holland Hall School Project, CGIC Insured, 6.75%, 12/01/14 3,564,692
----------------
33,851,595
----------------
Oregon 1.2%
1,500,000 Deschutes and Jefferson Counties School District No. 2-J, Redmond, MBIA Insured, 5.60%, 06/01/09 1,547,535
5,000,000 Josephine County School District No. 7, FGIC Insured, 5.70%, 06/01/13 ........................ 5,090,900
700,000 Ontario Catholic Health Corp., Hospital Facilities Authority Revenue, Holy Rosary Medical Facility,
Refunding, Series C, MBIA Insured, 5.50%, 11/15/12 .......................................... 699,937
1,500,000 Oregon Health Sciences University Revenue, Series B, MBIA Insured, 5.25%, 07/01/15 ........... 1,455,585
6,025,000 Portland Hospital Facilities Authority Revenue, Legacy Health System, Series A, AMBAC Insured,
6.70%, 05/01/21 ............................................................................. 6,586,952
Washington County, Unified Sewer Agency Revenue, AMBAC Insured,
1,000,000 Senior Lien, Series A, 6.125%, 10/01/12 .................................................. 1,057,610
1,000,000 Series 1, 6.125%, 10/01/12 ............................................................... 1,057,610
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 .................................................... 3,100,050
----------------
20,596,179
----------------
Pennsylvania 2.8%
3,000,000 Bristol Township, Bucks County GO, FGIC Insured, Pre-Refunded, 7.875%, 09/01/16 .............. 3,068,940
3,900,000 Butler County Hospital Authority Revenue, North Hills Passavant Hospital, CGIC Insured, 7.00%,
06/01/22 .................................................................................... 4,240,002
5,000,000 Cambria County Hospital Development Authority Revenue, Refunding & Improvement, Conemaugh
Valley Hospital, Series B, Connie Lee Insured, 6.375%, 07/01/18 ............................. 5,207,200
5,000,000 Cambria County IDA, PCR, Refunding, Pennsylvania Electric Co. Project, Series B, MBIA Insured,
6.05%, 11/01/25 ............................................................................. 5,062,050
3,000,000 Dauphin County Hospital Authority Revenue, Refunding, Harrisburg Hospital, MBIA Insured, 8.25%,
07/01/14 .................................................................................... 3,194,280
1,500,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue, Refunding,
AMBAC Insured, 7.375%, 01/01/07 ............................................................. 1,633,560
200,000 Exeter Township School District, FGIC Insured, 6.50%, 05/15/06 ............................... 216,678
1,200,000 Harrisburg RDAR, Capital Improvement, Series A, FGIC Insured, 7.875%, 11/02/16 ............... 1,248,048
100,000 Lehigh County General Purpose Authority Revenues, Hospital Healtheast, Inc., Series A, Refunding,
MBIA Insured, 7.00%, 07/01/15 ............................................................... 107,753
8,000,000 Montgomery County IDAR, PCR, Refunding, Series B, MBIA Insured, 6.70%, 12/01/21 .............. 8,632,560
500,000 Pennsylvania Convention Center Authority Revenue, Series A, FGIC Insured, ETM 09/01/17, 6.00%,
09/01/19 .................................................................................... 543,165
100,000 Pennsylvania State Higher Educational Facilities Authority, College and University Revenues,
Hahnemann University Project, MBIA Insured, 7.20%, 07/01/19 ................................. 108,089
2,740,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ............................................................... 2,904,099
Pennsylvania State Turnpike Commission Revenue,
$ 500,000 Refunding, Series P, AMBAC Insured, 6.00%, 12/01/17 ...................................... $ 513,965
2,500,000 Series K, MBIA Insured, Pre-Refunded, 7.50%, 12/01/12 .................................... 2,829,925
1,000,000 Philadelphia Water and Waste Water Revenue, Refunding, CGIC Insured, 5.50%, 06/15/15 ......... 978,970
Pittsburgh Water and Sewer System Authority Revenue,
4,800,000 bFGIC Insured, 5.60%, 09/01/22 ........................................................... 4,728,288
90,000 Refunding, ETM 09/01/05, 7.25%, 09/01/14 ................................................. 105,245
2,000,000 Quaker Valley School District, FGIC Insured, 5.70%, 01/15/19 ................................. 2,012,260
10,000 Scranton-Lackawanna Health and Welfare Authority Revenue, Community Medical Center Project,
BIG Insured, 7.875%, 07/01/10 ............................................................... 10,844
----------------
47,345,921
----------------
Rhode Island 1.3%
2,100,000 Kent County Water Authority, General Revenue, Series A, MBIA Insured, 6.35%, 07/15/14 ........ 2,242,800
620,000 Newport, GO, Refunding, Series B, FGIC Insured, 5.125%, 05/15/10 ............................. 611,041
5,000,000 Providence PBA General Revenue, Series A, CGIC Insured, 7.25%, 12/15/10 ...................... 5,524,300
350,000 Rhode Island Convention Center Authority Revenue, Series A, MBIA Insured, Pre-Refunded, 6.65%,
05/15/12 .................................................................................... 392,637
3,335,000 Rhode Island Health and Education Building Authority, Series A, CGIC Insured, Pre-Refunded, 7.50%,
09/15/19 .................................................................................... 3,767,550
Rhode Island Health and Educational Building Corp. Revenue, Higher Educational Facilities,
Connie Lee Insured,
3,000,000 6.30%, 03/15/20 .......................................................................... 3,097,800
2,000,000 Roger Williams Facility, 7.25%, 11/15/24 ................................................. 2,218,480
2,000,000 Rhode Island Port Authority and Economic Development Corp. Revenue, Shepard Building Project,
Series B, AMBAC Insured, 6.75%, 06/01/25 .................................................... 2,180,840
250,000 Rhode Island State, Refunding, Series A, FGIC Insured, 6.25%, 06/15/07 ....................... 271,290
2,000,000 West Warwick GO, MBIA Insured, Pre-Refunded, 7.25%, 09/01/11 ................................. 2,327,860
----------------
22,634,598
----------------
South Carolina .4%
250,000 Charleston Waterworks and Sewer Revenue, Refunding & Improvement, AMBAC Insured, 6.00%,
01/01/16 .................................................................................... 258,158
2,910,000 Cherokee County COP, Peachtree Centre Project, CGIC Insured, 7.05%, 09/01/11 ................. 3,242,089
250,000 Edgefield County School District, Refunding, FSA Insured, 8.50%, 02/01/01 .................... 296,343
50,000 Greenville Hospital System Facilities Revenue, Series A, FGIC Insured, 7.50%, 05/01/16 ....... 51,171
200,000 North Charleston Sewer District Revenue, MBIA Insured, Pre-Refunded, 7.75%, 08/01/18 ......... 221,640
200,000 Piedmont Municipal Power Agency, South Carolina Electric Revenue, Refunding, FGIC Insured,
6.25%, 01/01/21 ............................................................................. 218,438
3,000,000 Richland County Hospital Facilities Revenue, Community Provider, Pooled Loan Program, Series A,
CGIC Insured, 7.125%, 07/01/17 .............................................................. 3,303,480
100,000 South Carolina Public Service Authority Electric Revenue, Electric System Expansion, Refunding,
Series C, AMBAC Insured, Pre-Refunded, 7.30%, 07/01/21 ...................................... 103,307
----------------
7,694,626
----------------
South Dakota .7%
1,355,000 Heartland Consumer Power District, Electric System Revenue, Refunding, MBIA Insured,
Pre-Refunded, 7.625%, 01/01/16 .............................................................. 1,426,138
2,000,000 Lawrence County COP, Courthouse, CGIC Insured, 7.65%, 07/01/10 ............................... 2,233,340
2,450,000 Sioux Falls Medical Clinic Revenue, AMBAC Insured, 8.00%, 09/01/08 ........................... 2,497,898
$ 2,720,000 South Dakota State Lease Revenue, Series A, CGIC Insured, 6.75%, 12/15/16 .................... $ 3,111,898
2,220,000 South Dakota State University Revenue, Housing and Auxiliary Facilities, Refunding, Series A,
MBIA Insured, 5.50%, 04/01/17 ............................................................... 2,157,862
----------------
11,427,136
----------------
Tennessee .3%
1,465,000 Greater Tennessee Housing Assistance Corp., Mortgage Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 07/01/24 ............................................................... 1,470,010
500,000 Memphis-Shelby County Airport Authority Revenue, Refunding, MBIA Insured, 5.65%, 09/01/15 .... 504,375
200,000 Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%, 07/01/15 .... 215,702
3,450,000 Trenton Special School District, AMBAC Insured, 5.75%, 11/01/20 .............................. 3,470,079
----------------
5,660,166
----------------
Texas 9.6%
Austin Combined Utility System Revenue,
1,000,000 BIG Insured, Pre-Refunded, 8.625%, 11/15/17 .............................................. 1,220,730
50,000 Refunding, Series A, FGIC Insured, 6.00%, 05/15/15 ....................................... 50,920
3,000,000 Series A, BIG Insured, Pre-Refunded, 8.00%, 11/15/16 ..................................... 3,496,350
4,080,000 Bexar County HFC Revenue, GNMA Secured, Series A, 8.20%, 04/01/22 ............................ 4,403,870
3,450,000 Brazos River Authority PCR, Texas Utilities Electric Co. Project, Series A, AMBAC Insured, 6.05%,
04/01/25 .................................................................................... 3,512,411
Brazos River Authority Revenue, Refunding, Houston Light and Power Co. Project,
2,000,000 Series A, AMBAC Insured, 6.70%, 03/01/17 ................................................. 2,194,020
3,360,000 Series D, FGIC Insured, 7.75%, 10/01/15 .................................................. 3,679,603
12,230,000 Coastal Bend Health Facilities Development Corp., Series B, AMBAC Insured, 6.30%, 01/01/17 ... 12,809,702
7,000,000 Coastal Water Authority, Water Conveyance System Revenue, Series 1987, MBIA Insured,
Pre-Refunded, 8.125%, 12/15/17 .............................................................. 7,527,590
975,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 .............................................. 1,025,788
910,000 East Texas HFC, SFMR, Series 1990, GNMA Secured, 7.85%, 12/01/10 ............................. 968,213
1,520,000 Faulkey Gully MUD, Refunding, Waterworks and Sewerage System, AMBAC Insured, 6.625%,
03/01/07 .................................................................................... 1,648,911
Fort Bend County Levee Improvement District No. 011, AMBAC Insured,
1,395,000 6.00%, 09/01/21 .......................................................................... 1,416,134
1,495,000 6.00%, 09/01/22 .......................................................................... 1,517,649
1,610,000 6.00%, 09/01/23 .......................................................................... 1,634,392
2,700,000 Grand Prairie Health Facilities, Refunding, Dallas/Fort Worth Medical Center Project, AMBAC Insured,
6.875%, 11/01/10 ............................................................................ 3,030,237
2,350,000 Harris County Hospital District Mortgage Revenue, Refunding, AMBAC Insured, 7.40%, 02/15/10 .. 2,837,226
3,000,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, MBIA Insured,
Pre-Refunded, 7.80%, 12/15/11 ............................................................... 3,358,800
Harris County Toll Road,
35,000 Series A, FGIC Insured, 6.50%, 08/15/11 .................................................. 38,046
1,580,000 Series A, Senior Lien, AMBAC Insured, 6.50%, 08/15/17 .................................... 1,704,852
240,000 Series B, Senior Lien, AMBAC Insured, 6.625%, 08/15/17 ................................... 249,727
Houston Airport System Revenue, Sub Lien, FGIC Insured,
2,500,000 Series A, 6.75%, 07/01/21 ................................................................ 2,665,350
1,000,000 Series B, 6.625%, 07/01/22 ............................................................... 1,074,340
Houston Water and Sewer System Revenue,
6,000,000 ePrior Lien, Pre-Refunded, 8.125%, 12/01/17 .............................................. 6,555,180
1,000,000 Refunding, Junior Lien, Series C, AMBAC Insured, 6.375%, 12/01/17 ........................ 1,062,850
500,000 Refunding, Junior Lien, Series C, MBIA Insured, 5.75%, 12/01/15 .......................... 501,650
8,000,000 Refunding, Junior Lien, Series C, MBIA Insured, 6.375%, 12/01/22 ......................... 8,496,800
1,600,000 Lower Colorado River Authority Priority Revenue, MBIA Insured, Pre-Refunded, 7.625%, 01/01/16 1,738,000
$ 1,345,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, BIG Insured, 8.875%,
12/01/12 .................................................................................... $ 1,371,537
Matagorda County Navigation District No. 1 Revenue,
200,000 PCR, Central P & L Co. Project, AMBAC Insured, 7.50%, 12/15/14 ........................... 225,084
2,000,000 PCR, Central P & L Co. Project, FGIC Insured, 7.125%, 07/01/19 ........................... 2,199,220
Matagorda County Navigation District No. 1 Revenue, (cont.)
100,000 Refunding, Houston Light & Power Co., Series E, FGIC Insured, 7.20%, 12/01/18 ............ 111,136
2,000,000 Refunding, Houston Light & Power Co., Series E, MBIA Insured, 6.10%, 07/01/28 ............ 2,041,760
2,000,000 Metro Health Facilities Development Corp., Hospital Revenue, The Wilson N. Jones Memorial
Hospital, Refunding, Connie Lee Insured, 5.60%, 01/01/17 .................................... 1,985,240
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 .............................. 2,210,080
6,000,000 Palo Duro River Authority, Refunding, CGIC Insured, 6.375%, 08/01/08 ......................... 6,222,720
Sabine River Authority, PCR, FGIC Insured,
3,250,000 Refunding, Collateralized, Texas Utilities Electric Co. Project, 6.55%, 10/01/22 ......... 3,476,005
2,000,000 Texas Utility Co. Project, Collateralized, 7.75%, 04/01/16 ............................... 2,044,480
9,900,000 San Antonio Electric & Gas System Revenue, Series A, FGIC Insured, Pre-Refunded, 8.00%,
02/01/16 .................................................................................... 10,841,094
5,200,000 San Antonio Water Revenue, Refunding, MBIA Insured, 6.50%, 05/15/10 .......................... 5,655,260
2,500,000 San Patricio County COP, MBIA Insured, 6.60%, 04/01/07 ....................................... 2,711,225
1,110,000 Smithville HDC Mortgage Revenue, Smithville Retirement, Refunding, Series A, MBIA Insured,
6.40%, 01/01/22 ............................................................................. 1,124,141
1,170,000 Southeast HDC Mortgage Revenue, Stonegate Retirement, MBIA Insured, 6.40%,01/01/24 ........... 1,208,903
9,690,000 Tarrant County HFC, SFMR, GNMA Secured, Series A, 8.00%, 07/01/21 ............................ 10,247,950
Texas Health Facilities Development Corp. Hospital Revenue, Refunding,
2,500,000 All Saints Episcopal Hospitals, Series B, MBIA Insured, 6.25%, 08/15/22 .................. 2,619,700
4,885,000 All Saints Episcopal Hospitals, Series B, MBIA Insured, 6.375%, 08/15/23 ................. 5,148,546
2,000,000 Cook-Fort Worth Medical Center Project, FGIC Insured, Pre-Refunded, 8.125%, 06/01/18 ..... 2,215,980
Texas State Turnpike Authority Revenue, Dallas North Tollway,
50,000 FGIC Insured, 7.125%, 01/01/15 ........................................................... 52,918
7,250,000 Refunding, AMBAC Insured, 5.00%, 01/01/20 ................................................ 6,681,020
5,995,000 Texas Water Resources Financial Authority Revenue, AMBAC Insured, 7.50%, 08/15/13 ............ 6,504,995
3,995,000 Travis County HFC, SFMR, GNMA Secured, 8.20%, 04/01/22 ....................................... 4,150,450
1,965,000 Webb County, Limited Tax GO, CGIC Insured, Pre-Refunded, 7.25%, 02/15/09 ..................... 2,140,651
----------------
163,609,436
----------------
Utah 2.7%
6,250,000 Emery County PCR, Refunding, Series A, AMBAC Insured, 5.65%, 11/01/23 ........................ 6,232,063
Intermountain Power Agency, Special Obligation, Refunding,
6,230,000 Fifth Crossover Series, FGIC Insured, 7.00%, 07/01/15 .................................... 6,529,850
7,500,000 Second Crossover Series 1986-C, FGIC Insured, 7.25%, 07/01/17 ............................ 7,727,850
Intermountain Power Agency, Power Supply Revenue, Refunding, AMBAC Insured,
4,000,000 Series 1985, 6.00%, 07/01/21 ............................................................. 3,972,280
2,000,000 Series 1987-C, Pre-Refunded, 8.375%, 07/01/12 ............................................ 2,160,220
6,300,000 Series 1987-D, 8.375%, 07/01/12 .......................................................... 6,761,160
5,000,000 Provo City Energy System Revenue, Series A, FGIC Insured, Pre-Refunded, 7.625%, 11/01/12 ..... 5,583,300
40,000 Provo Electric System Revenue, Refunding, Series 1984-A, AMBAC Insured, ETM 09/15/00, 10.375%,
09/15/15 .................................................................................... 59,004
5,000 Salt Lake County Water Conservancy District Revenue, Series A, MBIA Insured, ETM 10/01/02,
10.875%, 10/01/02 ........................................................................... 6,098
1,080,000 Utah State Board of Regents, Student Loan Revenue, Series H, AMBAC Insured, 6.70%, 11/01/15 .. 1,123,697
$ 660,000 Utah State Municipal Finance Corp., Local Government Revenue, St. George Water, FGIC Insured,
Pre-Refunded, 6.90%, 06/01/08 ............................................................... $ 743,299
2,935,000 Washington County Water Conservancy District, MBIA Insured, 8.20%, 02/01/18 .................. 3,145,967
Weber County Municipal Building Authority, Lease Revenue, CGIC Insured, Pre-Refunded,
825,000 7.20%, 06/01/05 .......................................................................... 903,070
875,000 7.20%, 06/01/06 .......................................................................... 957,801
950,000 7.20%, 06/01/07 .......................................................................... 1,039,898
----------------
46,945,557
----------------
Vermont 1.0%
Burlington Electric System Revenue, Series 1986-A, MBIA Insured,
1,000,000 7.25%, 07/01/06 .......................................................................... 1,029,550
6,000,000 7.375%, 07/01/12 ......................................................................... 6,165,360
2,205,000 State of Vermont COP, MBIA Insured, 7.25%, 06/15/11 .......................................... 2,407,970
6,630,000 Vermont Home Mortgage, Series 1989-B, MBIA Insured, 7.60%, 12/01/24 .......................... 6,981,058
1,000,000 Vermont Municipal Bond Bank, Series 2, FSA Insured, 6.25%, 12/01/19 .......................... 1,042,220
----------------
17,626,158
----------------
Virginia .7%
4,500,000 Chesapeake Bay Bridge and Tunnel Commission, District Revenue, Refunding, GeneralResolution,
MBIA Insured, 5.75%, 07/01/25 ............................................................... 4,534,380
5,000,000 Chesapeake IDA, Public Facilities, Lease Revenue, Chesapeake Jail Project, MBIA Insured, 6.00%,
06/01/12 .................................................................................... 5,229,100
1,000,000 Danville IDA, Danville Regional Medical Center, FGIC Insured, 6.50%, 10/01/24 ................ 1,066,780
1,000,000 James Madison University Revenue, Refunding, AMBAC Insured, 5.25%, 06/01/13 .................. 978,830
----------------
11,809,090
----------------
Washington 8.3%
5,700,000 Benton County PUD No. 1, Electric Revenue, Refunding, AMBAC Insured, 6.75%, 11/01/11 ......... 6,198,180
1,600,000 Benton County School District No. 400, Richland, AMBAC Insured, Pre-Refunded, 7.875%, 12/01/00 1,652,864
2,000,000 Clallam County PUD No. 1, Revenue, Refunding, AMBAC Insured, 6.50%, 01/01/08 ................. 2,187,800
900,000 Douglas County Public Utility, MBIA Insured, 6.00%, 01/01/15 ................................. 934,020
850,000 Everett COP, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 04/01/09 .......................... 963,144
2,000,000 Grant County PUD No. 2, Wanapum Hydro-Electric Revenue, Series B, AMBAC Insured, 6.75%,
01/01/23 .................................................................................... 2,142,740
2,245,000 Grays Harbor County PUD No. 001, Electric Revenue, Refunding, AMBAC Insured, 7.10%, 01/01/06 . 2,376,512
1,500,000 King County Public Hospital District No. 001, Hospital Facilities Revenue, Valley Medical Center,
AMBAC Insured, 7.25%, 09/01/15 .............................................................. 1,661,415
3,375,000 King County School District No. 411, Issaquah, Refunding, AMBAC Insured, Pre-Refunded, 6.50%,
12/01/09 .................................................................................... 3,784,151
1,015,000 Kitsap County School District No. 100-C, Refunding, MBIA Insured, 6.60%, 12/01/08 ............ 1,115,353
2,105,000 Kittitas County School District No. 404, AMBAC Insured, Pre-Refunded, 6.80%, 12/01/11 ........ 2,369,935
Klickitat County Public Utility District No. 001, Electric Revenue, FGIC Insured,
1,000,000 5.65%, 10/01/15 .......................................................................... 1,004,690
1,000,000 5.75%, 10/01/27 .......................................................................... 1,004,660
1,040,000 Mason County School District No. 402, Pioneer, MBIA Insured, 6.60%, 12/01/11 ................. 1,151,103
Seatac Storm Water Revenue, MBIA Insured,
490,000 5.40%, 12/01/00 .......................................................................... 508,806
570,000 5.75%, 12/01/03 .......................................................................... 606,885
2,890,000 6.50%, 12/01/13 .......................................................................... 3,114,380
6,000,000 Seattle Metropolitan Sewer System Revenue, Series W, MBIA Insured, 6.30%, 01/01/33 ........... 6,242,040
Snohomish County PUD No. 1, Electric Revenue,
$ 4,250,000 Generation System, FGIC Insured, ETM 01/01/13, 6.65%, 01/01/16 ........................... $ 4,840,623
9,000,000 Refunding, BIG Insured, Pre-Refunded, 8.00%, 01/01/15 .................................... 9,495,810
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 ..................................................... 5,304,100
14,000,000 Spokane Regional Solid Waste Management System Revenue, Series B, AMBAC Insured,
Pre-Refunded, 7.625%, 01/01/11 .............................................................. 15,590,820
Tacoma Electric System Revenue,
6,000,000 AMBAC Insured, Pre-Refunded, 8.00%, 01/01/11 ............................................. 6,551,160
500,000 Refunding, AMBAC Insured, 6.25%, 01/01/11 ................................................ 531,035
6,190,000 Refunding, FGIC Insured, 6.25%, 01/01/15 ................................................. 6,523,641
1,305,000 Thurston and Pierce Counties, Community Schools, Series B, AMBAC Insured, 6.65%, 12/01/09 .... 1,421,093
Washington Public Power Supply System, Nuclear Project No. 1 Revenue,
500,000 Refunding, Series A, MBIA Insured, 6.25%, 07/01/17 ....................................... 527,794
4,420,000 Refunding, Series B, FGIC Insured, 7.25%, 07/01/12 ....................................... 4,880,520
2,500,000 Refunding, Series C, FGIC Insured, 7.75%, 07/01/08 ....................................... 2,842,100
1,465,000 Series A, MBIA Insured, 7.50%, 07/01/15 .................................................. 1,591,604
2,200,000 Series A, MBIA Insured, Pre-Refunded, 7.50%, 07/01/15 .................................... 2,472,030
100,000 Washington Public Power Supply System Revenue, Nuclear Project No. 3, Refunding, Series A,
BIG Insured, Pre-Refunded, 7.25%, 07/01/16 .................................................. 111,595
2,910,000 Washington State HFA, Series A, GNMA Secured, 7.70%, 07/01/32 ................................ 3,036,584
Washington State Health Care Facilities Authority Revenue,
250,000 Empire Health Services, Spokane, MBIA Insured, 5.80%, 11/01/10 ........................... 260,272
1,000,000 Franciscan Health System, BIG Insured, Pre-Refunded, 7.70%, 01/01/13 ..................... 1,078,210
1,000,000 Harrison Memorial Hospital, AMBAC Insured, 5.40%, 08/15/23 ............................... 950,610
5,000,000 Mason Medical Center, MBIA Insured, 8.00%, 07/01/15 ...................................... 5,341,450
8,100,000 Multi-Care Medical Center, Tacoma, FGIC Insured, 5.75%, 08/15/22 ......................... 8,110,367
3,250,000 Swedish Hospital Medical Center, AMBAC Insured, 6.30%, 11/15/22 .......................... 3,415,977
Western Washington University Revenue, Housing & Dining System, MBIA Insured,
3,000,000 6.375%, 10/01/22 ......................................................................... 3,145,380
1,050,000 Refunding, 6.70%, 10/01/11 ............................................................... 1,119,026
3,500,000 Refunding, 6.375%, 10/01/21 .............................................................. 3,626,420
6,130,000 Refunding, 6.40%, 10/01/24 ............................................................... 6,493,815
2,000,000 Whatcom County School District No. 501, Bellingham, FGIC Insured, 6.125%, 12/01/13 ........... 2,109,720
1,405,000 Yakima GO, Convention Center, AMBAC Insured, 5.375%, 11/01/19 ................................ 1,387,296
350,000 Yakima-Tieton Irrigation District Revenue, Refunding, FSA Insured, 6.20%, 06/01/19 ........... 365,973
----------------
142,143,703
----------------
West Virginia 2.2%
11,560,000 Harrison County, Community Solid Waste Disposal Revenue, Potomac Edison Co., Series C,
AMBAC Insured, 6.75%, 08/01/24 .............................................................. 12,445,612
1,000,000 Monongalia County Building Community Hospital Revenue, Refunding, Monongalia General Hospital,
Series B, MBIA Insured, 6.50%, 07/01/17 ..................................................... 1,049,430
Parkersburg Waterworks Revenue, Refunding, MBIA Insured,
1,370,000 6.30%, 09/01/14 .......................................................................... 1,372,055
1,880,000 6.375%, 09/01/19 ......................................................................... 1,878,834
South Charleston Hospital Revenue, Refunding, Herbert J. Thomas Memorial Hospital, BIG Insured,
Pre-Refunded,
3,060,000 8.00%, 10/01/04 .......................................................................... 3,415,480
2,400,000 8.00%, 10/01/10 .......................................................................... 2,678,808
1,000,000 West Virginia Resource & Recovery, Solid Waste Disposal System Authority Revenue, BIG Insured,
Pre-Refunded, 8.25%, 06/01/09 ............................................................... 1,031,780
$ 300,000 West Virginia School Building Authority Revenue, Capital Improvement, Series B, MBIA Insured,
6.75%, 07/01/17 ............................................................................. $ 318,251
2,000,000 West Virginia State HDA, SFMR, MBIA Insured, 7.40%, 11/01/11 ................................. 2,076,000
2,000,000 West Virginia State Hospital Finance Authority Revenue, Monongalia General Hospital Project,
BIG Insured, Pre-Refunded, 8.60%, 07/01/17 .................................................. 2,127,820
2,250,000 West Virginia State University Revenue, Refunding, AMBAC Insured, 6.00%, 04/01/12 ............ 2,342,430
West Virginia State Water Development Authority Revenue,
3,000,000 Loan Program II, Series B, CGIC Insured, Pre-Refunded, 7.50%, 11/01/29 ................... 3,389,010
2,750,000 Refunding, Loan Program, Series A, CGIC Insured, 7.00%, 11/01/25 ......................... 2,998,187
----------------
37,123,697
----------------
Wisconsin 1.1%
500,000 Holmen School District, Series A, AMBAC Insured, 6.25%, 10/01/10 ............................. 542,680
Lake County School District GO, Refunding, AMBAC Insured,
850,000 6.35%, 04/01/11 .......................................................................... 893,843
900,000 6.35%, 04/01/12 .......................................................................... 950,742
1,970,000 Sturgeon Bay, Combined Utilities Mortgage Revenue, Refunding, AMBAC Insured, 5.20%, 01/01/10 . 1,937,456
3,000,000 Superior Limited Obligation Revenue, Refunding, Midwest Energy Resources, Series E, FGIC Insured,
6.90%, 08/01/21 ............................................................................. 3,547,890
Wisconsin Health Educational Revenue, Series A, CGIC Insured,
2,000,000 7.50%, 01/15/09 .......................................................................... 2,156,280
1,965,000 Community Provider Program, 7.50%, 01/15/04 .............................................. 2,146,585
Wisconsin Health Facilities Authority Revenue,
2,000,000 Meriter Hospital, Inc., FGIC Insured, Pre-Refunded, 8.375%, 12/01/09 ..................... 2,193,400
4,000,000 Milwaukee Psychiatric Hospital, MBIA Insured, 7.30%, 04/01/12 ............................ 4,177,800
500,000 Wisconsin State Health and Educational Facilities Authority Revenue, Refunding, Series AA,
MBIA Insured, 6.25%, 06/01/20 ............................................................... 516,830
----------------
19,063,506
----------------
Wyoming 1.0%
500,000 Gillette Health Facilities Revenue, Lutheran Hospital and Home Society, Refunding, MBIA Insured,
5.90%, 01/01/16 ............................................................................. 512,730
3,085,000 Lincoln City PCR, Refunding, Pacificorp Projects, AMBAC Insured, 5.625%, 11/01/21 ............ 2,997,078
1,735,000 Natrona County Hospital Revenue, Wyoming Medical Center Projects, Refunding, AMBAC Insured,
6.00%, 09/15/24 ............................................................................. 1,775,269
2,245,000 University Facilities Revenues, MBIA Insured, 7.10%, 06/01/10 ................................ 2,441,056
1,525,000 Worland GO, Refunding, AMBAC Insured, 5.30%, 06/01/12 ........................................ 1,487,576
6,750,000 Wyoming CDA, AMBAC Insured, 6.00%, 06/01/23 .................................................. 6,740,213
2,000,000 Wyoming Municipal Power Agency, Power Supply System Revenue, Refunding, Series A,
MBIA Insured, 6.125%, 01/01/16 .............................................................. 2,074,940
----------------
18,028,862
----------------
Total Long Term Investments (Cost $1,606,753,169) ..................................... 1,719,302,985
----------------
cShort Term Investments .1%..................................................................
$ 200,000 Grand Rapids, Michigan, Water Supply Systems Revenue, Refunding, FGIC Insured, Daily VRDN
and Put, 3.35%, 01/01/20 .................................................................... $ 200,000
800,000 New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue, Series G,
FGIC Insured, Daily VRDN and Put, 3.35%, 06/15/24 ........................................... 800,000
1,100,000 Scioto County, Ohio, Hospital Facilities Revenue, VHA Central, Inc., Capital Asset, Series G,
AMBAC Insured, Weekly VRDN and Put, 3.20%, 12/01/25 ......................................... 1,100,000
----------------
Total Short Term Investments (Cost $2,100,000) ........................................ 2,100,000
----------------
Total Investments (Cost $1,608,853,169) 100.5% ................................... 1,721,402,985
Liabilities in Excess of Other Assets (.5)% ...................................... (8,212,295)
----------------
Net Assets 100.0% ................................................................ $1,713,190,690
================
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,608,853,169 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 115,072,188
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (2,522,372)
----------------
Net unrealized appreciation ................................................................ $ 112,549,816
================
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CDA - Community Development 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
HFA - Housing Finance Agency/Authority
HFAR - Housing Finance Agency Revenue
HFC - Housing Finance Corp.
HMR - Housing Mortgage Revenue
IDA - Industrial Development Authority
IDAR - Industrial Development Authority Revenue
IDB - Industrial Development Bond
L.P. - Limited Partnership
MAC - Municipal Assistance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MUD - Municipal Utility District
PBA - Public Building Authority
PCA - Pollution Control Authority
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
VHA - Volunteer Hospital of America
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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(c) regarding uninsured
securities collateralized by U.S. government securities.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount Franklin Massachusetts Insured Tax-Free Income Fund (Note 1)
Long Term Investments 98.7%...................................................................
<C> <C> <C>
$ 2,700,000 Ashburnham & Westminister, Regional School District, MBIA Insured, 6.00%, 12/15/13 ............. $ 2,774,034
Attleboro Municipal Purpose GO, AMBAC Insured,
1,045,000 6.00%, 07/01/11 ............................................................................ 1,105,892
1,045,000 6.00%, 07/01/12 ............................................................................ 1,093,175
685,000 6.00%, 07/01/13 ............................................................................ 713,832
755,000 6.00%, 07/01/14 ............................................................................ 783,758
Blackstone-Milville School District, AMBAC Insured,
705,000 6.50%, 05/01/08 ............................................................................ 768,034
750,000 6.50%, 05/01/09 ............................................................................ 812,910
795,000 6.50%, 05/01/10 ............................................................................ 859,490
6,000,000 Boston GO, AMBAC Insured, Pre-Refunded, 7.375%, 08/01/04 ....................................... 6,281,220
2,200,000 Boston Revenue, Refunding, Boston City Hospital, Series B, MBIA Insured, 5,75%, 02/15/13 ....... 2,212,826
Boston Water and Sewage Commission, General Revenue,
3,000,000 Series 1988-A, BIG Insured, 7.25%, 11/01/06 ................................................ 3,269,250
1,400,000 eSeries 1989-A, Pre-Refunded, 7.10%, 11/01/19 .............................................. 1,562,736
1,095,000 Central Berkshire GO, School District, MBIA Insured, 7.25%, 06/01/08 ........................... 1,209,252
2,000,000 Fall River School Project, MBIA Insured, 7.20%, 06/01/10 ....................................... 2,244,060
1,650,000 Framingham Housing Authority Mortgage Revenue, Beaver Terrace Apartments, Series A,
GNMA Secured, 6.65%, 02/20/32 ................................................................. 1,684,865
Greenfield GO, MBIA Insured,
500,000 6.50%, 10/15/08 ............................................................................ 545,645
500,000 6.50%, 10/15/09 ............................................................................ 543,075
1,000,000 Holyoke GO, School Project Loans, MBIA Insured, 8.05%, 06/15/04 ................................ 1,213,620
Hudson GO, MBIA Insured,
250,000 6.00%, 05/15/13 ............................................................................ 261,218
240,000 6.00%, 05/15/14 ............................................................................ 249,816
Lenox GO, Refunding, AMBAC Insured,
1,000,000 6.60%, 10/15/11 ............................................................................ 1,081,790
500,000 6.625%, 10/15/15 ........................................................................... 538,455
450,000 Leominster GO, Series 1990, MBIA Insured, Pre-Refunded, 7.50%, 04/01/09 ........................ 512,631
Ludlow GO, School Project, Limited Tax, MBIA Insured,
210,000 7.30%, 11/01/07 ............................................................................ 252,876
210,000 7.30%, 11/01/08 ............................................................................ 253,329
210,000 7.40%, 11/01/09 ............................................................................ 255,442
4,000,000 Lynn Water and Sewer General Revenue, Series 1990-A, MBIA Insured, Pre-Refunded, 7.25%, 12/01/10 4,584,640
2,000,000 Mansfield GO, AMBAC Insured, 6.70%, 01/15/11 ................................................... 2,177,200
Martha's Vineyard, Regional High School District No. 100, AMBAC Insured,
830,000 6.55%, 12/15/10 ............................................................................ 918,038
725,000 6.60%, 12/15/11 ............................................................................ 801,712
880,000 6.65%, 12/15/12 ............................................................................ 974,864
210,000 6.70%, 12/15/14 ............................................................................ 231,804
500,000 Mashpee Water District GO, MBIA Insured, 6.40%, 10/15/12 ....................................... 536,505
Massachusetts Bay Transportation Authority,
2,500,000 COP, BIG Insured, 7.75%, 01/15/06 .......................................................... 3,078,200
3,000,000 eGeneral Transportation System, Series 1988-A, Pre-Refunded, 7.75%, 03/01/13 ............... 3,286,650
2,000,000 Refunding, Series B, CGIC Insured, 5.50%, 03/01/21 ......................................... 1,941,840
2,450,000 Massachusetts Education Loan Authority Revenue, Issue D, Series A, MBIA Insured, 7.25%, 01/01/09 2,579,924
Massachusetts GO,
1,000,000 Commonwealth, Series A, FGIC Insured, Pre-Refunded, 7.25%, 03/01/09 ........................ 1,127,880
800,000 Commonwealth, Series C, AMBAC Insured, 6.75%, 08/01/09 ..................................... 875,408
1,000,000 Commonwealth, Series C, CGIC Insured, Pre-Refunded, 7.00%, 12/01/10 ........................ 1,119,100
4,000,000 Refunding, Series A, AMBAC Insured, 6.50%, 08/01/11 ........................................ 4,306,600
2,000,000 Refunding, Series B, MBIA Insured, 6.50%, 08/01/11 ......................................... 2,155,260
Massachusetts Health & Educational Facilities Authority Revenue,
$ 1,500,000 Bay State Medical Center, Refunding, Series D, FGIC Insured, 6.00%, 07/01/15 ............... $ 1,547,370
2,000,000 Berkshire Health System, Series A, MBIA Insured, Pre-Refunded, 7.50%, 10/01/08 ............. 2,213,320
1,500,000 Berkshire Health System, Series A, MBIA Insured, Pre-Refunded, 6.75%, 10/01/19 ............. 1,605,495
5,500,000 Berkshire Health System, Series D, MBIA Insured, 6.00%, 10/01/19 ........................... 5,689,970
1,900,000 Beverly Hospital, Lot 1, Refunding, Series D, MBIA Insured, 7.30%, 07/01/13 ................ 2,099,424
4,000,000 Beverly Hospital, Lot 2, Series D, MBIA Insured, Pre-Refunded, 7.30%, 07/01/19 ............. 4,476,640
2,250,000 Boston College, Series J, FGIC Insured, 6.625%, 07/01/21 ................................... 2,434,703
500,000 Brigham & Women's Hospital, Series C, MBIA Insured, 7.00%, 06/01/18 ........................ 545,890
1,000,000 Cable Housing & Health Services, Series A, MBIA Insured, 5.25%, 07/01/23 ................... 930,130
2,200,000 Children's Hospital, Refunding, Series E, AMBAC Insured, 6.20%, 10/01/16 ................... 2,288,770
1,000,000 Community College Program, Series A, Connie Lee Insured, 6.50%, 10/01/09 ................... 1,092,250
3,250,000 Community College Program, Series A, Connie Lee Insured, 6.60%, 10/01/22 ................... 3,427,970
4,295,000 Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/18 ........................ 4,154,124
3,105,000 Emerson Hospital, Series D, FSA Insured, 5.80%, 08/15/18 ................................... 3,132,169
5,250,000 Fallon Healthcare System, Series A, CGIC Insured, 6.875%, 06/01/11 ......................... 5,835,848
7,550,000 Fallon Healthcare System, Series A, CGIC Insured, 6.75%, 06/01/20 .......................... 8,249,810
600,000 Fallon Healthcare System, Series A, CGIC Insured, 6.00%, 06/01/21 .......................... 610,848
3,490,000 Lahey Clinic Medical Center, Series A, MBIA Insured, Pre-Refunded, 7.625%, 07/01/18 ........ 3,847,690
8,965,000 Massachusetts General Hospital, AMBAC Insured, 6.25%, 07/01/20 ............................. 9,369,590
2,500,000 Massachusetts General Hospital, Refunding, Series F, AMBAC Insured, 6.00%, 07/01/15 ........ 2,586,300
1,280,000 McLean Hospital, Series C, FGIC Insured, 6.625%, 07/01/15 .................................. 1,381,901
3,000,000 Metro West Health, Inc., Series C, AMBAC Insured, 6.40%, 11/15/11 .......................... 3,247,140
3,500,000 Metro West Health, Inc., Series C, AMBAC Insured, 6.50%, 11/15/18 .......................... 3,706,710
550,000 Metro West Health, Inc., Refunding, Series C, AMBAC Insured, 6.30%, 11/15/12 ............... 582,758
5,400,000 Milton Hospital, Series B, MBIA Insured, 7.00%, 07/01/16 ................................... 6,024,834
6,000,000 Mt. Auburn Hospital, Series 1988-A, MBIA Insured, Pre-Refunded, 7.875%, 07/01/18 ........... 6,626,700
6,500,000 Mt. Auburn Hospital, Series B-1, MBIA Insured, 6.30%, 08/15/24 ............................. 6,861,075
1,895,000 New England Medical Center Hospitals, Series D, AMBAC Insured, 6.875%, 04/01/22 ............ 2,101,820
1,000,000 New England Medical Center Hospitals, Series F, FGIC Insured, 6.50%, 07/01/12 .............. 1,074,110
8,925,000 New England Medical Center Hospitals, Series F, FGIC Insured, 6.625%, 07/01/25 ............. 9,615,617
4,000,000 bNew England Medical Center Hospitals, Series G, MBIA Insured, 5.375%, 07/01/24 ............ 3,828,800
5,000,000 Newton-Wellesley Hospital, Series C, BIG Insured, Pre-Refunded, 8.00%, 07/01/18 ............ 5,553,750
4,030,000 Newton-Wellesley Hospital, Series D, MBIA Insured, 7.00%, 07/01/15 ......................... 4,514,406
250,000 Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 07/01/25 ......................... 257,643
1,250,000 Northeastern University, Series D, AMBAC Insured, Pre-Refunded, 7.125%, 10/01/10 ........... 1,389,188
3,900,000 Northeastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ........................... 4,243,122
5,750,000 Salem Hospital, Series 1987-A, MBIA Insured, Pre-Refunded, 7.25%, 07/01/09 ................. 6,025,828
4,000,000 eSt. Elizabeth's Hospital of Boston, Series B, FHA Mortgage Insured, Pre-Refunded, 7.75%, 08/01/27 4,304,280
6,200,000 St. Luke's Hospital, New Bedford, Series B, AMBAC Insured, Pre-Refunded, 7.75%, 07/01/13 ... 6,655,514
890,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.55%, 07/01/12 ...................... 965,810
3,000,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.60%, 07/01/20 ...................... 3,238,230
1,025,000 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.65%, 07/01/10 .................. 1,180,482
515,000 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.70%, 07/01/20 .................. 594,130
3,250,000 Suffolk University, Series B, Connie Lee Insured, 6.35%, 07/01/22 .......................... 3,385,915
1,500,000 University Hospital, Series C, MBIA Insured, Pre-Refunded, 7.25%, 07/01/19 ................. 1,681,845
1,820,000 Wentworth Institute of Technology, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 04/01/10 .. 2,066,555
3,000,000 Wheaton College, Series B, CGIC Insured, 7.25%, 07/01/19 ................................... 3,352,860
2,750,000 Worcester Polytech Institute, MBIA Insured, 6.625%, 09/01/17 ............................... 2,972,805
4,395,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue, Series D,
MBIA Insured, 6.125%, 07/01/19 ................................................................ 4,546,364
430,000 eMassachusetts State HFA, MFHR, Section 8 Assisted, Series 1979-A, ETM 04/01/19, 7.00%, 04/01/21 504,076
Massachusetts State HFA, Housing Revenue,
$ 1,735,000 Series 1986-A, MBIA Insured, 7.50%, 12/01/06 ............................................... $ 1,794,320
1,975,000 Series 1988-8, BIG Insured, 7.70%, 06/01/17 ................................................ 2,069,484
50,000 SFHR, Series 1985-1, FGIC Insured, 9.375%, 06/01/12 ........................................ 51,435
1,220,000 SFHR, Series 1986-2, FGIC Insured, 8.25%, 06/01/14 ......................................... 1,247,889
1,500,000 SFMR, Series 18, MBIA Insured, 7.35%, 12/01/16 ............................................. 1,573,350
Massachusetts State Industrial Finance Agency Revenue,
750,000 Babson College, Series A, MBIA Insured, 6.375%, 10/01/09 ................................... 818,408
3,105,000 Babson College, Series A, MBIA Insured, 6.50%, 10/01/22 .................................... 3,353,369
7,075,000 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 ............................... 7,646,236
1,000,000 Milton Academy, Series A, MBIA Insured, Pre-Refunded, 7.25%, 09/01/19 ...................... 1,122,260
2,010,000 Refunding, Combined Jewish Philanthropies, AMBAC Insured, Series A, 6.375%, 02/01/15 ....... 2,168,288
1,665,000 Saint Marks School Issue, MBIA Insured, 5.375%, 01/01/21 ................................... 1,597,701
5,200,000 Massachusetts State Port Authority Revenue, Series A, FGIC Insured, 7.50%, 07/01/20 ............ 5,837,208
Melrose Municipal Purpose GO, MBIA Insured,
200,000 6.00%, 08/15/11 ............................................................................ 210,946
200,000 6.05%, 08/15/12 ............................................................................ 211,412
200,000 6.10%, 08/15/13 ............................................................................ 211,384
200,000 6.10%, 08/15/14 ............................................................................ 210,566
Millis School Project, GO, Unlimited Tax, AMBAC Insured,
270,000 7.40%, 05/01/06 ............................................................................ 300,356
270,000 7.40%, 05/01/07 ............................................................................ 299,813
270,000 7.40%, 05/01/08 ............................................................................ 299,276
Norfolk GO, AMBAC Insured,
450,000 6.00%, 01/15/10 ............................................................................ 470,066
425,000 6.00%, 01/15/11 ............................................................................ 443,951
375,000 6.00%, 01/15/12 ............................................................................ 392,531
300,000 6.00%, 01/15/13 ............................................................................ 312,948
300,000 North Andover Municipal Purpose, Limited Tax, MBIA Insured, 7.40%, 09/15/09 .................... 339,186
North Attleborough GO, Limited Tax, AMBAC Insured, Pre-Refunded,
125,000 7.05%, 06/01/06 ............................................................................ 140,786
125,000 7.10%, 06/01/07 ............................................................................ 141,026
125,000 7.15%, 06/01/08 ............................................................................ 141,266
125,000 7.20%, 06/01/09 ............................................................................ 141,508
1,500,000 Palmer GO, Refunding, MBIA Insured, 5.50%, 10/01/10 ............................................ 1,515,495
Peabody GO, Electric Light, AMBAC Insured,
500,000 6.75%, 08/01/05 ............................................................................ 554,405
750,000 6.85%, 08/01/06 ............................................................................ 831,353
500,000 6.90%, 08/01/07 ............................................................................ 552,890
555,000 6.95%, 08/01/08 ............................................................................ 613,614
1,000,000 Puerto Rico Commonwealth, Public Improvement, MBIA Insured, Pre-Refunded, 6.50%, 07/01/09 ...... 1,135,020
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
2,545,000 Series 1988-A, 7.80%, 10/15/21 ............................................................. 2,667,949
815,000 Series 1988-B, 7.65%, 10/15/22 ............................................................. 863,101
Quabbin Regional School District, GO, AMBAC Insured,
275,000 7.00%, 06/15/04 ............................................................................ 305,206
275,000 7.00%, 06/15/05 ............................................................................ 304,073
275,000 7.00%, 06/15/06 ............................................................................ 304,073
275,000 7.00%, 06/15/07 ............................................................................ 304,073
275,000 7.00%, 06/15/08 ............................................................................ 304,073
250,000 7.00%, 06/15/09 ............................................................................ 276,430
Rochester School GO, Lot B, MBIA Insured,
$ 150,000 7.30%, 04/01/04 ............................................................................ $ 165,356
150,000 7.30%, 04/01/05 ............................................................................ 164,900
150,000 7.30%, 04/01/06 ............................................................................ 164,672
150,000 7.30%, 04/01/07 ............................................................................ 164,672
150,000 7.30%, 04/01/08 ............................................................................ 164,672
120,000 7.30%, 04/01/09 ............................................................................ 131,737
Salem GO,
425,000 AMBAC Insured, 6.70%, 08/15/05 ............................................................. 473,739
500,000 AMBAC Insured, 6.80%, 08/15/07 ............................................................. 558,435
470,000 MBIA Insured, 5.20%, 07/15/11 .............................................................. 466,531
470,000 MBIA Insured, 5.20%, 07/15/12 .............................................................. 455,867
3,000,000 Somerville Housing Authority Revenue, Clarendon Hill, GNMA Secured, 7.95%, 11/20/30 ............ 3,221,670
South Essex Sewer District,
330,000 AMBAC Insured, 6.25%, 11/01/11 ............................................................. 351,195
1,000,000 bSeries A, MBIA Insured, 5.25%, 06/15/24 ................................................... 955,980
2,800,000 Series B, MBIA Insured, Pre-Refunded, 7.00%, 06/01/24 ...................................... 3,305,343
2,375,000 Southbridge GO, AMBAC Insured, 6.375%, 01/01/12 ................................................ 2,531,820
Tyngsborough GO, School Project Loan, AMBAC Insured,
600,000 6.90%, 05/15/09 ............................................................................ 666,624
600,000 6.90%, 05/15/10 ............................................................................ 665,160
2,000,000 Westfield School District GO, AMBAC Insured, Pre-Refunded, 7.10%, 12/15/08 ..................... 2,281,339
Westford GO,
800,000 FGIC Insured, Pre-Refunded, 7.60%, 10/15/10 ................................................ 926,104
2,000,000 Refunding, AMBAC Insured, 5.45%, 10/15/10 .................................................. 2,020,739
Whately GO, AMBAC Insured,
215,000 6.20%, 01/15/07 ............................................................................ 230,942
215,000 6.30%, 01/15/08 ............................................................................ 231,454
200,000 6.40%, 01/15/10 ............................................................................ 215,356
Whitman GO, Various Purpose Loan, MBIA Insured, Pre-Refunded,
250,000 7.60%, 06/15/04 ............................................................................ 259,295
250,000 7.60%, 06/15/05 ............................................................................ 259,295
150,000 7.60%, 06/15/06 ............................................................................ 155,577
Worcester GO, Refunding, MBIA Insured,
1,335,000 Series E, 6.00%, 10/01/15 .................................................................. 1,397,344
1,200,000 Series G, 5.30%, 07/01/15 .................................................................. 1,144,103
----------------
Total Long Term Investments (Cost $277,210,731) .......................................... 300,210,080
----------------
cShort Term Investments .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 $278,310,731) 99.0% ......................................... 301,310,080
Other Assets and Liabilities, Net 1.0% ............................................... 2,977,459
----------------
Net Assets 100.0% .................................................................. $304,287,539
================
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $278,332,606 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 23,252,268
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (274,794)
----------------
Net unrealized appreciation .................................................................. $ 22,977,474
================
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
SFHR - Single Family Housing Revenue
SFMR - Single Family Mortgage Revenue
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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 rate
or U.S. Treasury bills rate). eSee Note 1(c) regarding uninsured securities
collateralized by U.S. government securities.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount Franklin Michigan Insured Tax-Free Income Fund (Note 1)
Long Term Investments 100.3%
<C> <C> <C>
$ 1,325,000 Allegan Public School District GO, School Building and Site, AMBAC Insured, 5.875%, 05/01/18 . $ 1,359,053
3,750,000 Allendale Public School District, MBIA Insured, 6.00%, 05/01/24 .............................. 3,900,000
5,000,000 Anchor Bay School District GO, FGIC Insured, 5.55%, 05/01/19 ................................. 4,916,400
1,625,000 Bath Community School District Refunding, FGIC Insured, 5.75%, 05/01/25 ...................... 1,628,835
Bay City Electric Utility Revenue, AMBAC Insured,
3,100,000 6.60%, 01/01/12 .......................................................................... 3,333,864
2,000,000 Refunding, Pre-Refunded, 7.30%, 01/01/05 ................................................. 2,100,640
1,135,000 Bay City GO, Refunding, AMBAC Insured, 5.20%, 09/01/12 ....................................... 1,094,810
Belding Area School, Series B, AMBAC Insured,
375,000 6.15%, 05/01/13 .......................................................................... 388,819
675,000 6.15%, 05/01/14 .......................................................................... 697,640
Berkley City School District, FGIC Insured,
2,060,000 5.625%, 01/01/15 ........................................................................ 2,067,272
2,125,000 6.00%, 01/01/19 .......................................................................... 2,179,209
1,450,000 Breckenridge Community School District, AMBAC Insured, 5.75%, 05/01/23 ....................... 1,451,914
Breitung Township School District,
7,500,000 CGIC Insured, Pre-Refunded, 7.20%, 05/01/19 .............................................. 8,349,150
2,935,000 MBIA Insured, 6.30%, 05/01/15 ............................................................ 3,046,354
2,500,000 Refunding, AMBAC Insured, 5.50%, 05/01/12 ................................................ 2,468,200
5,250,000 Byron Center Public Schools, Refunding, MBIA Insured, 5.875%, 05/01/24 ....................... 5,319,615
Caledonia Community Schools, Refunding, AMBAC Insured,
3,750,000 6.625%, 05/01/14 ......................................................................... 4,025,175
11,485,000 5.50%, 05/01/22 .......................................................................... 11,128,161
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...................................... 1,415,749
875,000 Calumet School District GO, Laurium and Keweenah Public Schools, CGIC Insured, 5.875%, 05/01/20 888,878
3,875,000 Cedar Springs Public School District, MBIA Insured, 5.875%, 05/01/24 ......................... 3,930,064
5,000,000 Central Michigan University Revenue, MBIA Insured, Pre-Refunded, 7.90%, 10/01/15 ............. 5,420,100
3,140,000 Chelsea School District, FGIC Insured, 5.875%, 05/01/25 ...................................... 3,176,801
Chippewa Valley School District, BIG Insured, Pre-Refunded,
500,000 7.40%, 05/01/07 .......................................................................... 556,505
500,000 7.40%, 05/01/08 .......................................................................... 556,505
500,000 7.40%, 05/01/09 .......................................................................... 556,505
500,000 7.40%, 05/01/10 .......................................................................... 556,505
1,225,000 Clinton Township Building Authority, Macomb County, Series A, AMBAC Insured, 5.875%, 11/01/17 1,251,301
Coldwater Community Schools, MBIA Insured,
1,100,000 6.20%, 05/01/15 .......................................................................... 1,156,584
1,700,000 6.30%, 05/01/23 .......................................................................... 1,787,023
3,000,000 Comstock Park Public Schools, Refunding, School Building and Site, FGIC Insured, 5.25%, 05/01/15 2,873,940
65,000 Coopersville Area Public Schools, Counties of Ottawa and Muskegon, MBIA Insured, Pre-Refunded,
8.60%, 05/01/04 ............................................................................. 67,484
3,000,000 Dearborn EDC Revenue, Oakwood Hospital, Refunding, Series A, MBIA Insured, 5.25%, 08/15/14 ... 2,870,100
4,400,000 Dearborn EDC Revenue, Oakwood Obligation Group, Series A, FGIC Insured, 5.875%, 11/15/25 ..... 4,445,892
13,050,000 Detroit City Water Supply System Revenue, MBIA Insured, Pre-Refunded, 7.875%, 07/01/19 ....... 14,459,400
Detroit Sewage Disposal System Revenue,
10,300,000 FGIC Insured, Pre-Refunded, 7.125%, 07/01/19 ............................................. 11,426,614
1,000,000 FGIC Insured, Pre-Refunded, 6.625%, 07/01/21 ............................................. 1,127,970
4,000,000 Refunding, BIG Insured, 7.00%, 07/01/09 .................................................. 4,164,680
500,000 Refunding, BIG Insured, Pre-Refunded, 8.00%, 07/01/08 .................................... 537,995
4,000,000 Refunding, Series B, MBIAInsured, 5.25%, 07/01/21 ........................................ 3,801,000
6,000,000 Detroit State Aid GO, AMBAC Insured, Pre-Refunded, 7.20%, 05/01/09 ........................... 6,669,300
Detroit Water Supply System Revenue,
$ 4,960,000 FGIC Insured, Pre-Refunded, 7.125%, 07/01/10 ............................................. $ 5,610,454
5,000,000 FGIC Insured, Pre-Refunded, 6.25%, 07/01/12 .............................................. 5,479,350
3,500,000 FGIC Insured, Pre-Refunded, 7.25%, 07/01/20 .............................................. 3,976,105
1,025,000 Second Lien, Series A, MBIAInsured, 5.50%, 07/01/25 ...................................... 995,859
DeWitt Public Schools Building and Site, AMBAC Insured, Pre-Refunded,
350,000 6.60%, 05/01/15 .......................................................................... 391,059
350,000 6.60%, 05/01/16 .......................................................................... 391,059
1,050,000 Dexter Community Schools, Refunding, AMBAC Insured, 5.70%, 05/01/14 .......................... 1,055,103
1,250,000 East Lansing Building Authority, GO, Refunding, AMBAC Insured, 7.00%, 10/01/16 ............... 1,344,925
Eastern Michigan University Revenue, Refunding,
1,000,000 AMBAC Insured, 6.375%, 06/01/14 .......................................................... 1,052,160
2,105,000 Residence Hall, FGIC Insured, 7.875%, 10/01/10 ........................................... 2,163,645
4,500,000 eSpecial Project, Student Fee, Pre-Refunded, 7.875%, 10/01/14 ............................ 4,659,705
Eaton Rapids Public Schools Buidling and Site, MBIA Insured,
2,500,000 5.50%, 05/01/20 .......................................................................... 2,447,475
2,000,000 5.625%, 05/01/25 ......................................................................... 1,989,880
1,000,000 Farmington Hills Economic Development Corp., MBIAInsured, 5.70%, 2/15/15 ..................... 1,004,000
10,140,000 Farmington Hills Hospital Finance Authority Revenue, Refunding, Botsford General Hospital, Series A,
MBIA Insured, 7.10%, 02/15/14 ............................................................... 10,997,844
Ferndale School District, Refunding, FGIC Insured,
2,500,000 5.375%, 05/01/16 ......................................................................... 2,453,050
2,000,000 5.375%, 05/01/21 ......................................................................... 1,944,760
Ferris State College Revenue, AMBAC Insured,
1,000,000 6.15%, 10/01/14 .......................................................................... 1,050,100
1,000,000 6.25%, 10/01/19 .......................................................................... 1,053,660
6,665,000 Flint Hospital Building Authority Revenue, Refunding, Hurley Medical Center, Series A, BIG Insured,
Pre-Refunded, 7.75%, 07/01/00 ............................................................... 6,897,142
Fowlerville Community School District, Refunding, FGIC Insured,
645,000 5.50%, 05/01/13 .......................................................................... 640,698
2,150,000 5.75%, 05/01/20 .......................................................................... 2,163,481
2,345,000 Fremont Public Schools District, Series 95, FGIC Insured, 5.50%, 05/01/21 .................... 2,304,056
4,425,000 Gaylord Community Schools, Refunding, MBIA Insured, 5.625%, 05/01/21 ......................... 4,392,211
Gerrish and Higgins School District, Building and Site, CGIC Insured, Pre-Refunded,
3,000,000 6.40%, 05/01/12 .......................................................................... 3,331,830
2,500,000 6.50%, 05/01/17 .......................................................................... 2,787,975
4,000,000 Gibraltar School District GO, CGIC Insured, Pre-Refunded, 7.00%, 05/01/15 .................... 4,352,120
Gogebic - Iron Waste Water Authority, Waste Water Treatment System Revenue, Refunding,
MBIA Insured,
1,015,000 5.95%, 01/01/15 .......................................................................... 1,036,538
500,000 6.05%, 01/01/25 .......................................................................... 510,560
6,250,000 Grand Haven Area Public Schools, Refunding, MBIA Insured, 6.05%, 05/01/14 .................... 6,457,813
Grand Ledge Public School District, MBIA Insured,
5,750,000 b5.375%, 05/01/24 ........................................................................ 5,520,115
10,000,000 Pre-Refunded, 6.60%, 05/01/24 ............................................................ 11,521,500
610,000 Grand Rapids Community College, MBIA Insured, 5.90%, 05/01/19 ................................ 622,554
7,500,000 Grand Rapids, Downtown, Devauth Tax Increment Revenue, MBIA Insured, 6.875%, 06/01/24 ........ 8,255,100
3,850,000 Grand Rapids Sewer System Revenue Improvement, Refunding, MBIA Insured, 6.00%, 01/01/20 ...... 3,892,735
Grand Rapids Water Supply System Revenue,
5,500,000 FGIC Insured, 5.75%, 01/01/18 ............................................................ 5,536,245
5,375,000 FGIC Insured, Pre-Refunded, 7.25%, 01/01/20 .............................................. 6,039,565
4,500,000 MBIA Insured, Pre-Refunded, 7.875%, 01/01/18 ............................................. 4,911,930
Grand Traverse County Hospital Finance Authority Revenue, Series A,
$ 5,500,000 eMunson Medical Center, Pre-Refunded, 7.625%, 12/01/15 ................................... $ 5,781,270
2,500,000 Refunding, Munson Healthcare, AMBAC Insured, 6.25%, 07/01/12 ............................. 2,649,300
7,900,000 Refunding, Munson Healthcare, AMBAC Insured, 6.25%, 07/01/22 ............................. 8,242,386
3,000,000 Gratiot County EDC, EDR, Masonic Home Project, AMBAC Insured, Pre-Refunded, 7.375%, 04/01/20 . 3,403,620
1,850,000 Greenville Public Schools Building, MBIA Insured, 5.75%, 05/01/19 ............................ 1,869,684
2,750,000 Gull Lake Community School District, FGIC Insured, Pre-Refunded, 6.80%, 05/01/21 ............. 3,108,820
4,715,000 Harrison Community Schools GO, AMBAC Insured, 6.25%, 05/01/13 ................................ 5,024,728
Haslett Public School District, CGIC Insured,
4,000,000 Pre-Refunded, 7.50%, 05/01/20 ............................................................ 4,531,840
3,875,000 Refunding, 6.625%, 05/01/19 .............................................................. 4,169,926
Hastings School District, FGIC Insured,
1,000,000 5.625%, 05/01/15 ......................................................................... 1,000,320
1,750,000 5.625%, 05/01/18 ......................................................................... 1,739,973
2,000,000 Holland School District GO, Refunding, AMBAC Insured, 6.375%, 05/01/10 ....................... 2,125,720
Holly Area School District, FGIC Insured,
8,815,000 b5.625%, 05/01/20 ........................................................................ 8,825,049
3,775,000 5.625%, 05/01/25 ......................................................................... 3,724,075
Holt Public Schools Building and Site, MBIA Insured,
1,000,000 6.25%, 05/01/16 .......................................................................... 1,045,430
3,060,000 6.25%, 05/01/18 .......................................................................... 3,199,016
2,525,000 6.30%, 05/01/20 .......................................................................... 2,639,534
1,425,000 6.50%, 05/01/21 .......................................................................... 1,502,264
Houghton-Portage Township School District, Refunding,
2,000,000 AMBAC Insured, 6.00%, 05/01/14 ........................................................... 2,083,500
2,700,000 CGIC Insured, Pre-Refunded, 7.00%, 05/01/17 .............................................. 2,937,681
750,000 Hudsonville Building Authority, Refunding, AMBAC Insured, 6.60%, 10/01/17 .................... 795,225
Hudsonville Public Schools GO, Refunding, Series B, FGIC Insured,
2,000,000 6.05%, 05/01/19 .......................................................................... 2,079,800
2,000,000 6.10%, 05/01/24 .......................................................................... 2,079,620
9,800,000 Huron Valley School District, Refunding, FGIC Insured, 6.125%, 05/01/20 ...................... 10,177,888
Imlay City Community School District,
3,750,000 Crossover Refunding, AMBAC Insured, 5.40%, 05/01/17 ...................................... 3,652,838
6,800,000 Refunding, CGIC Insured, 6.70%, 05/01/21 ................................................. 7,292,660
Inkster Michigan School District, Series 1990, AMBAC Insured, Pre-Refunded,
450,000 7.00%, 05/01/14 .......................................................................... 503,231
450,000 7.00%, 05/01/16 .......................................................................... 503,231
2,250,000 Iron Mountain School District, Building and Site, AMBAC Insured, Pre-Refunded, 6.30%, 05/01/21 2,488,545
1,350,000 Ithaca Public Schools GO, AMBAC Insured, 5.75%, 05/01/21 ..................................... 1,362,285
Jackson County GO,
3,000,000 Refunding, AMBAC Insured, 5.50%, 04/01/13 ................................................ 2,989,980
400,000 eSeries 1985, Pre-Refunded, 8.60%, 04/01/12 .............................................. 446,716
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding & Improvement,
Bronson Methodist, Series A, MBIA Insured,
5,000,000 6.25%, 05/15/12 .......................................................................... 5,289,450
2,460,000 6.375%, 05/15/17 ......................................................................... 2,597,096
1,000,000 Kelloggsville Public School District GO, FGIC Insured, 5.75%, 05/01/13 ....................... 1,020,280
2,400,000 Laingsburg Comunity School District, Refunding, FGIC Insured, 5.375%, 05/01/21 ............... 2,317,992
Lake City Area School District GO, AMBAC Insured,
2,500,000 Pre-Refunded, 6.95%, 05/01/13 ............................................................ 2,684,375
2,955,000 Refunding, 5.625%, 05/01/13 .............................................................. 2,989,514
1,000,000 Lakeshore Public Schools, Berrien County, MBIA Insured, 5.70%, 05/01/22 ...................... 1,002,360
Lake Superior State University Revenue,
$ 1,500,000 AMBAC Insured, 6.375%, 11/15/15 .......................................................... $ 1,608,660
2,135,000 MBIA Insured, 6.50%, 11/15/11 ............................................................ 2,286,564
1,500,000 Lakeview Community School District GO, Refunding, MBIA Insured, 6.75%, 05/01/13 .............. 1,636,110
7,500,000 Lansing Sewage Disposal System Revenue, Refunding, Series 1988, MBIA Insured, Pre-Refunded,
7.625%, 05/01/06 ............................................................................ 7,776,075
Livonia Public School District, Refunding, FGIC Insured,
10,000,000 5.50%, 05/01/16 .......................................................................... 9,938,900
9,625,000 5.50%, 05/01/21 .......................................................................... 9,495,159
1,000,000 Marquette Area Public School Building and Site, Series B, FGIC Insured, Pre-Refunded, 6.65%,
05/01/12 .................................................................................... 1,123,620
5,000,000 Marquette City Hospital Finance Authority Revenue, Refunding, Marquette General Hospital,
Series C, AMBAC Insured, 7.50%, 04/01/07 .................................................... 5,448,000
1,100,000 Marysville Public School District, MBIA Insured, 5.75%, 05/01/22 ............................. 1,105,775
1,000,000 Mason Public Schools District, FGIC Insured, 5.40%, 05/01/21 ................................. 963,960
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 .......................................................................... 848,044
775,000 7.55%, 05/01/16 .......................................................................... 848,834
800,000 7.55%, 05/01/17 .......................................................................... 876,216
800,000 7.55%, 05/01/18 .......................................................................... 876,216
2,675,000 Menominee Area Public School District, Refunding, AMBAC Insured, 6.00%, 05/01/20 ............. 2,783,632
Michigan Higher Education Student Loan Authority Revenue, Series 8-A, MBIA Insured,
2,000,000 7.40%, 10/01/04 .......................................................................... 2,135,940
2,000,000 7.55%, 10/01/08 .......................................................................... 2,122,220
Michigan Municipal Bond Authority Revenue, Local Government Loan Program,
850,000 Series A, Group 15, AMBAC Insured, 7.60%, 05/01/09 ....................................... 932,085
3,790,000 Series C, MBIA Insured, 6.00%, 11/01/10 .................................................. 3,969,153
6,490,000 Series G, AMBAC Insured, 6.75%, 11/01/14 ................................................. 7,109,146
1,650,000 Series G, AMBAC Insured, 6.80%, 11/01/14 ................................................. 1,813,020
825,000 Series G, AMBAC Insured, 6.80%, 11/01/23 ................................................. 900,537
1,000,000 Wayne County Project, Series A, FGIC Insured, Pre-Refunded,
7.00%, 12/01/09 ......................................................................... 1,124,370
Michigan Public Power Agency Revenue, Refunding,
5,000,000 bBelle River Project, MBIA Insured, 5.25%, 01/01/18 ...................................... 4,744,500
1,900,000 Campbell Project, AMBAC Insured, 6.125%, 01/01/10 ........................................ 1,961,503
Michigan State Building Authority Revenue,
10,000,000 Detroit Regional Prisons, Series I, MBIA Insured, Pre-Refunded, 7.25%, 10/01/08 .......... 11,036,400
1,000,000 Refunding, University of Michigan, Adult General Hospital, AMBAC Insured, Pre-Refunded,
7.375%, 12/01/00 ........................................................................ 1,049,330
5,625,000 Refunding, University of Michigan, Adult General Hospital, BIG Insured, Pre-Refunded, 7.875%,
12/01/04 ................................................................................ 5,922,788
1,500,000 Refunding, Series I, AMBAC Insured, 6.25%, 10/01/20 ...................................... 1,551,015
4,645,000 Series II, MBIA Insured, 6.25%, 10/01/20 ................................................. 4,831,915
5,000,000 Series II, MBIA Insured, ETM 04/01/98, 7.40%, 04/01/01 ................................... 5,449,800
1,750,000 Michigan State Comprehensive Transportation Revenue, Refunding, Series 1988-II, FGIC Insured,
7.625%, 05/01/11 ............................................................................ 1,889,405
Michigan State HDA, Limited Obligation Revenue, Mercy Bellbrook Project, MBIA Insured,
Pre-Refunded,
3,200,000 8.00%, 04/01/07 .......................................................................... 3,410,016
1,200,000 8.125%, 04/01/18 ......................................................................... 1,280,316
Michigan State HDA, MFHR, FGIC Insured,
$ 5,750,000 Series 1987-A, 8.375%, 07/01/19 .......................................................... $ 6,114,033
4,415,000 Series 1988-A, 7.70%, 07/01/18 ........................................................... 4,614,646
2,880,000 Series 1989-A, 7.55%, 07/01/09 ........................................................... 3,029,357
2,945,000 Series 1989-A, 7.65%, 07/01/15 ........................................................... 3,082,797
1,800,000 Michigan State HDA, SFMR, Series 1978, FGIC Insured, 6.30%, 04/01/11 ......................... 1,800,396
4,420,000 Michigan State HDA, SFMR, Series 1986-A, FGIC Insured, 8.00%, 10/01/06 ....................... 4,539,915
Michigan State Hospital Finance Authority Revenue,
1,750,000 Crittenton Hospital, FGIC Insured, 6.75%, 03/01/20 ....................................... 1,850,398
2,000,000 Crittenton Hospital, Series A, FGIC Insured, 7.125%, 12/01/06 ............................ 2,076,540
4,295,000 eCrittenton Hospital, Series A, Pre-Refunded, 7.25%, 12/01/13 ............................ 4,501,332
1,000,000 eHenry Ford Hospital, Series 1985-A, Pre-Refunded, 7.50%, 07/01/13 ....................... 1,051,920
3,500,000 MidMichigan Hospital, MBIA Insured, 6.625%, 06/01/10 ..................................... 3,674,965
8,750,000 Mt. Sinai Hospital of Detroit, FGIC Insured, Pre-Refunded, 7.00%, 01/01/09 ............... 9,172,888
9,020,000 Oakland General Hospital, AMBAC Insured, 7.00%, 07/01/15 ................................. 9,770,103
2,200,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.00%, 07/01/10 ............................ 2,477,750
10,000,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.20%, 11/01/15 ............................ 11,361,100
13,250,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.10%, 07/01/18 ............................ 14,974,620
7,635,000 Pontiac Osteopathic, Series B, AMBAC Insured, Pre-Refunded, 7.75%, 02/01/05 .............. 8,072,867
4,500,000 Refunding, Oakwood Hospital, Group A, FGIC Insured, 5.625%, 11/01/18 ..................... 4,485,330
2,075,000 bRefunding, Sisters of Mercy Health Corp., MBIA Insured, 5.25%, 08/15/21 ................. 1,963,593
2,000,000 Refunding, Sisters of Mercy Health Corp., Series H, MBIA Insured, 7.50%, 08/15/07 ........ 2,138,020
3,445,000 Refunding, St. John's Hospital, Series A, AMBAC Insured, 6.00%, 05/15/13 ................. 3,570,191
9,545,000 Refunding, St. John's Hospital, Series A, AMBAC Insured, 6.25%, 05/15/14 ................. 10,034,181
4,900,000 Sisters of Mercy Health Corp., Series H, MBIA Insured, 7.50%, 08/15/13 ................... 5,232,416
1,500,000 Sparrow Obligation Group, MBIA Insured, 6.50%, 11/15/11 .................................. 1,598,730
3,000,000 Michigan State, South Central Power Agency, Power Supply System Revenue, Refunding,
AMBAC Insured, Pre-Refunded, 7.25%, 11/01/06 ................................................ 3,135,750
Michigan State Strategic Fund, Limited Obligation Revenue,
3,000,000 Refunding, Detroit Edison Co., AMBAC Insured, 7.00%, 05/01/21 ............................ 3,632,280
5,000,000 Refunding, Detroit Edison Co., FGIC Insured, 6.95%, 05/01/11 ............................. 5,823,050
20,000,000 Refunding, Detroit Edison Co., FGIC Insured, 6.875%, 12/01/21 ............................ 21,700,400
1,285,000 Refunding, Detroit Edison Co., Series BB, MBIA Insured, 6.05%, 10/01/23 .................. 1,333,110
10,000,000 Refunding, Detroit Edison Co., Series BB, MBIA Insured, 6.20%,08/15/25 ................... 10,484,300
5,540,000 Refunding, Detroit Edison Co., Series CC, FGIC Insured, 6.95%, 09/01/21 .................. 6,017,603
5,825,000 Refunding, Detroit Edison Co., Series CC, MBIA Insured, 6.05%, 10/01/23 .................. 6,043,088
1,800,000 St. John-Bon Secours Care Center, FGIC Insured, 7.90%, 11/15/16 .......................... 1,920,960
Michigan State Trunk Line GO,
6,000,000 Refunding, Series B-2, MBIA Insured, 5.50%, 10/01/21 ..................................... 5,926,680
10,000,000 Series A, FGIC Insured, 5.80%, 11/15/24 .................................................. 10,102,200
5,000,000 bMichigan State University Revenues, Series A, AMBAC Insured, 5.00%, 02/15/26 ................ 4,607,350
2,500,000 Monroe County EDC, Limited Obligation Revenue, Monroe Community Health Services,
MBIA Insured, Pre-Refunded, 7.00%, 09/01/21 ................................................. 2,866,475
Monroe County PCR, Detroit Edison Co.,
4,000,000 Series 1, MBIA Insured, 6.875%, 09/01/22 ................................................. 4,312,000
4,000,000 Series 1-B, MBIA Insured, 6.55%, 09/01/24 ................................................ 4,234,480
10,000,000 Series C, AMBAC Insured, 7.50%, 12/01/19 ................................................. 11,105,800
1,150,000 Series CC, MBIA Insured, 6.55%, 06/01/24 ................................................. 1,215,940
4,725,000 Morley-Stanwood Community Schools Building and Site, FGIC Insured, 5.625%, 05/01/21 .......... 4,665,087
2,040,000 Mount Clemens Community School District, Refunding, MBIA Insured, 5.50%, 05/01/19 ............ 1,985,165
1,900,000 bMuskegon Public Schools, Series 95, FGIC Insured, 5.25%, 05/01/18 ........................... 1,834,716
3,200,000 North Branch Area Schools, Lapeer County Building and Site, Refunding, CGIC Insured,
Pre-Refunded, 6.60%, 05/01/21 ............................................................... 3,624,736
Northern Michigan University Revenue, AMBAC Insured,
$ 1,715,000 5.60%, 12/01/13 .......................................................................... $ 1,732,064
1,000,000 6.55%, 12/01/14 .......................................................................... 1,092,280
1,000,000 Norway Electric Utilities System Revenue, Refunding, AMBAC Insured, 5.375%, 02/01/12 ......... 986,800
4,750,000 Novi Community School District, FGIC Insured, 6.125%, 05/01/18 ............................... 4,912,545
4,750,000 Oak Park GO, Refunding, AMBAC Insured, 5.50%, 05/01/12 ....................................... 4,756,365
3,500,000 Oakland Community College District, Washtenaw County, AMBAC Insured, 6.65%, 05/01/11 ......... 3,824,835
6,770,000 Oakland County EDC, EDR, FHA Mortgage Insured, Series A, FGIC Insured, 8.00%, 08/01/18 ....... 6,947,036
Okemos Public School District,
5,390,000 Refunding, MBIA Insured, 5.50%, 05/01/11 ................................................. 5,463,035
3,000,000 Series I, MBIA Insured, Pre-Refunded, 6.90%, 05/01/11 .................................... 3,405,180
1,800,000 Olivet Community School District, Refunding, MBIA Insured, 5.50%, 05/01/20 ................... 1,750,626
2,270,000 Otsego Public School District, Building and Site, CGIC Insured, 6.625%, 05/01/16 ............. 2,446,969
1,000,000 Paw Paw Public School District Building and Site, FGIC Insured, 5.625%, 05/01/25 ............. 987,910
3,755,000 Perry Public School Building and Site, Refunding, FGIC Insured 5.45%, 05/01/22 ............... 3,662,740
Petoskey Hospital Finance Authority Facilities Revenue, Refunding, Northern Michigan Hospital,
MBIA Insured,
4,500,000 7.00%, 11/15/07 .......................................................................... 4,925,880
1,000,000 6.75%, 11/15/19 .......................................................................... 1,056,500
Plymouth-Canton Community School District,
4,000,000 Refunding, AMBAC Insured, 5.50%, 05/01/13 ................................................ 3,986,480
1,875,000 Refunding, AMBAC Insured, 5.50%, 05/01/17 ................................................ 1,844,925
3,500,000 Series C, FGIC Insured, 6.50%, 05/01/16 .................................................. 3,791,620
3,000,000 Series C, MBIA Insured, 6.50%, 05/01/16 .................................................. 3,249,960
1,305,000 Pontiac General Building Authority, Series 1991, Refunding, AMBAC Insured, 6.875%, 04/01/06 .. 1,426,587
Port Huron School District,
5,500,000 CGIC Insured, Pre-Refunded, 7.25%, 05/01/15 .............................................. 6,225,670
4,500,000 Refunding, AMBAC Insured, 6.00%, 05/01/12 ................................................ 4,706,010
Portage Lake Water and Sewer Authority GO, Refunding, AMBAC Insured,
770,000 6.10%, 10/01/14 .......................................................................... 817,255
670,000 6.20%, 10/01/20 .......................................................................... 710,904
Portage Public Schools GO, MBIA Insured,
4,750,000 5.70%, 05/01/12 .......................................................................... 4,824,053
2,750,000 5.625%, 05/01/19 ......................................................................... 2,747,993
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1985-A, FSA Insured,
500,000 ETM 07/01/00, 8.75%, 07/01/00 ............................................................ 591,185
2,500,000 Pre-Refunded, 9.00%, 07/01/09 ............................................................ 3,303,625
Puerto Rico Commonwealth Public Improvement GO, MBIA Insured, Pre-Refunded,
825,000 7.125%, 07/01/02 ......................................................................... 870,606
175,000 7.125%, 07/01/02 ......................................................................... 186,813
10,875,000 6.60%, 07/01/13 .......................................................................... 12,403,046
8,500,000 Series 1987, 6.75%, 07/01/06 ............................................................. 8,912,505
Puerto Rico Electric Power Authority Revenue, CGIC Insured,
3,400,000 Refunding, Series U, 6.00%, 07/01/14 ..................................................... 3,515,974
7,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 .................................................. 8,074,080
1,315,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series 1988-C, GNMA Secured, 6.85%, 10/15/23 ......... 1,381,565
8,700,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 07/01/14 .................. 9,530,154
2,985,000 Reeths-Puffer Schools, Refunding, MBIA Insured, Pre-Refunded, 6.625%, 05/01/12 ............... 3,385,169
1,000,000 Reeths-Puffer Schools Building, MBIA Insured, Pre-Refunded, 6.625%, 05/01/12 ................. 1,134,060
1,150,000 River Rouge School District, FSA Insured, 5.625%, 05/01/22 ................................... 1,138,247
Rockford Public Schools GO, Refunding,
3,900,000 AMBAC Insured, 5.875%, 05/01/19 .......................................................... 3,966,534
9,750,000 CGIC Insured, Pre-Refunded, 7.375%, 05/01/19 ............................................. 11,000,340
$ 3,150,000 CGIC Insured, 5.875%, 05/01/19 ........................................................... $ 3,203,739
1,850,000 MBIA Insured, 5.875%, 05/01/12 ........................................................... 1,897,379
1,925,000 MBIA Insured, 5.875%, 05/01/19 ........................................................... 1,957,840
Romulus Community Schools, Refunding, FGIC Insured,
690,000 5.75%, 05/01/13 .......................................................................... 699,246
1,200,000 5.75%, 05/01/17 .......................................................................... 1,211,796
5,435,000 5.75%, 05/01/22 .......................................................................... 5,507,829
2,220,000 Series II, Pre-Refunded, 6.40%, 05/01/17 ................................................. 2,497,367
5,000,000 Royal Oak Hospital Finance Authority Revenue, Refunding, MBIA Insured, 6.25%, 01/01/19 ....... 5,203,050
25,000 Saginaw City School District, Unlimited Tax, MBIA Insured, Pre-Refunded, 11.00%, 06/01/03 .... 27,697
Saginaw Hospital Finance Authority Revenue, St. Luke's Hospital Project,
5,325,000 Refunding, Series C, MBIA Insured, 6.875%, 07/01/14 ...................................... 5,702,383
2,000,000 Refunding, Series C, MBIA Insured, 6.75%, 07/01/17 ....................................... 2,130,380
1,000,000 Refunding, Series D, MBIA Insured, 6.50%, 07/01/11 ....................................... 1,063,220
2,185,000 Series B, AMBAC Insured, Pre-Refunded, 7.625%, 07/01/06 .................................. 2,388,926
3,540,000 Series B, AMBAC Insured, Pre-Refunded, 7.75%, 07/01/13 ................................... 3,880,123
3,875,000 Series B, MBIA Insured, 6.00%, 07/01/21 .................................................. 3,952,229
1,000,000 Saginaw Valley State University Revenue, MBIA Insured, 5.375%, 07/01/16 ...................... 968,100
3,425,000 Sandusky Community School District, CGIC Insured, Pre-Refunded, 6.50%, 05/01/21 .............. 3,811,100
1,350,000 Saranac Coummunity School District Building and Site, MBIA Insured, 5.25%, 05/01/21 .......... 1,288,290
2,000,000 Sault Ste. Marie GO, Series 1990, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10 ............... 2,260,660
Shelby Charter Township Authority, AMBAC Insured,
750,000 5.75%, 11/01/11 .......................................................................... 772,935
750,000 5.75%, 11/01/12 .......................................................................... 774,420
South Haven Public Schools, Refunding, FGIC Insured,
1,640,000 5.50%, 05/01/13 .......................................................................... 1,611,284
1,725,000 5.50%, 05/01/17 .......................................................................... 1,680,685
7,745,000 St. Clair County EDC, PCR, Refunding, Detroit Edison Co., Series DD, AMBAC Insured, 6.05%,
08/01/24 .................................................................................... 8,007,090
Saint Johns Public Schools, FGIC Insured,
4,500,000 5.625%, 05/01/20 ......................................................................... 4,467,285
2,000,000 5.75%, 05/01/25 .......................................................................... 2,003,080
1,000,000 Sturgis Public School District, MBIA Insured, 6.10%, 05/01/18 ................................ 1,052,460
Tri County Area School District, School Building and Site, MBIA Insured, Pre-Refunded,
1,850,000 6.875%, 05/01/11 ......................................................................... 2,090,315
2,325,000 6.875%, 05/01/16 ......................................................................... 2,627,018
1,395,000 University of Michigan Construction Project, Student Fee Revenue, FGIC Insured, Pre-Refunded,
7.25%, 04/01/12 ............................................................................. 1,426,959
10,635,000 eUniversity of Michigan Hospital Revenue, Refunding, Series 1986-A, Pre-Refunded, 7.75%, 12/01/12 11,184,404
2,365,000 University Revenues Medical Service Plan, MBIA Insured, 6.50%, 12/01/21 ...................... 2,496,920
Vicksburg Community School District, Refunding, MBIA Insured,
2,175,000 5.625%, 05/01/12 ......................................................................... 2,189,507
1,000,000 5.625%, 05/01/20 ......................................................................... 992,730
Warren Consolidated School District, Refunding,
6,500,000 CGIC Insured, Pre-Refunded, 6.70%, 05/01/16 .............................................. 7,318,415
4,985,000 MBIA Insured, 5.50%, 05/01/14 ............................................................ 4,939,437
2,530,000 MBIA Insured, 5.50%, 05/01/21 ............................................................ 2,469,204
1,225,000 Series II, FGIC Insured, 5.375%, 05/01/14 ................................................ 1,196,458
3,405,000 Series II, FGIC Insured, 5.50%, 05/01/16 ................................................. 3,372,006
2,000,000 Wayland Union School District, FGIC Insured, 6.75%, 05/01/24 ................................. 2,223,500
Wayne Charter County Airport Revenue, Detroit Metro Airport, MBIA Insured,
$ 2,900,000 Pre-Refunded, 6.75%, 12/01/19 ............................................................ $ 3,303,100
6,635,000 Pre-Refunded, 7.00%, 12/01/21 ............................................................ 7,640,866
300,000 Series B, 6.875%, 12/01/11 ............................................................... 323,655
2,000,000 Series B, 6.75%, 12/01/21 ................................................................ 2,139,440
1,000,000 bRefunding, Sub Lien Detroit Metro, 5.25%, 12/01/21 ...................................... 945,980
10,585,000 Wayne County Airport Revenue, Series B, AMBAC Insured, 6.00%, 12/01/20 ....................... 10,757,959
Wayne County, Ecorse Creek Drain District, Pollution Abatement No. 1, AMBAC Insured,
500,000 7.40%, 11/01/04 .......................................................................... 537,865
500,000 7.50%, 11/01/05 .......................................................................... 538,235
490,000 7.50%, 11/01/06 .......................................................................... 527,470
450,000 7.50%, 11/01/07 .......................................................................... 484,410
2,275,000 Wayne-Westland Community School, Refunding, FGIC Insured, 6.10%, 05/01/13 .................... 2,386,384
6,205,000 West Ottawa Public School District, Refunding, FGIC Insured, 6.00%, 05/01/20 ................. 6,414,357
Western Michigan University Revenues,
5,000,000 FGIC Insured, 6.25%, 11/15/12 ............................................................ 5,291,300
4,290,000 Special Projects, Student Fees, BIG Insured, Pre-Refunded, 7.375%, 10/01/11 .............. 4,473,569
Western Townships Utilities Authority, Sewer Disposal System, Refunding, CGIC Insured,
18,710,000 6.75%, 01/01/15 .......................................................................... 19,945,980
6,115,000 6.50%, 01/01/19 .......................................................................... 6,443,498
1,000,000 White Cloud Public Schools Refunding, Cap Guard, CGIC Insured, 5.50%, 05/01/20 ............... 973,850
1,800,000 Williamston County GO, Refunding, AMBAC Insured, 6.90%, 11/01/17 ............................. 1,988,100
4,900,000 Williamston Community School District Building and Site, MBIA Insured, 5.375%, 05/01/15 ...... 4,793,570
6,210,000 Willow Run Community School, CGIC Insured, 6.375%, 05/01/18 .................................. 6,512,675
Wyandotte Electric Revenue, Refunding,
16,060,000 AMBAC Insured, Pre-Refunded, 7.875%, 10/01/17 ............................................ 17,403,258
9,980,000 MBIA Insured, 6.25%, 10/01/17 ............................................................ 10,597,660
Yale Public School District, School Building and Site, AMBAC Insured,
2,000,000 5.375%, 05/01/17 ......................................................................... 1,930,040
1,500,000 5.50%, 05/01/19 .......................................................................... 1,469,115
Zeeland Public Schools GO, Refunding, Series B, MBIA Insured,
2,000,000 6.05%, 05/01/19 .......................................................................... 2,092,460
4,000,000 6.10%, 05/01/24 .......................................................................... 4,184,480
----------------
Total Long Term Investments (Cost $1,055,345,657) ...................................... 1,125,194,938
----------------
Short Term Investments .2%
2,700,000 cGrand Rapids Water Supply System Revenue, Refunding, FGIC Insured, Daily VRDN and Put,
3.35%, 01/01/20, (Cost $2,700,000)........................................................... 2,700,000
----------------
Total Investments (Cost $1,058,045,657) 100.5% .................................... 1,127,894,938
Liabilities in Excess of Other Assets (.5)% ....................................... (5,757,467)
----------------
Net Assets 100.0% ................................................................. $1,122,137,471
================
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,058,045,657 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 70,860,691
Aggregate gross unrealized depreciation for all investments in which there was an
excess of excess of tax cost over value ..................................................... (1,011,410)
----------------
Net unrealized appreciation ................................................................ $ 69,849,281
================
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
EDC - Economic Development Corp.
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority/Agency.
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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(c) regarding uninsured
securities collateralized by U.S. government securities.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount Franklin Minnesota Insured Tax-Free Income Fund (Note 1)
Long Term Investments 101.1%..................................................................
<C> <C> <C>
$ 2,295,000 Albany ISD No. 745, Series A, CGIC Insured, 6.00%, 02/01/16 ................................... $ 2,361,693
2,100,000 Anoka County Resource Recovery Revenue, Northern, AMBAC Insured, 7.15%, 12/01/08 .............. 2,311,911
4,870,000 Becker GO, Refunding, Tax Increment, Series D, MBIA Insured, 6.25%, 08/01/15 .................. 5,119,539
Becker Waste Water Treatment Facility, Series A, MBIA Insured,
625,000 5.90%, 02/01/12 ........................................................................... 646,475
610,000 5.95%, 02/01/15 ........................................................................... 628,154
290,000 Benson ISD No. 777 GO, CGIC Insured, 6.00%, 02/01/15 .......................................... 296,392
3,500,000 Brainerd Health Care Facilities Revenue, Refunding, Benedictine Health-St. Joseph, Series D,
MBIA Insured, 5.875%, 02/15/13 ............................................................... 3,616,550
2,800,000 Buffalo ISD No. 877, CGIC Insured, 6.15%, 02/01/18 ............................................ 2,926,084
2,105,000 Burnsville ISD, Series A, CGIC Insured, 6.20%, 02/01/17 ....................................... 2,218,123
625,000 Byron ISD No. 531 GO, AMBAC Insured, 6.90%, 06/01/14 .......................................... 683,500
Cannon Falls ISD No. 252 GO, School Building, Series 1987-A, AMBAC Insured,
610,000 8.00%, 02/01/05 ........................................................................... 633,387
655,000 8.10%, 02/01/06 ........................................................................... 680,696
705,000 8.20%, 02/01/07 ........................................................................... 733,278
760,000 8.20%, 02/01/08 ........................................................................... 790,484
2,975,000 Chanhassen Apartments Project GO, Series B, AMBAC Insured, 6.20%, 01/01/25 .................... 3,082,963
3,500,000 Cold Spring ISD No. 750, Series A, FGIC Insured, 6.15%, 02/01/11 .............................. 3,740,275
Dakota County Housing and Redevelopment Authority, SFMR,
15,000 City of South St. Paul, Burnsville and Inver Grove Heights, FGIC Insured, 9.375%, 05/01/18 16,139
1,005,000 Refunding, GNMA Secured, 8.10%, 03/01/16 .................................................. 1,059,541
Dakota, Washington and Stearns County SFMR, Series 1990, GNMA Secured,
960,000 7.80%, 12/01/10 ........................................................................... 1,029,686
3,375,000 7.85%, 12/01/30 ........................................................................... 3,606,626
Delano ISD No. 879, Refunding, Series A, AMBAC Insured,
810,000 5.55%, 02/01/09 ........................................................................... 832,372
700,000 5.60%, 02/01/10 ........................................................................... 717,255
1,040,000 Dilworth ISD No. 147, MBIA Insured, 6.00%, 02/01/15 ........................................... 1,066,478
1,940,000 Dover and Eyota ISD No. 533 GO, AMBAC Insured, 7.25%, 02/01/20 ................................ 2,050,813
Duluth EDA, Health Care Facilities Revenue,
1,145,000 Benedictine Health System, Series B, Connie Lee Insured, 6.00%, 02/15/17 .................. 1,180,083
2,880,000 The Duluth Clinic, Ltd., AMBAC Insured, 6.20%, 11/01/12 ................................... 3,055,766
5,405,000 The Duluth Clinic, Ltd., AMBAC Insured, 6.30%, 11/01/22 ................................... 5,706,707
1,120,000 The Duluth Clinic, Ltd., AMBAC Insured, Pre-Refunded, 6.20%, 11/01/12 ..................... 1,246,672
2,125,000 The Duluth Clinic, Ltd., AMBAC Insured, Pre-Refunded, 6.30%, 11/01/22 ..................... 2,380,382
3,000,000 Duluth EDA, Hospital Facilities Revenue, St. Lukes Hospital, Series A, Connie Lee Insured, 6.40%,
05/01/12 ..................................................................................... 3,124,950
3,500,000 Duluth EDA, Tax Increment Revenue, Refunding, MBIA Insured, 7.25%, 08/01/08 ................... 3,802,855
4,420,000 Eagan MFMR, Refunding, Forest Ridge Apartments, BIG Insured, 7.50%, 03/01/27 .................. 4,635,784
Eden Prairie ISD No. 272, Series A,
4,980,000 CGIC Insured, 5.75%, 02/01/15 ............................................................. 5,065,009
1,000,000 FGIC Insured, 5.45%, 02/01/08 ............................................................. 1,022,200
2,000,000 Eden Prairie MFHR, Refunding, Olympic Ridge, Series A, GNMA Secured, 6.25%, 01/20/31 .......... 2,036,740
500,000 Eden Valley ISD No. 463, CGIC Insured, 6.60%, 02/01/16 ........................................ 556,635
Elk River ISD No. 728 GO, CGIC Insured,
4,000,000 6.40%, 02/01/22 ........................................................................... 4,411,880
650,000 Series A, 7.00%, 02/01/11 ................................................................. 711,217
Farmington ISD No. 192 GO,
4,290,000 School Building, AMBAC Insured, 5.125%, 02/01/15 .......................................... 4,111,836
4,160,000 Series A, FSA Insured, 5.30%, 06/01/20 .................................................... 4,032,704
Forest Lake ISD No. 831 GO, School Building, Series A, FGIC Insured
$ 675,000 7.30%, 02/01/05 ........................................................................... $ 694,575
1,055,000 7.35%, 02/01/06 ........................................................................... 1,086,059
Fridley ISD No. 014 GO, FSA Insured,
1,735,000 5.30%, 02/01/17 ........................................................................... 1,683,713
5,470,000 5.35%, 02/01/26 ........................................................................... 5,279,972
bHibbing Health Care Facilities Revenue, The Duluth Clinic Limited, FSA Insured,
3,455,000 5.50%, 11/01/16 ........................................................................... 3,408,565
9,300,000 5.00%, 11/01/25 ........................................................................... 8,434,356
Lake of the Woods, ISD No. 390, School Building, AMBAC Insured,
325,000 7.40%, 02/01/18 ........................................................................... 353,613
350,000 7.40%, 02/01/19 ........................................................................... 380,814
375,000 7.40%, 02/01/20 ........................................................................... 408,015
Lakeville ISD No. 194,
5,325,000 Crossover Refunding, Series C, MBIA Insured, 5.125%, 02/01/13 ............................. 5,146,506
1,000,000 FGIC Insured, 5.40%, 02/01/13 ............................................................. 996,650
500,000 Series A, FGIC Insured, 7.00%, 02/01/14 ................................................... 541,450
2,105,000 Series C, FGIC Insured, 6.70%, 02/01/12 ................................................... 2,262,328
Marshall County Utility Revenue, CGIC Insured,
750,000 5.375%, 01/01/14 .......................................................................... 744,413
825,000 5.375%, 01/01/15 .......................................................................... 818,656
1,565,000 Menahga ISD No. 821, GO, AMBAC Insured, 6.25%, 02/01/18 ....................................... 1,722,596
2,100,000 Minneapolis CDA, Tax Increment Revenue, Series 1990, MBIA Insured, 7.00%, 03/01/01 ............ 2,356,137
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 .. 1,251,198
4,436,000 Minneapolis CDA and St. Paul Housing and Redevelopment Authority, Homeownership Mortgage
Revenue, Joint Housing Program, Phase II, FGIC Insured, 7.875%, 07/01/17 ..................... 4,538,117
Minneapolis Convention Center, Sales Tax Revenue, AMBAC Insured, Pre-Refunded,
2,000,000 7.625%, 04/01/04 .......................................................................... 2,046,420
10,000,000 7.75%, 04/01/11 ........................................................................... 10,232,700
Minneapolis Hospital Facilities Revenue,
1,475,000 eLifeSpan, Inc., Series 1987-A, Pre-Refunded, 8.125%, 04/01/07 ............................ 1,573,722
4,450,000 eLifeSpan, Inc., Series 1987-A, Pre-Refunded, 8.125%, 04/01/17 ............................ 4,747,839
600,000 Refunding, Fairview Hospital and Healthcare, Series A, MBIA Insured, 6.50%, 01/01/11 ...... 656,478
7,815,000 Refunding, Fairview Hospital and Healthcare, Series B, MBIA Insured, 6.70%, 01/01/17 ...... 8,545,546
700,000 eRefunding, LifeSpan, Inc., Series 1987-B, Pre-Refunded, 9.125%, 12/01/14 ................. 777,077
915,000 eRefunding, LifeSpan, Inc., Series 1988-A, Pre-Refunded, 7.875%, 12/01/14 ................. 997,478
Minneapolis-St. Paul Housing Finance Board, SFMR, GNMA Secured,
3,635,000 Phase VI, Series A, 8.30%, 08/01/21 ....................................................... 3,684,690
960,000 Series A, 8.375%, 11/01/17 ................................................................ 1,008,413
545,000 Series C, 8.875%, 11/01/18 ................................................................ 571,400
Minneapolis-St. Paul Housing and Redevelopment Authority, Health Care System Revenue, Series A,
1,000,000 Children's Healthcare, FSA Insured, 5.50%, 08/15/25 ....................................... 987,030
10,390,000 MBIA Insured, 7.40%, 08/15/11 ............................................................. 11,685,425
3,950,000 MBIA Insured, 6.75%, 08/15/14 ............................................................. 4,284,052
3,000,000 Minnesota State GO, Refunding, MBIA Insured, 5.40%, 08/01/09 .................................. 3,043,680
2,000,000 Minnesota State HFA, Housing Development, MFMR, Series 1988-A, FGIC Insured, 7.80%, 08/01/18 .. 2,053,640
1,000,000 Minnesota State HFA, MFHR, Series 1977-A, FGIC Insured, 6.375%, 02/01/20 ...................... 1,011,050
Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured,
3,240,000 5.95%, 02/01/18 ........................................................................... 3,247,484
3,810,000 6.00%, 02/01/22 ........................................................................... 3,818,801
Minnesota State HFA, SFMR,
$ 2,375,000 Series 1986-B, FGIC Insured, 7.25%, 07/01/06 .............................................. $ 2,434,589
710,000 Series 1986-B, FGIC Insured, 7.25%, 07/01/16 .............................................. 723,959
405,000 Series 1986-C, FGIC Insured, 7.00%, 07/01/16 .............................................. 412,205
710,000 Series 1987-A, FGIC Insured, 8.50%, 02/01/17 .............................................. 735,191
205,000 Series 1987-D, FGIC Insured, 8.80%, 07/01/16 .............................................. 217,470
2,930,000 Series 1989-A, FGIC Insured, 8.00%, 07/01/29 .............................................. 3,046,497
3,795,000 Series 1989-D, AMBAC Insured, 7.30%, 07/01/09 ............................................. 3,990,594
1,500,000 Series 1992-I, MBIA Insured, 6.25%, 01/01/15 .............................................. 1,535,550
1,500,000 Series 1994-F, MBIA Insured, 6.30%, 07/01/25 .............................................. 1,538,460
3,940,000 Minnesota State Higher Educational Facilities Authority Revenue, Series 3, Connie Lee Insured, 6.50%,
01/01/17 ..................................................................................... 4,135,621
Minnetonka MFHR,
350,000 Cedar Hills East Project, FGIC Insured, 7.40%, 12/01/07 ................................... 369,600
1,000,000 Cedar Hills East Project, FGIC Insured, 7.50%, 12/01/27 ................................... 1,070,000
2,720,000 Refunding, Brier Creek Project, Series A, GNMA Secured, 6.45%, 06/20/24 ................... 2,800,648
Monticello ISD No. 882 GO, Series 1991, CGIC Insured,
750,000 6.80%, 02/01/06 ........................................................................... 808,095
1,310,000 6.80%, 02/01/07 ........................................................................... 1,411,473
New Hope MFR, Refunding, North Ridge, Series A, GNMA Secured,
450,000 6.05%, 01/01/17 ........................................................................... 450,707
2,500,000 6.20%, 01/01/31 ........................................................................... 2,503,875
2,000,000 North St. Paul ISD No. 622, Maplewood, Series A, MBIA Insured, Pre-Refunded, 7.10%, 02/01/19 .. 2,345,880
5,475,000 Northeast Metropolitan ISD No. 916, CGIC Insured, 5.800%, 01/01/16 ............................ 5,595,779
Northern Municipal Power Agency, Electric System Revenue,
11,900,000 Refunding, Series A, AMBAC Insured, 6.00%, 01/01/19 ....................................... 12,046,251
4,200,000 Refunding, Series A, AMBAC Insured, 6.00%, 01/01/20 ....................................... 4,251,618
3,500,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/17 ......................... 3,867,990
9,500,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 01/01/18 ......................... 10,536,545
4,000,000 Refunding, Series A, MBIA Insured, 6.00%, 01/01/20 ........................................ 4,049,160
7,500,000 Refunding, Series B, AMBAC Insured, 5.50%, 01/01/18 ....................................... 7,414,800
1,500,000 Series B, AMBAC Insured, Pre-Refunded, 7.40%, 01/01/18 .................................... 1,663,665
8,090,000 Series C, AMBAC Insured, 6.125%, 01/01/20 ................................................. 8,456,153
2,000,000 Northfield College Facility Revenue, St. Olaf College Project, BIG Insured, Pre-Refunded, 8.00%,
10/01/18 ..................................................................................... 2,198,740
3,350,000 Owatonna Public Utilities Commission, Public Utilities Revenue, Refunding, Series A, AMBAC Insured,
5.45%, 01/01/16 .............................................................................. 3,341,659
2,835,000 Perham ISD No. 549, CGIC Insured, 5.375%, 02/01/14 ............................................ 2,801,150
Plymouth Health Facilities Revenue, Westhealth Project, Series A, CGIC Insured,
1,600,000 6.25%, 06/01/16 ........................................................................... 1,685,136
1,815,000 6.125%, 06/01/24 .......................................................................... 1,879,705
7,205,000 Princeton Hospital Revenue, Fairview Hospital and Healthcare, Series C, MBIA Insured, 6.25%,
01/01/21 ..................................................................................... 7,600,266
Princeton ISD No. 477, Mille Lacs County,
1,000,000 Refunding, FGIC Insured, 6.30%, 02/01/17 .................................................. 1,065,600
2,540,000 Series A, CGIC Insured, 5.375%, 02/01/17 .................................................. 2,491,410
3,000,000 bPuerto Rico Commonwealth GO, Refunding, MBIA Insured, 5.375%, 07/01/22 ....................... 2,927,520
Puerto Rico Commonwealth Public Improvement GO,
3,000,000 MBIA Insured, 6.50%, 07/01/23 ............................................................. 3,245,340
10,000,000 Series 1989-A, FGIC Insured, Pre-Refunded, 7.375%, 07/01/04 ............................... 11,220,800
1,730,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ............... 1,832,105
1,000,000 Puerto Rico PBA, Public Education and Health Facilities, Refunding, Series M, CGIC Insured, 5.50%,
07/01/21 ..................................................................................... 977,200
$ 1,300,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 07/01/14 ................... $ 1,424,046
Robbinsdale Hospital Revenue, North Memorial Medical Center Project, AMBAC Insured,
6,450,000 Refunding, Pre-Refunded, 7.35%, 01/01/19 .................................................. 7,149,503
2,000,000 Refunding, Series A, 5.45%, 05/15/13 ...................................................... 1,962,640
4,065,000 Refunding, Series A, 5.55%, 05/15/19 ...................................................... 3,951,017
2,190,000 Series B, 5.45%, 05/15/13 ................................................................. 2,149,091
2,900,000 Series B, 5.50%, 05/15/23 ................................................................. 2,796,760
400,000 Rochester Hospital Facilities Revenue, Rochester Methodist Hospital Project, Refunding, FGIC Insured,
Pre-Refunded, 8.75%, 06/01/05 ................................................................ 424,952
Roseville ISD No. 623, Series A,
1,200,000 CGIC Insured, 5.80%, 02/01/19 ............................................................. 1,220,448
2,470,000 CGIC Insured, 5.85%, 02/01/24 ............................................................. 2,511,990
4,260,000 CGIC Insured, 6.00%, 02/01/25 ............................................................. 4,429,378
1,250,000 FGIC Insured, 6.00%, 02/01/23 ............................................................. 1,285,513
1,750,000 Shakopee Public Utilities Commission Revenue, AMBAC Insured, 5.60%, 08/01/18 .................. 1,764,648
2,080,000 South Washington County ISD No. 833, Refunding, Series A, FGIC Insured, 6.125%, 06/01/10 ...... 2,146,851
Southern Minnesota Municipal Power Agency, Power Supply System Revenue,
5,000,000 Refunding, Series B, AMBAC Insured, 6.00%, 01/01/16 ....................................... 5,165,350
2,500,000 Series A, AMBAC Insured, 6.00%, 01/01/13 .................................................. 2,533,975
5,975,000 Series A, MBIA Insured, 5.00%, 01/01/12 ................................................... 5,710,188
12,500,000 Series A, MBIA Insured, 6.00%, 01/01/13 ................................................... 12,669,875
5,760,000 Series A, MBIA Insured, 5.75%, 01/01/18 ................................................... 5,791,104
1,370,000 Series A, MBIA Insured, Pre-Refunded, 5.75%, 01/01/18 ..................................... 1,413,854
St. Cloud Hospital Facilities Revenue, St. Cloud Hospital, AMBAC Insured,
2,000,000 Refunding, Series 1990-C, 7.00%, 07/01/07 ................................................. 2,230,380
1,350,000 Refunding, Series 1990-C, 6.75%, 07/01/15 ................................................. 1,467,923
2,165,000 bRefunding, Series A, 5.00%, 07/01/15 ..................................................... 2,039,452
8,000,000 eSeries 1990-B, Pre-Refunded, 7.00%, 07/01/20 ............................................. 9,144,720
St. Francis ISD No. 015, Series A, CGIC Insured,
1,500,000 6.35%, 02/01/13 ........................................................................... 1,626,090
5,465,000 6.375%, 02/01/16 .......................................................................... 5,912,857
St. Louis Park Health Care Facilities Revenue, Healthsystem of Minnesota-Obligated Group, Series A,
Refunding, AMBAC Insured,
1,000,000 5.20%, 07/01/16 ........................................................................... 957,580
9,250,000 5.20%, 07/01/23 ........................................................................... 8,734,590
St. Louis Park Hospital Facilities Revenue, Refunding, Methodist Hospital Project, AMBAC Insured,
1,000,000 Series 1985-A, 7.25%, 07/01/15 ............................................................ 1,125,440
4,500,000 Series 1985-C, Pre-Refunded, 7.25, 07/01/18 ............................................... 5,112,135
440,000 Series 1990-A, 7.20%, 07/01/03 ............................................................ 494,336
920,000 Series 1990-A, 7.25%, 07/01/04 ............................................................ 1,035,405
500,000 Series 1990-A, 7.30%, 07/01/05 ............................................................ 568,995
4,115,000 Series 1990-A, 7.25%, 07/01/08 ............................................................ 4,631,185
1,350,000 Series 1990-C, Pre-Refunded, 7.25%, 07/01/08 .............................................. 1,533,641
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 ................................................. 4,092,133
1,200,000 St. Paul Housing and Redevelopment Authority Hospital Revenue, St. Paul-Ramsey Medical Center
Project, AMBAC Insured, 5.50%, 05/15/13 ...................................................... 1,197,240
5,105,000 St. Paul Housing and Redevelopment Authority Parking Revenue, Series A, CGIC Insured, 5.750%,
08/01/13 ..................................................................................... 5,189,946
St. Paul Housing and Redevelopment Authority Revenue, Tax Increment, AMBAC Insured,
Pre-Refunded,
$ 355,000 7.20%, 09/01/01 ........................................................................... $ 369,174
380,000 7.25%, 09/01/02 ........................................................................... 395,264
405,000 7.30%, 09/01/03 ........................................................................... 421,365
St. Paul ISD No. 625, Series C, MBIA Insured,
1,075,000 6.10%, 02/01/14 ........................................................................... 1,122,837
500,000 6.10%, 02/01/15 ........................................................................... 526,190
200,000 St. Paul Port Authority, IDR, Series 1985-K, FGIC Insured, 9.50%, 12/01/14 .................... 206,517
8,000,000 St. Paul Sewer Revenue, Series A, AMBAC Insured, 8.00%, 12/01/08 .............................. 8,871,280
3,645,000 Stearns County Housing and Redevelopment Authority Lease Revenue, Refunding, Administration
Building Project, AMBAC Insured, 7.00%, 02/01/11 ............................................. 3,815,877
2,990,000 Stillwater ISD No. 834 GO, MBIA Insured, 5.75%, 02/01/15 ...................................... 3,037,691
1,350,000 Vadnais Heights Housing Development Revenue, Riverwood Housing Project FGIC Insured, 7.50%,
08/01/09 ..................................................................................... 1,356,440
Waconia ISD No. 110, Carver County, Series A,
1,500,000 FGIC Insured, 6.35%, 02/01/11 ............................................................. 1,614,974
630,000 Refunding, CGIC Insured, 5.25%, 02/01/10 .................................................. 629,351
3,150,000 Wadena ISD No. 819, Refunding, AMBAC Insured, 5.60%, 02/01/20 ................................. 3,152,930
Washington County Housing and Redevelopment Authority, Jail Facility Revenue, MBIA Insured,
3,500,000 Refunding, 5.40%, 02/01/08 ................................................................ 3,558,240
3,000,000 Unlimited Tax, Pre-Refunded, 7.00%, 02/01/12 .............................................. 3,401,610
175,000 Washington County SFRMR, Housing and Redevelopment Authority, City of Cottage Grove,
GNMA Secured, Series 1986, FGIC Insured, 7.60%, 12/01/11 ..................................... 175,281
Western Minnesota Municipal Power Agency, Power Supply Revenue, Refunding, Series A,
1,090,000 AMBAC Insured, 7.00%, 01/01/13 ............................................................ 1,134,210
7,000,000 MBIA Insured, 6.875%, 01/01/09 ............................................................ 7,286,230
5,425,000 MBIA Insured, 5.50%, 01/01/15 ............................................................. 5,430,100
2,000,000 Western Minnesota Municipal Power Agency, Transmission Project Revenue, Refunding,
AMBAC Insured, 6.75%, 01/01/16 ............................................................... 2,199,580
----------------
Total Long Term Investments (Cost $472,969,643) .................................... 498,989,870
----------------
cShort Term Investments .6%
Beltrami County Environmental Control Revenue, Northwood Panelboard Co. Project, Daily VRDN
and Put,
1,100,000 3.45%, 07/01/25 ........................................................................... 1,100,000
300,000 Refunding, 3.35%, 12/01/21 ................................................................ 300,000
1,500,000 Duluth Tax Increment Revenue, Lake Superior Paper, Weekly VRDN and Put, 3.45%, 09/01/10 ... 1,500,000
----------------
Total Short Term Investments (Cost $2,900,000) ...................................... 2,900,000
----------------
Total Investments (Cost $475,869,643) 101.7% ....................................... 501,889,870
Liabilities in Excess of Other Assets (1.7)% ................................... (8,598,689)
----------------
Net Assets 100.0% .............................................................. $493,291,181
================
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $475,870,637 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 26,818,710
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (799,477)
----------------
Net unrealized appreciation ............................................................. $ 26,019,233
================
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CDA - Community Development Agency
CGIC - Capital Guaranty Insurance Co.
EDA - Economic Development Authority
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
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
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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(c) regarding uninsured securitites collateralized by U.S. government
securities.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount Franklin Ohio Insured Tax-Free Income Fund (Note 1)
Investments 100.2%
Akron Bath Copley Joint Township Hospital District Revenue, AMBAC Insured,
<C> <C> <C>
$ 1,000,000 Akron General Medical Center Project, 6.50%, 01/01/11 ..................................... $ 1,057,890
5,000,000 Akron General Medical Center Project, 6.50%, 01/01/19 ..................................... 5,305,400
2,000,000 Children's Hospital Medical Center, Pre-Refunded, 7.45%, 11/15/20 ......................... 2,311,700
500,000 Akron GO, Limited Tax, FGIC Insured, 7.50%, 09/01/05 .......................................... 596,030
1,000,000 Akron Waterworks System, First Mortgage Revenue, FGIC Insured, 6.00%, 03/01/14 ................ 1,041,140
1,250,000 Allen County, Refunding, AMBAC Insured, 5.30%, 12/01/15 ....................................... 1,208,325
1,200,000 Allen County Sewer Revenue, MBIA Insured, 5.70%, 12/01/13 ..................................... 1,226,376
600,000 Archbold Area Local School District GO, Refunding, MBIA Insured, 5.90%, 12/01/11 .............. 615,762
1,075,000 Aurora City School District GO, Refunding & Improvement, FGIC Insured, 5.80%, 12/01/16 ........ 1,093,200
Bedford Sewer System Mortgage Revenue, AMBAC Insured, Pre-Refunded,
310,000 7.75%, 07/01/02 ........................................................................... 323,866
335,000 7.75%, 07/01/03 ........................................................................... 349,985
360,000 7.75%, 07/01/04 ........................................................................... 376,103
2,000,000 Bellefontaine School District GO, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.125%, 12/01/11 2,311,160
430,000 Belmont County, AMBAC Insured, 5.20%, 12/01/13 ................................................ 414,051
Berne and Union Local School District, Series A, AMBAC Insured,
640,000 5.40%, 12/01/11 ........................................................................... 644,275
370,000 5.50%, 12/01/14 ........................................................................... 368,679
1,450,000 Big Walnut Local School District, Delaware County Construction and Improvement, AMBAC Insured,
6.625%, 12/01/15 ............................................................................. 1,570,582
2,295,000 Brunswick City School District, AMBAC Insured, 6.90%, 12/01/12 ................................ 2,510,799
Butler County Hospital Facilities Revenue, FGIC Insured,
2,150,000 Refunding & Improvement, Middletown Regional Hospital, 6.75%, 11/15/10 .................... 2,368,956
1,400,000 Series 1985-A, Pre-Refunded, 9.30%, 11/01/15 .............................................. 1,527,008
Butler County Waterworks Revenue, AMBAC Insured,
790,000 6.35%, 12/01/08 ........................................................................... 853,145
500,000 6.40%, 12/01/12 ........................................................................... 536,935
1,250,000 5.45%, 12/01/16 ........................................................................... 1,250,000
400,000 Cardington and Lincoln Local School District, MBIA Insured, 6.60%, 12/01/14 ................... 431,324
1,200,000 Celina Wastewater System Mortgage Revenue, FGIC Insured, 6.55%, 11/01/16 ...................... 1,278,264
2,265,000 Centerville GO, Capital Facilities, MBIA Insured, 5.65%, 12/01/18 ............................. 2,282,169
675,000 Chillicothe GO, Limited Tax, AMBAC Insured, 6.05%, 12/01/12 ................................... 701,521
1,000,000 Chillicothe Sanitary Sewer System, First Mortgage Revenue, BIG Insured, Pre-Refunded, 7.65%,
12/01/08 ..................................................................................... 1,123,650
Clermont County Hospital Facilities Revenue, Mercy Health System, Refunding, Province of Cincinnati,
Pre-Refunded,
2,000,000 Series 1988-A, MBIA Insured, 7.625%, 01/01/15 ............................................. 2,176,220
2,250,000 Series A, AMBAC Insured, 7.50%, 09/01/19 .................................................. 2,560,328
1,500,000 Clermont County Road Improvement GO, AMBAC Insured, Pre-Refunded, 7.125%, 09/01/11 ............ 1,705,995
Clermont County Sewer System Revenue, AMBAC Insured, Pre-Refunded,
4,280,000 Refunding, 7.10%, 12/01/15 ................................................................ 4,801,989
5,500,000 Series 1991, 7.10%, 12/01/21 .............................................................. 6,376,755
11,000,000 Clermont County Waterworks Revenue, Refunding, AMBAC Insured, 5.80%, 12/01/18 ................. 11,224,290
Cleveland Airport Systems Revenue, FGIC Insured,
3,000,000 Series A, FGIC Insured, 6.25%, 01/01/20 ................................................... 3,136,260
1,450,000 Series B, FGIC Insured, 6.10%, 01/01/24 ................................................... 1,510,726
2,000,000 Cleveland GO, Series 1994, MBIA Insured, 6.70%, 11/15/18 ...................................... 2,190,300
Cleveland Waterworks, First Mortgage Revenue, AMBAC Insured,
3,000,000 Refunding, Series D, Pre-Refunded, 7.25%, 01/01/12 ........................................ 3,151,020
2,000,000 Refunding, Series F, 6.25%, 01/01/16 ...................................................... 2,104,500
1,000,000 Series F-92, 6.25%, 01/01/15 .............................................................. 1,052,250
1,000,000 Clinton-Massie Local School District, Refunding, Issue I, AMBAC Insured, 7.50%, 12/01/11 ...... 1,153,530
$ 1,360,000 Columbus City School District GO, Renovation & Improvement, FGIC Insured, Pre-Refunded, 6.65%,
12/01/12 ..................................................................................... $ 1,561,239
975,000 Columbus GO, Limited Tax, FGIC Insured, 9.50%, 04/15/03 ....................................... 1,274,335
2,500,000 eColumbus Sewer System Revenue, Series A, Pre-Refunded, 8.00%, 06/01/08 ....................... 2,578,275
1,530,000 Coshocton Sewer System GO, AMBAC Insured, 6.50%, 12/01/12 ..................................... 1,647,014
1,650,000 Crestview Local School District GO, Construction and Improvement, AMBAC Insured, 6.65%, 12/01/14 1,790,036
100,000 Cuyahoga County GO, Limited Tax, MBIA Insured, 9.375%, 10/01/04 ............................... 131,670
Cuyahoga County Hospital Revenue,
10,200,000 Metro Health System Project, MBIA Insured, 6.00%, 02/15/19 ................................ 10,367,382
2,685,000 Mt. Sinai Medical Center, AMBAC Insured, 6.625%, 11/15/21 ................................. 2,871,473
1,500,000 Refunding, Fairview General Hospital Project, AMBAC Insured, 5.50%, 08/15/19 .............. 1,478,565
5,360,000 Refunding, University Hospital Health System, Series A, BIG Insured, 6.875%, 01/15/19 ..... 5,655,604
Cuyahoga County Utility System Revenue, Refunding, Medical Center Co. Project, Series B,
MBIA Insured,
1,000,000 5.85%, 08/15/10 ........................................................................... 1,009,930
2,945,000 6.10%, 08/15/15 ........................................................................... 3,020,480
1,395,000 Dayton Water System, Mortgage Revenue, Refunding, MBIA Insured, 6.75%, 12/01/10 ............... 1,473,343
Defiance GO, MBIA Insured,
1,000,000 6.10%, 12/01/14 ........................................................................... 1,045,590
750,000 6.20%, 12/01/20 ........................................................................... 784,020
Delphos Sewer System Revenue, CGIC Insured, Pre-Refunded,
450,000 7.20%, 09/01/10 ........................................................................... 513,167
1,100,000 7.25%, 09/01/20 ........................................................................... 1,256,640
2,000,000 Dover City School District, AMBAC Insured, 6.25%, 12/01/16 .................................... 2,102,300
1,625,000 Dover Municipal Electric System Revenue, FGIC Insured, 6.00%, 12/01/19 ........................ 1,684,719
1,100,000 Dover Waterworks Systems Revenue, AMBAC Insured, 6.00%, 12/01/13 .............................. 1,150,402
5,735,000 Dublin City School District, AMBAC Insured, 6.20%, 12/01/19 ................................... 6,079,387
800,000 Dublin Local School District GO, Franklin, Delaware and Union Counties, Unlimited Tax for School
Buildings, Construction and Improvement, Series 1988, AMBAC Insured, Pre-Refunded, 7.30%,
12/01/05 ..................................................................................... 886,544
1,390,000 Fairborn GO, Limited Tax, Series 1991, MBIA Insured, 7.00%, 10/01/11 .......................... 1,571,645
1,000,000 Fairfield City School District GO, FGIC Insured, 6.00%, 12/01/20 .............................. 1,038,180
5,915,000 Fairfield County Hospital Improvement Revenue, Lancaster-Fairfield Community Hospital, Series A,
MBIA Insured, Pre-Refunded, 7.10%, 06/15/21 .................................................. 6,798,701
2,500,000 Fostoria City School District GO, AMBAC Insured, 6.70%, 12/01/16 .............................. 2,719,150
5,000,000 Franklin County Convention Facility Authority, Tax and Lease Revenue, Anticipation Bonds,
MBIA Insured, Pre-Refunded, 7.00%, 12/01/19 .................................................. 5,689,200
Franklin County Hospital Revenue,
2,000,000 Refunding & Improvement, Riverside United Hospital, MBIA Insured, 7.25%, 05/15/20 ......... 2,167,400
4,250,000 Refunding, Riverside United Methodist Facility, Series A, FSA Insured, 5.75%, 05/15/20 .... 4,222,120
5,150,000 Granville Exempted Village School District, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.15%,
12/01/15 ..................................................................................... 6,061,035
Green Local School District GO, Summit County, FGIC Insured,
2,800,000 5.875%, 12/01/14 .......................................................................... 2,865,772
5,150,000 5.90%, 12/01/19 ........................................................................... 5,281,222
Hamilton City Electric System Mortgage Revenue, FGIC Insured,
12,000,000 Refunding, Series A, 6.00%, 10/15/23 ...................................................... 12,667,320
2,340,000 Series B, 6.30%, 10/15/25 ................................................................. 2,516,974
9,500,000 Series B, Pre-Refunded, 8.00%, 10/15/22 ................................................... 10,641,805
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 ................................................. 2,208,260
Hamilton County Hospital Facilities Revenue,
$ 2,000,000 Children's Hospital Medical Center, FGIC Insured, Pre-Refunded, 7.125%, 05/15/09 .......... $ 2,177,640
990,000 Christ Hospital, Series 1987, FGIC Insured, Pre-Refunded, 8.375%, 01/01/07 ................ 1,089,267
3,650,000 Refunding, Bethesda Hospital, Series A, AMBAC Insured, 6.25%, 01/01/12 .................... 3,865,131
Hamilton County Sewer System Revenue, Series A,
4,410,000 eMetropolitan Sewer District of Greater Cincinnati, Pre-Refunded, 7.50%, 12/01/10 ......... 4,544,020
3,010,000 Refunding, FGIC Insured, 6.05%, 12/01/15 .................................................. 3,154,119
4,665,000 Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ................. 4,926,846
500,000 Hillard School District, Refunding, FGIC Insured, 6.55%, 12/01/05 ............................. 572,835
Hudson Local School District, FGIC Insured,
2,750,000 Refunding, 5.60%, 12/15/14 ................................................................ 2,764,108
3,350,000 Series A, Pre-Refunded, 7.10%, 12/15/13 ................................................... 3,829,084
1,000,000 Indian Lake Local School District GO, Construction & Improvement, FGIC Insured, 5.375%, 12/01/23 969,780
1,000,000 Indian Valley Local School District GO, AMBAC Insured, 5.75%, 12/01/19 ........................ 1,013,530
Jackson Local School District, Stark and Summit Counties School Building, Construction &
Improvement, MBIA Insured,
2,750,000 5.40%, 12/01/13 ........................................................................... 2,679,353
4,060,000 5.50%, 12/01/21 ........................................................................... 3,934,708
500,000 Jackson Waterworks Revenue, AMBAC Insured, 5.60%, 12/01/18 .................................... 502,695
1,195,000 Kent State University Revenues, AMBAC Insured, 6.45%, 05/01/12 ................................ 1,281,626
1,000,000 Kettering City School District, FGIC Insured, 5.25%, 12/01/22 ................................. 941,130
Lake County Hospital Improvement Revenue, Lake Hospital System, Inc., Series B and C,
AMBAC Insured,
4,500,000 7.875%, 01/01/05 .......................................................................... 4,735,405
2,185,000 8.00%, 01/01/13 ........................................................................... 2,288,503
2,560,000 Pre-Refunded, 7.875%, 01/01/05 ............................................................ 2,701,722
2,815,000 Pre-Refunded, 8.00%, 01/01/13 ............................................................. 2,972,471
1,000,000 Lake Local School District, Stark County, AMBAC Insured, 6.25%, 12/01/09 ...................... 1,084,360
3,200,000 Lakota Local District GO, AMBAC Insured, 6.125%, 12/01/17 ..................................... 3,329,312
Liberty Benton Local School District, AMBAC Insured,
2,000,000 6.00%, 12/01/15 ........................................................................... 2,075,140
2,045,000 6.10%, 12/01/19 ........................................................................... 2,121,442
Lucas County GO, Limited Tax, FGIC Insured,
120,000 8.00%, 12/01/06 ........................................................................... 148,375
110,000 8.00%, 12/01/08 ........................................................................... 137,595
120,000 8.00%, 12/01/09 ........................................................................... 151,050
220,000 8.00%, 12/01/10 ........................................................................... 276,822
Lucas County Hospital Revenue, MBIA Insured,
4,140,000 St. Vincent Medical Center, Series C, 5.25%, 08/15/22 ..................................... 3,886,922
3,200,000 The Toledo Hospital, Pre-Refunded, 7.50%, 11/15/14 ........................................ 3,558,080
Mahoning County GO, Bridge Improvement, AMBAC Insured,
1,500,000 Limited Tax, 7.20%, 12/01/09 .............................................................. 1,668,135
1,500,000 Unlimited Tax, 7.15%, 12/01/04 ............................................................ 1,654,080
Mahoning County Hospital Facilities Revenue, MBIA Insured,
5,835,000 Western Reserve Care, 5.50%, 10/15/25 ..................................................... 5,676,755
2,000,000 Youngstown Hospital, Inc. Project, Series B, 7.00%, 10/15/08 .............................. 2,186,820
2,500,000 Mansfield Hospital Improvement Revenue, Mansfield General Hospital Project, AMBAC Insured, 6.70%,
12/01/09 ..................................................................................... 2,713,175
1,000,000 Marietta City School District, Series B, AMBAC Insured, 5.75%, 12/01/07 ....................... 1,056,110
500,000 Marietta Sewer System Mortgage Revenue, BIG Insured, 7.50%, 11/01/07 .......................... 535,580
1,000,000 Marysville Exempted Village School District GO, MBIA Insured, 5.75%, 12/01/23 ................. 1,009,470
Marysville Water Systems, Refunding, AMBAC Insured,
$ 1,000,000 5.40%, 12/01/13 ........................................................................... $ 978,700
1,500,000 5.50%, 12/01/18 ........................................................................... 1,473,120
1,935,000 Mason Sewer Systems Revenue, FGIC Insured, 6.00%, 12/01/19 .................................... 2,002,570
Massillon City School District GO, AMBAC Insured, Pre-Refunded,
1,500,000 Series 1, 7.10%, 12/01/11 ................................................................. 1,682,940
1,000,000 Unlimited Tax, 7.20%, 12/01/11 ............................................................ 1,146,360
2,755,000 Maumee Hospital Revenue, Refunding, Saint Luke's Hospital Project, AMBAC Insured, 5.80%, 12/01/14 2,832,333
3,000,000 Medina City School District, FGIC Insured, 6.20%, 12/01/18 .................................... 3,158,730
Mentor Exempted Village School District, MBIA Insured,
1,000,000 5.375%, 12/01/11 .......................................................................... 1,004,800
2,000,000 6.625%, 12/01/13 .......................................................................... 2,171,500
2,040,000 Pre-Refunded, 7.40%, 12/01/11 ............................................................. 2,309,831
Miami County Hospital Facilities Revenue, Upper Valley Medical Center, Nursing Care, Inc.,
525,000 Series A, BIG Insured, 8.375%, 05/01/13 ................................................... 557,765
1,340,000 Series B, MBIA Insured, 6.50%, 05/01/21 ................................................... 1,419,877
500,000 Middleburg Heights Hospital Revenue, Refunding, Southwest General Health Center, FSA Insured,
5.75%, 08/15/21 .............................................................................. 499,975
Montgomery County, Greater Moraine-Beaver Creek Sewer Revenue, Series A, FGIC Insured,
Pre-Refunded,
500,000 7.45%, 09/01/00 ........................................................................... 520,570
500,000 7.50%, 09/01/01 ........................................................................... 520,690
3,800,000 7.75%, 09/01/11 ........................................................................... 3,961,804
Montgomery County Hospital Facilities Revenue, Refunding, Kettering Medical Center Project,
MBIA Insured,
15,000,000 7.40%, 04/01/09 ........................................................................... 16,181,250
5,000,000 7.50%, 04/01/14 ........................................................................... 5,375,250
Montgomery County Revenue, Series A,
1,600,000 Refunding, Miami Valley Hospital, AMBAC Insured, 6.25%, 11/15/12 .......................... 1,690,944
3,250,000 Refunding, Miami Valley Hospital, AMBAC Insured, 6.25%, 11/15/16 .......................... 3,423,225
1,780,000 Sisters of Charity Health Care, AMBAC Insured, 6.25%, 05/15/14 ............................ 1,873,557
1,565,000 Sisters of Charity Health Care, MBIA Insured, 6.625%, 05/15/21 ............................ 1,664,863
Muskingum County GO, AMBAC Insured,
1,000,000 County Office Building Improvement, 7.20%, 12/01/10 ....................................... 1,120,590
1,695,000 Justice Center Improvement, 6.375%, 12/01/17 .............................................. 1,799,039
1,110,000 bNew Lexington HDC, Mortgage Revenue, Refunding, Lincoln Park, Series A, MBIA Insured,
FHA Insured, 5.85%, 01/01/21 ................................................................. 1,109,889
2,000,000 New Philadelphia City School District, School and Improvement, AMBAC Insured, 6.25%, 12/01/17 . 2,108,740
1,500,000 New Richmond Exempted Village School District GO, AMBAC Insured, 7.125%, 09/01/09 ............. 1,625,520
1,000,000 Newark Water System, AMBAC Insured, 6.00%, 12/01/18 ........................................... 1,042,570
3,800,000 North Olmsted GO, AMBAC Insured, 6.25%, 12/15/12 .............................................. 4,036,664
1,000,000 North Ridgeville GO, AMBAC Insured, 5.125%, 12/01/13 .......................................... 954,500
2,900,000 North Ridgeville GO, City School District, AMBAC Insured, 6.30%, 12/01/17 ..................... 3,094,184
455,000 Northeast Regional Sewer District, Waste Water Revenue, AMBAC Insured, Pre-Refunded, 6.50%,
11/15/16 ..................................................................................... 511,070
25,000 Northeast Regional Sewer District Water Resource Revenue, Junior Lien, MBIA Insured, ETM 10/01/96,
9.80%, 10/01/96 .............................................................................. 25,863
1,090,000 Northridge Local School District, Licking, Knox and Del Counties Improvement, FSA Insured, 5.75%,
12/01/18 ..................................................................................... 1,088,507
2,000,000 Northwest Local School District, Scioto County GO, AMBAC Insured, 7.05%, 12/01/14 ............. 2,213,220
1,000,000 Norwalk Waterworks System Revenue, Series 1990, AMBAC Insured, 7.20%, 04/01/15 ................ 1,080,290
Ohio Capital Corp. for Housing Mortgage Revenue, Refunding, MBIA Insured,
$ 2,000,000 6.35%, 07/01/22 ........................................................................... $ 2,043,500
4,215,000 6.90%, 07/01/24 ........................................................................... 4,353,547
3,500,000 Series J, 6.50%, 01/01/25 ................................................................. 3,589,005
1,625,000 Westview Apartments, Series A, 6.125%, 01/01/15 ........................................... 1,662,911
2,565,000 Westview Apartments, Series A, 6.25%, 01/01/23 ............................................ 2,613,171
780,000 Ohio HFA, MFHR, Northridge Apartments, FGIC Insured, 10.35%, 12/01/25 ......................... 844,108
Ohio HFA, SFMR, GNMA Secured,
2,800,000 Series 1988-C, 8.00%, 09/01/08 ............................................................ 2,989,672
2,625,000 Series 1988-C, 8.125%, 03/01/20 ........................................................... 2,771,843
4,185,000 Series 1989-A, 7.65%, 03/01/29 ............................................................ 4,448,488
1,090,000 Series 1990-B, 7.40%, 09/01/15 ............................................................ 1,145,710
2,565,000 Series 1990-C, 7.85%, 09/01/21 ............................................................ 2,725,082
1,385,000 Series 1990-D, 7.50%, 09/01/13 ............................................................ 1,469,499
3,995,000 Series 1990-I, 7.60%, 09/01/16 ............................................................ 4,238,056
4,865,000 Series 1991-D, 7.05%, 09/01/16 ............................................................ 5,071,276
Ohio Municipal Electric Generation Agency, AMBAC Insured,
13,000,000 Joint Venture, 5.625%, 02/15/16 ........................................................... 13,067,470
2,500,000 Joint Venture 5, Certificates of Beneficial Interest, 5.375%, 02/15/13 .................... 2,479,325
7,680,000 Joint Venture 5, Certificates of Beneficial Interest, 5.375%, 02/15/24 .................... 7,437,005
Ohio State Air Quality Development Authority Revenue,
4,000,000 Columbus Southern Power, Series A, FGIC Insured, 6.375%, 12/01/20 ......................... 4,254,080
5,000,000 Refunding, Cincinnati Gas & Electric, MBIA Insured, 5.45%, 01/01/24 ....................... 4,839,700
1,230,000 Refunding, JMG Funding, L.P., AMBAC Insured, 6.375%, 01/01/29 ............................. 1,290,196
15,245,000 Refunding, JMG Funding, L.P., AMBAC Insured, 6.375%, 04/01/29 ............................. 15,991,090
1,000,000 Refunding, PCR, FGIC Insured, 7.45%, 03/01/16 ............................................. 1,117,900
1,500,000 Refunding, PCR, Ohio Edison, Series B, AMBAC Insured, 5.625%, 11/15/29 .................... 1,476,465
7,000,000 Refunding, PCR, Pennsylvania Power Co., AMBAC Insured, 6.45%, 05/01/27 .................... 7,445,830
13,000,000 Ohio State Building Authority, Adult Correctional Facility, Series A, MBIA Insured, 6.125%, 10/01/13 13,729,560
1,100,000 Ohio State Department of Transportation, COP, Panhandle Rail Line Project, Series A, CGIC Insured,
6.50%, 04/15/12 .............................................................................. 1,183,446
Ohio State Higher Educational Facility Commission Revenue,
2,500,000 Dayton University Project, FGIC Insured, 7.25%, 12/01/12 .................................. 2,763,950
1,300,000 Dayton University Project, FGIC Insured, 5.80%, 12/01/14 .................................. 1,332,240
1,725,000 Dayton University Project, FGIC Insured, 6.75%, 12/01/15 .................................. 1,883,079
1,135,000 Northern University Project, FGIC Insured, Pre-Refunded, 7.30%, 05/15/10 .................. 1,271,234
1,000,000 Wittenberg University Project, FGIC Insured, 7.85%, 06/01/07 .............................. 1,063,140
1,500,000 Xavier University Project, MBIA Insured, Pre-Refunded, 7.625%, 11/01/08 ................... 1,643,505
2,420,000 Ohio State Water Development Authority, PCR Facilities, Refunding, PA Power Co. Project,
AMBAC Insured, 6.15%, 08/01/23 ............................................................... 2,525,657
Ohio State Water Development Authority Revenue,
270,000 AMBAC Insured, 9.375%, 12/01/18 ........................................................... 280,395
3,500,000 Fresh Water Service, AMBAC Insured, 5.90%, 12/01/21 ....................................... 3,606,960
4,000,000 Refunding, Cincinnati Gas, Series A, MBIAInsured, 5.45%, 01/01/24 ......................... 3,899,040
5,000,000 Refunding, Dayton Power, Series A, AMBAC Insured, 6.40%, 08/15/27 ......................... 5,297,050
1,000,000 Refunding & Improvement, AMBAC Insured, 5.50%, 12/01/11 ................................... 1,008,180
4,450,000 Refunding & Improvement, Pure Water, AMBAC Insured, 5.50%, 12/01/18 ....................... 4,375,863
2,000,000 Series I, ETM 06/01/00, AMBAC Insured, 7.00%, 12/01/09 .................................... 2,371,860
Olentangy Local School District GO,
375,000 BIG Insured, 7.75%, 12/01/08 .............................................................. 474,525
375,000 BIG Insured, 7.75%, 12/01/09 .............................................................. 475,691
375,000 BIG Insured, 7.75%, 12/01/10 .............................................................. 478,406
1,000,000 MBIA Insured, 6.35%, 12/01/17 ............................................................. 1,069,680
$ 1,000,000 Olmsted Falls Local School District, FGIC Insured, 7.05%, 12/15/11 ............................ $ 1,135,070
2,500,000 Orrville Electric System Mortgage Revenue, Refunding, Series A & B,AMBAC Insured, 7.50%, 12/01/10 2,717,625
4,100,000 Orrville Sewer System Revenue, Improvement Mortgage, MBIA Insured, 7.875%, 12/01/12 ........... 4,412,297
1,150,000 Orrville Water Systems Improvement Revenue, MBIA Insured, 6.125%, 12/01/18 .................... 1,204,729
Ottawa County GO, AMBAC Insured,
400,000 5.75%, 12/01/14 ........................................................................... 405,756
1,500,000 Catawba Isle, 7.00%, 09/01/11 ............................................................. 1,656,180
1,950,000 Ottawa County Sewer System Revenue, Refunding, Danbury Project, AMBAC Insured, 5.50%, 10/01/14 1,957,839
3,225,000 Oxford Water Supply System Mortgage Revenue, AMBAC Insured, Pre-Refunded, 7.625%, 12/01/14 .... 3,600,906
Painesville Township Local School District GO, Lake County, FGIC Insured,
3,240,000 5.625%, 12/01/09 .......................................................................... 3,316,529
4,490,000 5.65%, 12/01/15 ........................................................................... 4,546,574
2,000,000 Perrysburg Exempted Village School District, AMBAC Insured, 6.00%, 12/01/15 ................... 2,100,580
1,000,000 Pickerington Local School District GO, Refunding, AMBAC Insured, 5.55%, 12/01/07 .............. 1,048,200
Puerto Rico Commonwealth GO,
3,710,000 AMBAC Insured, 5.85%, 07/01/15 ............................................................ 3,805,384
2,000,000 MBIA Insured, 5.75%, 07/01/24 ............................................................. 2,031,420
1,000,000 Public Improvement, MBIA Insured, Pre-Refunded, 6.50%, 07/01/09 ........................... 1,135,020
1,000,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series W, FSA Insured,
5.50%, 07/01/17 .............................................................................. 993,700
11,000,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 6.00%, 07/01/21 ................... 11,193,930
Puerto Rico Public Buildings Authority Revenue, Guaranteed, Government Facilities, Series A,
AMBAC Insured,
5,000,000 b5.50%, 07/01/21 .......................................................................... 4,919,000
4,130,000 b5.50%, 07/01/25 .......................................................................... 4,047,152
2,700,000 bPuerto Rico Public Buildings Authority Revenue, Guaranteed, Public Education and Health Facilities,
Refunding, AMBAC Insured, 5.50%, 07/01/21 .................................................... 2,659,851
Revere Local School District, AMBAC Insured,
2,000,000 5.25%, 12/01/16 ........................................................................... 1,907,500
1,600,000 6.00%, 12/01/16 ........................................................................... 1,655,872
1,300,000 Reynoldsburg City School District, FGIC Insured, 6.55%, 12/01/17 .............................. 1,390,766
1,200,000 Rural Lorain County Water Authority, Water Resource Revenue, Refunding, AMBAC Insured,
Pre-Refunded, 7.70%, 10/01/08 ................................................................ 1,335,384
600,000 Saint Mary's Electric System Mortgage Revenue, AMBAC Insured, 6.65%, 12/01/11 ................. 653,124
750,000 Saint Mary's Waterworks Revenue, AMBAC Insured, 6.65%, 12/01/11 ............................... 816,405
2,000,000 Salem GO, AMBAC Insured, 6.50%, 12/01/06 ...................................................... 2,260,980
1,000,000 South Euclid Lyndhurst City School District, FGIC Insured, 5.30%, 12/01/14 .................... 967,620
700,000 South Range Local School District, MBIA Insured, 6.15%, 12/01/18 .............................. 740,369
South-Western City School District of Ohio, Franklin and Pickway Counties, FGIC Insured,
490,000 ETM 12/01/03, 7.875%, 12/01/03 ............................................................ 597,016
550,000 ETM 12/01/04, 7.875%, 12/01/04 ............................................................ 678,359
600,000 ETM 12/01/06, 7.875%, 12/01/06 ............................................................ 759,138
600,000 ETM 12/01/07, 7.875%, 12/01/07 ............................................................ 741,420
SouthWest Regional Water District, Water Revenue, MBIA Insured,
1,000,000 6.00%, 12/01/15 ........................................................................... 1,035,930
700,000 6.00%, 12/01/20 ........................................................................... 722,295
1,125,000 Springboro Water Systems Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/18 ................... 1,104,761
Springfield City School District, Clark County, AMBAC Insured,
1,220,000 6.40%, 12/01/12 ........................................................................... 1,320,918
1,000,000 6.60%, 12/01/12 ........................................................................... 1,084,530
2,775,000 Stark County GO, Refunding, AMBAC Insured, 5.70%, 11/15/17 .................................... 2,799,392
$ 3,830,000 eStark County Hospital Facilities Revenue, Refunding, Timken Mercy Medical Center, Series A,
Pre-Refunded, 7.50%, 12/01/07 ................................................................ $ 4,023,836
8,500,000 Stark County Sanitary Sewer System Revenue, Series A, MBIA Insured, Pre-Refunded, 7.75%,
11/15/18 ..................................................................................... 9,505,040
2,075,000 Steubenville City School District, Series A, AMBAC Insured, 6.20%, 12/01/17 ................... 2,202,447
1,750,000 Struthers City School District, AMBAC Insured, 6.50%, 12/01/14 ................................ 1,899,398
Summit County GO, Limited Tax, AMBAC Insured,
630,000 Building Improvement, Pre-Refunded, 8.00%, 12/01/07 ....................................... 688,105
340,000 Capital Improvement, Pre-Refunded, 8.00%, 12/01/07 ........................................ 371,358
3,530,000 County Jail Improvement, Pre-Refunded, 7.85%, 12/01/08 .................................... 3,961,896
760,000 Justice Facilities, Pre-Refunded, 8.00%, 12/01/07 ......................................... 830,095
1,000,000 Refunding, Series B, 6.95%, 08/01/08 ...................................................... 1,111,150
655,000 Sewer System Improvement, Pre-Refunded, 8.00%, 12/01/07 ................................... 715,411
475,000 Water System Improvement, Pre-Refunded, 8.00%, 12/01/07 ................................... 518,809
1,750,000 Sylvania City School District, FGIC Insured, 5.75%, 12/01/22 .................................. 1,752,590
Toledo GO, Limited Tax,
3,715,000 AMBAC Insured, 5.95%, 12/01/15 ............................................................ 3,848,034
500,000 FGIC Insured, 7.375%, 12/01/00 ............................................................ 559,325
400,000 FGIC Insured, 7.375%, 12/01/02 ............................................................ 453,740
650,000 FGIC Insured, 7.375%, 12/01/03 ............................................................ 742,170
650,000 FGIC Insured, 7.375%, 12/01/04 ............................................................ 753,149
650,000 FGIC Insured, 7.375%, 12/01/05 ............................................................ 758,511
625,000 FGIC Insured, 7.375%, 12/01/06 ............................................................ 734,019
4,500,000 MBIA Insured, 6.50%, 12/01/11 ............................................................. 4,900,230
Toledo Sewerage System Mortgage Revenue, Series 1988-B, MBIA Insured,
2,320,000 7.75%, 11/15/17 ........................................................................... 2,542,766
3,680,000 Pre-Refunded, 7.75%, 11/15/17 ............................................................. 4,115,123
1,500,000 Trumbull County GO, Refunding, AMBAC Insured, 5.30%, 12/01/14 ................................. 1,443,000
Trumbull County Hospital Revenue, FGIC Insured,
1,000,000 Refunding & Improvement, Series A, 6.25%, 11/15/12 ........................................ 1,060,590
2,000,000 Refunding, Series B, 6.90%, 11/15/12 ...................................................... 2,189,140
4,000,000 Twinsburg City School District, CGIC Insured, 6.70%, 12/01/11 ................................. 4,351,480
1,600,000 University of Cincinnati, COP, MBIA Insured, 6.75%, 12/01/09 .................................. 1,747,024
University of Toledo General Receipt,
2,000,000 FGIC Insured, 5.30%, 06/01/18 ............................................................. 1,924,040
3,450,000 MBIA Insured, Pre-Refunded, 7.70%, 06/01/18 ............................................... 3,803,211
5,000,000 Refunding, FGIC Insured, Series A, 5.90%, 06/01/20 ........................................ 5,108,950
1,000,000 Urbana Waste Water Treatment Plant GO, AMBAC Insured, 7.05%, 12/01/11 ......................... 1,129,680
1,400,000 Valley Local School District, AMBAC Insured, 7.00%, 12/01/13 .................................. 1,574,678
Warren County Sewer System Revenue, County Sewer District, FGIC Insured,
700,000 5.60%, 12/01/15 ........................................................................... 691,698
500,000 5.65%, 12/01/20 ........................................................................... 493,390
1,250,000 Series A, Pre-Refunded, 7.20%, 12/01/15 ................................................... 1,432,950
2,000,000 Warren County Water Works District Revenue, Refunding, FGIC Insured, 5.45%, 12/01/15 .......... 2,001,300
Warren GO,
2,415,000 MBIA Insured, 6.65%, 11/01/12 ............................................................. 2,661,378
1,015,000 Refunding, AMBAC Insured, 5.50%, 11/15/13 ................................................. 1,011,498
1,150,000 Washington City Water System Revenue, AMBAC Insured, 5.30%, 12/01/13 .......................... 1,121,502
500,000 Washington County Hospital Revenue, Refunding, Marietta Memorial Hospital, AMBAC Insured,
Pre-Refunded, 9.00%, 06/01/98 ................................................................ 516,894
5,000,000 Westerville, Minerva Park and Blendon Joint Township Hospital District Revenue, Refunding, St. Ann's
Hospital, Series B, AMBAC Insured, 7.00%, 09/15/12 ........................................... 5,520,550
2,000,000 Wilmington City School District, FGIC Insured, 6.30%, 12/01/14 ................................ 2,121,500
Wilmington Sewer System Revenue, Refunding, First Mortgage, MBIA Insured,
$ 1,085,000 b5.20%, 02/15/13 .......................................................................... $ 1,061,064
1,170,000 b5.30%, 02/15/18 .......................................................................... 1,140,341
500,000 Woodmore Local School District, Refunding, AMBAC Insured, 5.65%, 12/01/08 ..................... 522,024
8,700,000 Wooster City School District, AMBAC Insured, 6.50%, 12/01/17 .................................. 9,641,252
2,350,000 Worthington City School District, Refunding, FGIC Insured, 6.375%, 12/01/12 ................... 2,495,700
2,250,000 Youngstown State University, General Receipts, AMBAC Insured, 6.00%, 12/15/16 ................. 2,344,050
----------------
Total Investments (Cost $650,824,476) 100.2% ....................................... 693,060,128
Liabilities in Excess of Other Assets (.2)% ........................................ (1,191,679)
----------------
Net Assets 100.0% .................................................................. $691,868,449
================
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $650,889,268 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 43,410,127
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (1,239,267)
----------------
Net unrealized appreciation ................................................................. $ 42,170,860
================
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency
FSA - Financial Security Assurance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Agency/Authority
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
bSee Note 1(g) regarding securities purchased on a when-issued basis.
eSee Note 1(c) regarding uninsured securities collateralized by U.S. government
securities.
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
February 29, 1996
<TABLE>
<CAPTION>
Franklin Franklin Franklin
Arizona Insured Florida Insured Franklin Massachusetts
Tax-Free Tax-Free Insured Tax-Free Insured Tax-Free
Income Fund Income Fund Income Fund Income Fund
---------- --------- ----------- ----------
Assets:
Investments in securities:
<S> <C> <C> <C> <C>
At identified cost.......................................... $36,971,970 $68,377,035 $1,608,853,169 $278,310,731
========== ========= =========== ==========
At value.................................................... 38,392,837 70,450,024 1,721,402,985 301,310,080
Cash......................................................... 134,603 178,330 107,647 166,305
Receivables:
Interest.................................................... 387,500 1,219,406 26,006,524 4,428,151
Investment securities sold.................................. -- -- 592,655 3,638,112
Capital shares sold......................................... 230,670 320,064 2,838,662 311,037
---------- ---------- ----------- ----------
Total assets............................................ 39,145,610 72,167,824 1,750,948,473 309,853,685
---------- ---------- ----------- ----------
Liabilities:
Payables:
Investment securities purchased (Note 1).................... 875,174 2,431,854 32,410,461 4,863,883
Distributions payable to shareholders....................... 51,215 93,953 2,555,232 444,539
Capital shares repurchased.................................. 9,323 15,500 1,747,929 47,195
Management fees............................................. 1,703 29,438 663,232 134,913
Distribution fees........................................... 3,124 4,931 213,393 40,120
Shareholder servicing costs................................. 675 1,682 38,614 7,605
Accrued expenses and other liabilities....................... 5,600 7,113 128,922 27,891
---------- --------- ----------- ----------
Total liabilities....................................... 946,814 2,584,471 37,757,783 5,566,146
---------- --------- ----------- ----------
Net assets, at value.......................................... $38,198,796 $69,583,353 $1,713,190,690 $304,287,539
========== ========== ============ ===========
Net assets consist of:
Undistributed net investment income.......................... $ 75,946 $ 32,739 $ 1,118,209 $ 156,087
Net unrealized appreciation on investments................... 1,420,867 2,072,989 112,549,816 22,999,349
Net realized loss............................................ (427,540) (1,290,275) (225,894) (3,604,410)
Class I capital shares....................................... 37,129,523 68,767,900 1,591,621,961 282,003,775
Class II capital shares...................................... -- -- 8,126,598 2,732,738
---------- --------- ----------- ----------
Net assets, at value.......................................... $38,198,796 $69,583,353 $1,713,190,690 $304,287,539
========== ========== ============= ===========
Class I shares:
Net assets, at value......................................... $38,198,796 $69,583,353 $1,705,038,443 $301,528,832
========== ========== ============= ===========
Shares outstanding........................................... 3,688,139 6,942,043 139,005,800 25,881,419
========== ========== ============= ===========
Net asset value per share*................................... $10.36 $10.02 $12.27 $11.65
========== ========== =========== ==========
Maximum offering price per share (100/95.75 of net asset value
per share)................................................... $10.82 $10.46 $12.81 $12.17
========== ========== =========== ==========
Class II shares:
Net assets, at value......................................... -- -- $ 8,152,247 $ 2,758,707
========== ========= =========== ==========
Shares outstanding........................................... -- -- 662,359 236,038
========== ========= =========== ==========
Net asset value per share*................................... -- -- $12.31 $11.69
========== ========= =========== ==========
Maximum offering price per share (100/99 of net asset value
per share)................................................... -- -- $12.43 $11.81
========== ========= =========== ==========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
February 29, 1996
<TABLE>
<CAPTION>
Franklin Franklin Franklin
Michigan Insured Minnesota Insured Ohio Insured
Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund
----------- ----------- ----------
Assets:
Investments in securities:
<S> <C> <C> <C>
At identified cost........................................................ $1,058,045,657 $475,869,643 $650,824,476
============= =========== ===========
At value.................................................................. 1,127,894,938 501,889,870 693,060,128
Cash....................................................................... 2,043,269 3,642,764 1,786,927
Receivables:
Interest.................................................................. 19,492,959 5,479,000 11,520,835
Investment securities sold................................................ -- 6,102,916 895,000
Capital shares sold....................................................... 1,306,319 577,635 1,414,942
------------ ----------- ----------
Total assets.......................................................... 1,150,737,485 517,692,185 708,677,832
------------ ----------- -----------
Liabilities:
Payables:
Investment securities purchased (Note 1).................................. 26,185,023 23,344,367 15,354,781
Distributions payable to shareholders..................................... 1,577,054 703,890 961,339
Capital shares repurchased................................................ 121,527 12 33,345
Management fees........................................................... 441,588 205,636 280,093
Distribution fees......................................................... 139,680 55,630 90,236
Shareholder servicing costs............................................... 32,340 13,627 17,575
Accrued expenses and other liabilities..................................... 102,802 77,842 72,014
------------ ----------- ----------
Total liabilities..................................................... 28,600,014 24,401,004 16,809,383
------------ ----------- ----------
Net assets, at value........................................................ $1,122,137,471 $493,291,181 $691,868,449
============ =========== ===========
Net assets consist of:
Undistributed net investment income........................................ $-- $ 489,930 $--
Accumulated distributions in excess of net investment income (Note 1)...... (111,019) -- (53,972)
Net unrealized appreciation on investments................................. 69,849,281 26,020,227 42,235,652
Net realized loss.......................................................... (10,805) (3,761) (5,605,438)
Class I capital shares..................................................... 1,045,750,320 465,635,501 649,230,107
Class II capital shares.................................................... 6,659,694 1,149,284 6,062,100
------------ ----------- ----------
Net assets, at value........................................................ $1,122,137,471 $493,291,181 $691,868,449
============ =========== ===========
Class I shares:
Net assets, at value....................................................... $1,115,454,105 $492,139,012 $685,783,422
============ =========== ===========
Shares outstanding......................................................... 92,289,436 40,539,811 56,120,455
============ =========== ==========
Net asset value per share*................................................. 12.09 $12.14 $12.22
============ =========== ==========
Maximum offering price per share (100/95.75 of net asset value per share).. $12.63 $12.68 $12.76
============ =========== ==========
Class II shares:
Net assets, at value....................................................... $ 6,683,366 $ 1,152,169 $ 6,085,027
=========== =========== ===========
Shares outstanding......................................................... 550,577 94,671 496,533
============ =========== ==========
Net asset value per share*................................................. $12.14 $12.17 $12.26
============ =========== ==========
Maximum offering price per share (100/99 of net asset value per share)..... $12.26 $12.29 $12.38
============ =========== ==========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Operations
for the year ended February 29, 1996
<TABLE>
<CAPTION>
Franklin Franklin Franklin
Arizona Insured Florida Insured Franklin Massachusetts
Tax-Free Tax-Free Insured Tax-Free Insured Tax-Free
Income Fund Income Fund Income Fund Income Fund
----------- ----------- ------------ -----------
Investment income:
<S> <C> <C> <C> <C>
Interest (Note 1).............................................. $1,683,040 $3,270,050 $108,697,017 $18,755,293
---------- --------- ----------- ----------
Expenses:
Management fees (Note 5)....................................... 190,058 362,566 7,882,310 1,580,640
Distribution fees - Class I (Note 5)........................... 28,427 52,944 1,236,821 217,122
Distribution fees - Class II (Note 5).......................... -- -- 16,915 8,112
Shareholder servicing costs (Note 5)........................... 531 14,724 383,753 75,300
Reports to shareholders........................................ 8,447 9,103 301,500 47,092
Insurance (Note 1)............................................. 2,443 -- 3,249 4,112
Registration and filing fees................................... 2,010 2,090 56,718 14,145
Custodian fees................................................. 1,895 4,948 142,285 24,604
Professional fees.............................................. 1,758 2,555 47,806 8,796
Trustees' fees and expenses.................................... 246 786 25,777 4,475
Other.......................................................... 20,753 18,631 157,641 40,180
Expenses waived/assumed by Manager (Note 5).................... (208,778) (269,869) -- --
----------- --------- ----------- ----------
Total expenses............................................ 47,790 198,478 10,254,775 2,024,578
----------- --------- ----------- ----------
Net investment income..................................... 1,635,250 3,071,572 98,442,242 16,730,715
----------- --------- ----------- ----------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)....................................... 8,518 29,740 12,703,972 (82,430)
Net unrealized appreciation.................................... 1,489,428 2,612,156 29,657,448 8,199,260
----------- --------- ----------- ----------
Net realized and unrealized gain on investments................. 1,497,946 2,641,896 42,361,420 8,116,830
----------- --------- ----------- ----------
Net increase in net assets resulting from operations............ $3,133,196 $5,713,468 $140,803,662 $24,847,545
=========== ========= =========== ==========
</TABLE>
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Operations (cont.)
for the year ended February 29, 1996
<TABLE>
<CAPTION>
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)............................................................ $67,769,458 $30,244,782 $41,629,659
----------- ----------- ----------
Expenses:
Management fees (Note 5)..................................................... 5,130,941 2,430,182 3,268,575
Distribution fees - Class I (Note 5)......................................... 802,219 347,521 495,532
Distribution fees - Class II (Note 5)........................................ 14,138 2,380 12,888
Shareholder servicing costs (Note 5)......................................... 318,350 139,933 193,223
Reports to shareholders...................................................... 184,734 90,657 122,630
Insurance (Note 1)........................................................... 46,661 73,933 27,202
Registration and filing fees................................................. 7,431 24,351 5,845
Custodian fees............................................................... 90,244 41,104 56,041
Professional fees............................................................ 30,716 14,167 19,330
Trustees' fees and expenses.................................................. 16,399 7,352 10,157
Other........................................................................ 75,322 46,464 65,180
----------- ----------- ---------
Total expenses.......................................................... 6,717,155 3,218,044 4,276,603
----------- ----------- ---------
Net investment income................................................... 61,052,303 27,026,738 37,353,056
----------- ----------- ----------
Realized and unrealized gain on investments:
Net realized gain............................................................ 2,392,717 596,366 2,896,481
Net unrealized appreciation.................................................. 27,527,016 9,650,802 15,182,787
----------- ----------- ----------
Net realized and unrealized gain on investments............................... 29,919,733 10,247,168 18,079,268
----------- ----------- ----------
Net increase in net assets resulting from operations.......................... $90,972,036 $37,273,906 $55,432,324
=========== =========== ==========
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended February 29, 1996 and February 28, 1995
Franklin Arizona Insured Franklin Florida Insured
Tax-Free Income Fund Tax-Free Income Fund
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income............................................. $ 1,635,250 $ 938,235 $ 3,071,572 $ 2,127,044
Net realized gain (loss) from security transactions............... 8,518 (394,263) 29,740 (1,225,446)
Net unrealized appreciation on investments........................ 1,489,428 20,907 2,612,156 97,973
---------- --------- --------- ----------
Net increase in net assets resulting from operations......... 3,133,196 564,879 5,713,468 999,571
Distributions to shareholders from undistributed net investment income
Class I (Note 7) ................................................. (1,604,164) (915,004) (3,052,806) (2,149,615)
Increase in net assets from capital share transactions (Note 2).... 15,875,305 8,249,140 20,076,187 15,846,220
---------- --------- --------- ----------
Net increase in net assets................................... 17,404,337 7,899,015 22,736,849 14,696,176
Net assets:
Beginning of year................................................. 20,794,459 12,895,444 46,846,504 32,150,328
---------- --------- --------- ----------
End of year....................................................... $38,198,796 $20,794,459 $69,583,353 $46,846,504
========= ========== ========== ==========
Undistributed net investment income included in net assets:
Beginning of year................................................. $ 44,860 $ 21,629 $ 13,973 $ 36,544
========== ========= ========= ========
End of year....................................................... $ 75,946 $ 44,860 $ 32,739 $ 13,973
========== ========= ========= ========
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the years ended February 29, 1996 and February 28, 1995
Franklin Insured Franklin Massachusetts Insured
Tax-Free Income Fund Tax-Free Income Fund
------------------------- ----------------------
1996 1995 1996 1995
----------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income.................................... $ 98,442,242 $ 102,450,006 $ 16,730,715 $ 16,981,078
Net realized gain (loss) from security transactions...... 12,703,972 (8,535,568) (82,430) (1,669,981)
Net unrealized appreciation (depreciation) on investments 29,657,448 (63,668,654) 8,199,260 (10,866,463)
----------- ----------- ----------- ----------
Net increase in net assets resulting from operations. 140,803,662 30,245,784 24,847,545 4,444,634
Distributions to shareholders from undistributed net investment
income:
Class I (Note 7) ........................................ (98,929,211) (102,152,086) (16,888,337) (16,987,060)
Class II (Note 7) ....................................... (130,554) -- (62,237) --
Increase (decrease) in net assets from capital share
transactions (Note 2)..................................... (11,787,371) (47,407,145) 8,059,652 (6,139,716)
----------- ----------- ----------- ----------
Net increase (decrease) in net assets................ 29,956,526 (119,313,447) 15,956,623 (18,682,142)
Net assets:
Beginning of year......................................... 1,683,234,164 1,802,547,611 288,330,916 307,013,058
----------- ------------- ----------- -----------
End of year............................................... $1,713,190,690 $1,683,234,164 $304,287,539 $288,330,916
============= ============= =========== ===========
Undistributed net investment income included in net assets:
Beginning of year......................................... $ 1,735,732 $ 1,437,812 $ 375,946 $ 381,928
=========== =========== =========== ==========
End of year............................................... $ 1,118,209 $ 1,735,732 $ 156,087 $ 375,946
=========== =========== =========== ==========
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the years ended February 29, 1996 and February 28, 1995
Franklin Michigan Insured Franklin Minnesota Insured Franklin Ohio Insured
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------------ --------------------- ---------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income............. $ 61,052,303 $ 60,143,574 $ 27,026,738 $ 27,876,364 $ 37,353,056 $ 38,121,995
Net realized gain (loss) from
security transactions............. 2,392,717 (146,409) 596,366 (599,133) 2,896,481 (2,762,910)
Net unrealized appreciation
(depreciation) on investments..... 27,527,016 (41,854,681) 9,650,802 (18,084,434) 15,182,787 (25,721,132)
----------- ----------- ---------- ---------- ---------- -----------
Net increase in net assets
resulting from operations......... 90,972,036 18,142,484 37,273,906 9,192,797 55,432,324 9,637,953
Distributions to shareholders:
From undistributed net investment
income:
Class I (Note 7) ............... (61,725,372) (60,164,972) (27,066,218) (27,874,417) (37,736,610) (38,353,594)
Class II (Note 7) .............. (105,454) -- (17,666) -- (95,312) --
In excess of net investment income
Class I (Note 1).................. (113,681) -- -- -- (56,788) --
From net realized gain............ -- -- -- (146,496) -- --
Increase (decrease) in net assets
from capital share transactions
(Note 2).......................... 55,393,011 24,287,690 3,166,929 (856,282) 21,780,231 (5,138,221)
----------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets........................ 84,420,540 (17,734,798) 13,356,951 (19,684,398) 39,323,845 (33,853,862)
Net assets:
Beginning of year................. 1,037,716,931 1,055,451,729 479,934,230 499,618,628 652,544,604 686,398,466
------------- ------------- ----------- ----------- ----------- ----------
End of year....................... $1,122,137,471 $1,037,716,931 $493,291,181 $479,934,230 $691,868,449 $652,544,604
============= ============= =========== ========== =========== ===========
Undistributed net investment income
(accumulated distributions in excess
of net investment income) included
in net assets:
Beginning of year................ $ 781,185 $ 802,583 $ 547,076 $ 545,129 $ 481,682 $ 713,281
=========== =========== ========== ========== ========== ==========
End of year...................... $ (111,019) $ 781,185 $ 489,930 $ 547,076 $ (53,972) $ 481,682
=========== =========== ========== ========== ========== ==========
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Free Trust (the Trust) is an open-end management investment company
(mutual fund), registered under the Investment Company Act of 1940 as amended.
The Trust currently consists of twenty-seven separate funds. 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
investment, while seeking 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 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 shares became Class I shares. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security 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 of the
bonds or notes). Such a right to resell is commonly known as a "put".
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.
f. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount and premium 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. Monthly dividends are reinvested
in additional shares of the Funds, or paid in cash as requested by the
shareholders.
The distributions in excess of net investment income for the Franklin Michigan
Insured Tax-Free Income Fund and the Franklin Ohio Insured Tax-Free Income Fund
did not 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.
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. 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.
i. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. TRUST SHARES
At February 29, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Funds' shares for the years
ended February 29, 1996 and February 28, 1995 were as follows:
<TABLE>
<CAPTION>
Franklin Arizona InsuredFranklin 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
-------- --------- -------- --------- --------- -----------
1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold ...................................... 1,310,752 $13,300,895 2,146,664 $21,308,471 9,929,360 $120,982,743
Shares issued in reinvestment of distributions ... 70,984 721,684 103,904 1,024,348 3,371,851 41,020,750
Shares redeemed .................................. (275,770) (2,805,108) (657,790) (6,510,967) (12,018,435) (146,156,709)
Changes from exercise of exchange privilege:
Shares sold ..................................... 527,979 5,359,303 1,055,014 10,533,372 8,254,222 100,201,004
Shares redeemed ................................. (68,728) (701,469) (620,715) (6,279,037) (11,180,382) (135,961,757)
-------- --------- -------- --------- --------- -----------
Net increase (decrease)...................... 1,565,217 $15,875,305 2,027,077 $20,076,187 (1,643,384) $ (19,913,969)
========= ========== ========= ========== ========= ===========
1995
Shares sold ...................................... 720,312 $ 6,864,816 1,400,121 $13,019,430 10,709,574 $127,758,145
Shares issued in reinvestment of distributions ... 46,351 439,728 74,928 689,499 3,460,173 40,968,219
Shares redeemed .................................. (171,115) (1,597,343) (561,546) (5,079,480) (16,808,196) (198,025,835)
Changes from exercise of exchange privilege:
Shares sold ..................................... 404,530 3,767,372 1,024,661 9,214,606 14,126,885 166,515,862
Shares redeemed ................................. (132,005) (1,225,433) (217,134) (1,997,835) (15,627,091) (184,623,536)
-------- --------- -------- --------- ---------- -----------
Net increase (decrease)...................... 868,073 $ 8,249,140 1,721,030 $15,846,220 (4,138,655) $ (47,407,145)
======== ========= ========= ========== ========= ===========
Franklin Arizona InsuredFranklin 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
-------- --------- -------- --------- --------- -----------
1996*
Shares sold ...................................... -- -- -- -- 666,072 $8,171,707
Shares issued in reinvestment of distributions ... -- -- -- -- 5,942 73,170
Shares redeemed .................................. -- -- -- -- (18,703) (230,327)
Changes from exercise of exchange privilege:
Shares sold ..................................... -- -- -- -- 12,348 151,962
Shares redeemed ................................. -- -- -- -- (3,300) (39,914)
-------- --------- -------- --------- --------- -----------
Net increase ................................ -- -- -- -- 662,359 $8,126,598
======== ========= ======== ========= ========= ==========
*For the period May 1, 1995 to February 29, 1996
Franklin Massachusetts Franklin Michigan Insured
Insured Tax-Free Income Fund Tax-Free Income Fund
------------------- --------------------
Class I shares: Shares Amount Shares Amount
-------- ---------- -------- -----------
1996
<S> <C> <C> <C> <C>
Shares sold ............................................................... 2,192,320 $25,360,361 8,973,142 $107,555,167
Shares issued in reinvestment of distributions ............................ 616,949 7,118,850 2,481,201 29,703,331
Shares redeemed ...........................................................(2,361,351) (27,226,511) (6,847,171) (82,021,459)
Changes from exercise of exchange privilege:
Shares sold .............................................................. 632,568 7,306,981 735,915 8,812,975
Shares redeemed .......................................................... (628,852) (7,234,236) (1,276,407) (15,316,697)
-------- ---------- -------- -----------
Net increase ......................................................... 451,634 $ 5,325,445 4,066,680 $ 48,733,317
======== ========== ========= ===========
1995
Shares sold ............................................................... 2,136,833 $24,013,694 8,411,532 $ 98,364,535
Shares issued in reinvestment of distributions ............................ 611,950 6,849,369 2,368,629 27,539,473
Shares redeemed ...........................................................(3,436,289) (38,407,049) (8,097,706) (93,942,160)
Changes from exercise of exchange privilege:
Shares sold .............................................................. 1,622,193 18,251,780 1,232,418 14,413,187
Shares redeemed ..........................................................(1,500,057) (16,847,510) (1,905,019) (22,087,345)
--------- ---------- --------- ----------
Net increase (decrease) .............................................. (565,370) $ (6,139,716) 2,009,854 $ 24,287,690
======== ========== ========= ==========
Class II shares:
1996*
Shares sold ............................................................... 231,785 $2,684,668 561,833 $6,797,339
Shares issued in reinvestment of distributions ............................ 4,367 50,866 6,207 75,384
Shares redeemed ........................................................... (104) (1,202) (9,660) (117,454)
Changes from exercise of exchange privilege:
Shares sold .............................................................. -- -- 298 3,668
Shares redeemed .......................................................... (10) (125) (8,101) (99,243)
-------- ---------- -------- -----------
Net increase.......................................................... 236,038 $2,734,207 550,577 $6,659,694
======== ========== ========= ==========
*For the period May 1, 1995 to February 29, 1996
Franklin Minnesota Insured Franklin Ohio Insured
Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------
Class I shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
1996
<S> <C> <C> <C> <C>
Shares sold ................................................................ 2,940,994 $35,545,343 5,015,523 $60,890,700
Shares issued in reinvestment of distributions ............................. 1,131,910 13,654,723 1,462,685 17,716,211
Shares redeemed ............................................................ (3,752,986) (45,223,267)(4,930,409) (59,660,284)
Changes from exercise of exchange privilege:
Shares sold ............................................................... 500,484 6,048,510 511,558 6,164,659
Shares redeemed ........................................................... (664,293) (8,007,664) (775,061) (9,393,155)
-------- ---------- -------- ----------
Net increase........................................................... 156,109 $ 2,017,645 1,284,296 $15,718,131
======== ========== ========= ==========
Franklin Minnesota Insured Franklin Ohio Insured
Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------
Class I shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
1995
Shares sold ................................................................ 3,174,540 $37,475,651 4,851,598 $57,392,071
Shares issued in reinvestment of distributions ............................. 1,183,229 13,910,099 1,494,660 17,553,487
Shares redeemed ............................................................ (4,116,746) (48,145,194)(6,250,075) (73,187,665)
Changes from exercise of exchange privilege:
Shares sold ............................................................... 989,975 11,620,432 880,783 10,306,806
Shares redeemed ........................................................... (1,353,664) (15,717,270)(1,475,603) (17,202,920)
--------- ---------- --------- -----------
Net decrease .......................................................... (122,666) $ (856,282) (498,637) $ (5,138,221)
======== ========== ======== ==========
Class II shares:
1996*
Shares sold ................................................................ 99,039 $1,202,330 490,891 $5,992,934
Shares issued in reinvestment of distributions ............................. 952 11,610 5,067 62,185
Shares redeemed ............................................................ -- -- (167) (2,068)
Changes from exercise of exchange privilege:
Shares sold ............................................................... -- -- 1,065 12,993
Shares redeemed ........................................................... (5,320) (64,656) (323) (3,944)
-------- ---------- -------- ----------
Net increase ......................................................... 94,671 $1,149,284 496,533 $6,062,100
======== ========== ======== ==========
*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 accumulated net capital
loss carryovers as follows:
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 .. -- -- -- -- -- -- --
2001 .. -- -- -- 6,640 -- -- 2,000
2002 .. 33,026 64,829 -- -- -- -- 90,225
2003 .. 394,514 1,225,446 226,494 1,670,219 10,805 2,767 2,762,910
2004 .. -- -- -- 82,668 -- -- --
-------- -------- -------- --------- -------- -------- --------
$427,540 $1,290,275 $226,494 $3,582,535 $10,805 $2,767 $5,540,646
======== ======== ======== ========= ======== ======== ========
</TABLE>
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at February 29,
1996 by $21,875 in the Franklin Massachusetts Insured Tax-Free Income Fund, $994
in the Franklin Minnesota Insured Tax-Free Income Fund and $64,792 in the
Franklin Ohio Insured Tax-Free Income Fund.
The Franklin Massachusetts Insured Tax-Free Income Fund had capital loss
carryovers of $162,016 that expired on February 29, 1996 and were reclassified
to paid-in capital.
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended February 29, 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 ......................... $16,283,137 $35,843,153 $242,443,475 $38,631,029 $177,207,915 $98,947,587 $107,278,921
========== ========== =========== ========== =========== ========== ===========
Sales ............................. $ 1,188,023 $13,683,493 $220,052,362 $29,791,422 $ 99,842,319 $84,530,795 $ 75,648,685
========== ========== =========== ========== ========== ========== ==========
</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:
<TABLE>
<CAPTION>
Annualized Fee Rate Month End Net Assets
------------- ----------------------------------
<C> <C>
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% In excess of $250 million
</TABLE>
The terms of the management agreement provide that aggregate annual 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 year ended February 29,
1996, the Funds' expenses did not exceed these limitations. However, Advisers
agreed in advance to waive management fees and assume payment of other expenses,
as indicated below, in an effort to minimize the Funds' expenses.
<TABLE>
<CAPTION>
Franklin ArizonaFranklin Florida
Insured Tax-FreeInsured Tax-Free
Income Fund Income Fund
---------- ----------
<S> <C> <C>
Management fees waived............................................................................ $190,058 $269,869
Other expenses assumed............................................................................ 18,720 --
---------- ----------
Total expenses waived/assumed by Advisers......................................................... $208,778 $269,869
========== ==========
</TABLE>
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 year ended February 29, 1996, aggregated $1,125,814, of which $1,000,929 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 will 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 of all the Funds, except the Franklin Arizona Insured
Tax-Free Income Fund and the Franklin Florida Insured Tax-Free Income Fund, 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 $3,153,648 for the year
ended February 29, 1996.
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Franklin Arizona Insured Tax-Free Income
Fund and the Florida Insured Tax-Free Income Fund will reimburse Distributors,
in an amount up to 0.15% per annum of the Fund's average daily net assets 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 $81,371 for the year ended
February 29, 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 dealers for certain sales of
the Funds' Class I and Class II shares. Commissions received by Distributors,
the amounts paid to other dealers and any applicable contingent deferred sales
charges for the year ended February 29, 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
Class I Income FundIncome Fund Income Fund Income Fund Income Fund Income FundIncome Fund
-------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total commissions received.................. $354,716 $529,386 $3,792,951 $879,517 $1,201,247 $1,201,790 $2,171,707
Paid to other dealers....................... $360,196 $510,299 $3,587,893 $824,460 $1,169,758 $1,136,445 $2,059,774
Contingent deferred sales charges........... -- $ 7,440 $ 111 -- $ 769 -- --
Class II
Total commissions received.................. $ 67,391 $ 27,804 $ 13,165 $ 11,884 $ 59,251
Paid to other dealers....................... $ 143,398 $ 54,195 $ 208,916 $ 23,235 $ 123,534
Contingent deferred sales charges........... $ 1,106 -- $ 1,381 -- --
d. Other Affiliated Parties and Transactions:
</TABLE>
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
Although each of the Funds, except the Franklin Arizona Insured Tax-Free Income
Fund and the Franklin Florida Insured Tax-Free Income Fund, has a diversified
investment portfolio, all of their investments are in the securities of issuers
within their respective states and U.S. territories and possessions. 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 Reali- Distri- Net Ratio of
Net zed and Total butions Distri- Net Assets Expenses Ratio of
Asset Net Unrealized From From Net butions Asset at End of to Average Net Invest-
Period Value at Invest-Gain Invest- Invest- From Total Value Total Period Net Assets ment Income Portfolio
Ended Beginning ment (Loss)on ment Ope-ment Capital Distri- at End Return (in (See Note to Average Turnover
Feb.29 of Period Income Securities rations Income Gains butions of Period ++ 000's) 5) + Net 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
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
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
Class II Shares:
19962 11.98 .54 .322 .862 (.532) -- (.532) 12.31 7.32 8,152 1.18* 5.21* 13.52
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
7. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
- ------------------------------------------------------------------------------- -------------------------------------------
Net Reali- Distri- Net Ratio of
Net zed and Total butions Distri- Net Assets Expenses Ratio of
Asset Net Unrealized From From Net butions Asset at End of to Average Net Invest-
Period Value at Invest-Gain Invest- Invest- From Total Value Total Period Net Assets ment Income Portfolio
Ended Beginning ment (Loss)on ment Ope-ment Capital Distri- at End Return (in (See Note to Average Turnover
Feb.29 of Period Income Securities rations Income Gains butions of Period ++ 000's) 5) + Net Assets Rate
Franklin Massachusetts Insured Tax-Free Income Fund: (cont.)
Class II Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19962 $11.36 $.50 $.323 $ .823 $(.493) $ -- $(.493) $11.69 7.36% $ 2,759 1.26%* 5.06%* 10.29%
Franklin Michigan Insured Tax-Free Income Fund:
Class I Shares:
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)3 -- (.687) 12.09 8.86 1,115,454 .62 5.65 9.38
Class II Shares:
19962 11.77 .51 .369 .879 (.509) -- (.509) 12.14 7.58 6,683 1.20* 5.03* 9.38
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
Class II Shares:
19962 11.89 .500 .281 .781 (.501) -- (.501) 12.17 6.67 1,152 1.25* 4.94* 7.72
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
Class II Shares:
19962 11.90 .520 .351 .871 (.511) -- (.511) 12.26 7.43 6,085 1.22* 4.99* 11.47
*Annualized
1For the period April 30, 1993 (effective date) to February 28, 1994.
2For the period May 1, 1995 (effective date) to February 29, 1996.
3Includes distributions in excess of net investment income in the amount of $.001.
4Includes distributions in excess of net investment income in the amount of
$.001.
++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 shares, the
sales charges on reinvested dividends were eliminated.
+During the periods indicated, Advisors 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:
</TABLE>
<TABLE>
<CAPTION>
Ratio of Expenses to
Average Net Assets
-------------
Franklin Arizona Insured Tax-Free Income Fund
<C> <C>
19941............................................ 0.83%*
1995............................................. 0.96
1996............................................. 0.86
Franklin Florida Insured Tax-Free Income Fund
19941............................................ 0.83*
1995............................................. 0.88
1996............................................. 0.82
</TABLE>
During this fiscal year, each Fund paid distributions from undistributed net
investment income in the amounts shown in the Statement of Changes in Net
Assets. Each Fund hereby designates the total amount of these distributions as
exempt-interest dividends under Section 852(b)(5) of the Internal Revenue Code.
FRANKLIN TAX-FREE TRUST
Report of Independent Auditors
To the Shareholders and Board of Trustees
of Franklin Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities of each of
the funds comprising the Franklin Tax-Free Trust, including each Fund's
statement of investments in securities and net assets, as of February 29, 1996,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the funds comprising the Franklin Tax-Free Trust as of February 29, 1996, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated thereon, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 29, 1996
Franklin Tax-Free Trust #1 Annual Report 3/31/96.
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
11/30/94 88.69
12/31/94 92.76
1/31/95 96.16
2/28/95 99.01
3/31/95 99.45
4/30/95 98.50
5/31/95 101.13
6/30/95 98.19
7/31/95 96.02
8/31/95 96.09
9/30/95 96.72
10/31/95 98.26
11/30/95 99.96
12/31/95 98.10
GRAPHIC MATERIAL (2)
This bar chart shows that 37% insured municipal bonds and 63% non-insured
municipal bonds were issued in 1994, compared to 44% insured municipal bonds and
56% non-insured municipal bonds issued in 1995.
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), and 1995 ($156 billion).
GRAPHIC MATERIAL (4)
This chart shows in pie chart format the income and capital appreciation of the
Lehman Brothers 20-Year Municipal Bond Index for the 15-year period ended
12/31/95.
Income: An Important Component of Total Return
Income 88.45%
Capital Appreciation 11.55%
GRAPHIC MATERIAL (5)
This bar chart shows the comparison between the fund's distribution rate of
5.10% and the taxable equivalent distribution rate of 9.07%.
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the fund
with the Consumer Price Index (CPI) and the Lehman Brothers Municipal Bond
Index, based on a $10,000 investment from 4/30/93 to 2/29/96.
Period Ending Fund Index Index
4/30/93 9,579 10,000 10,000
5/31/93 9,646 10,056 10,014
6/30/93 9,837 10,224 10,028
7/31/93 9,837 10,237 10,028
8/31/93 10,053 10,450 10,056
9/30/93 10,183 10,569 10,077
10/31/93 10,187 10,589 10,119
11/30/93 10,046 10,496 10,126
12/31/93 10,334 10,718 10,126
1/31/94 10,477 10,840 10,153
2/28/94 10,147 10,559 10,187
3/31/94 9,518 10,129 10,222
4/30/94 9,613 10,215 10,236
5/31/94 9,707 10,304 10,244
6/30/94 9,612 10,241 10,278
7/31/94 9,848 10,429 10,306
8/31/94 9,864 10,465 10,347
9/30/94 9,666 10,312 10,375
10/31/94 9,425 10,128 10,383
11/30/94 9,185 9,945 10,396
12/31/94 9,480 10,163 10,396
1/31/95 9,870 10,454 10,438
2/28/95 10,240 10,758 10,479
3/31/95 10,382 10,882 10,514
4/30/95 10,388 10,895 10,549
5/31/95 10,764 11,243 10,570
6/30/95 10,600 11,145 10,591
7/31/95 10,660 11,251 10,591
8/31/95 10,817 11,394 10,618
9/30/95 10,899 11,465 10,640
10/31/95 11,078 11,632 10,675
11/30/95 11,345 11,825 10,667
12/31/95 11,494 11,938 10,660
1/31/96 11,555 12,029 10,723
2/29/96 11,429 11,947 10,743
Total Return 14.29% 19.47% 7.43%
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 8.36%.
GRAPHIC MATERIAL (8)
The following line graph hypothetically compares the performance of the fund
with the Consumer Price Index (CPI) and the Lehman Brothers Municipal Bond
Index, based on a $10,000 investment from 5/1/93 to 2/29/96.
Period Ending Fund Index Index
4/30/93 9,579 10,000 10,000
5/31/93 9,550 10,056 10,014
6/30/93 9,703 10,224 10,028
7/31/93 9,722 10,237 10,028
8/31/93 9,921 10,450 10,056
9/30/93 10,024 10,569 10,077
10/31/93 10,059 10,589 10,119
11/30/93 9,910 10,496 10,126
12/31/93 10,207 10,718 10,126
1/31/94 10,319 10,840 10,153
2/28/94 9,949 10,559 10,187
3/31/94 9,309 10,129 10,222
4/30/94 9,382 10,215 10,236
5/31/94 9,446 10,304 10,244
6/30/94 9,359 10,241 10,278
7/31/94 9,635 10,429 10,306
8/31/94 9,569 10,465 10,347
9/30/94 9,369 10,312 10,375
10/31/94 9,056 10,128 10,383
11/30/94 8,846 9,945 10,396
12/31/94 9,201 10,163 10,396
1/31/95 9,599 10,454 10,438
2/28/95 9,968 10,758 10,479
3/31/95 10,056 10,882 10,514
4/30/95 10,070 10,895 10,549
5/31/95 10,444 11,243 10,570
6/30/95 10,289 11,145 10,591
7/31/95 10,357 11,251 10,591
8/31/95 10,491 11,394 10,618
9/30/95 10,570 11,465 10,640
10/31/95 10,769 11,632 10,675
11/30/95 11,001 11,825 10,667
12/31/95 11,159 11,938 10,660
1/31/96 11,185 12,029 10,723
2/29/96 11,057 11,947 10,743
Total Return 10.57% 19.47% 7.43%
GRAPHIC MATERIAL (9)
This bar chart shows the comparison between the fund's distribution rate of
5.53% and the taxable equivalent distribution rate of 9.16%, for Class I shares.
GRAPHIC MATERIAL (10)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 3/1/86 to 2/29/96.
Period Ending Fund Index Index
3/1/86 9,571 10,000 10,000
3/31/86 9,721 10,003 9,954
4/30/86 9,638 10,011 9,936
5/31/86 9,471 9,848 9,964
6/30/86 9,557 9,941 10,019
7/31/86 9,617 10,002 10,019
8/31/86 10,089 10,450 10,037
9/30/86 10,047 10,476 10,083
10/31/86 10,317 10,657 10,092
11/30/86 10,458 10,868 10,101
12/31/86 10,477 10,838 10,110
1/31/87 10,690 11,164 10,174
2/28/87 10,736 11,219 10,210
3/31/87 10,593 11,100 10,256
4/30/87 9,884 10,543 10,312
5/31/87 9,651 10,490 10,348
6/30/87 9,961 10,799 10,384
7/31/87 10,017 10,909 10,411
8/31/87 10,054 10,933 10,466
9/30/87 9,516 10,529 10,521
10/31/87 9,594 10,566 10,548
11/30/87 9,982 10,842 10,558
12/31/87 10,154 10,999 10,558
1/31/88 10,634 11,391 10,585
2/29/88 10,751 11,511 10,613
3/31/88 10,462 11,378 10,658
4/30/88 10,502 11,464 10,714
5/31/88 10,542 11,431 10,750
6/30/88 10,761 11,598 10,796
7/31/88 10,841 11,673 10,842
8/31/88 10,893 11,684 10,887
9/30/88 11,125 11,895 10,960
10/31/88 11,441 12,105 10,996
11/30/88 11,319 11,993 11,005
12/31/88 11,454 12,116 11,024
1/31/89 11,683 12,366 11,079
2/28/89 11,580 12,226 11,124
3/31/89 11,577 12,196 11,189
4/30/89 11,837 12,485 11,262
5/31/89 12,078 12,745 11,326
6/30/89 12,234 12,918 11,353
7/31/89 12,338 13,094 11,380
8/31/89 12,281 12,966 11,398
9/30/89 12,213 12,927 11,435
10/31/89 12,329 13,084 11,490
11/30/89 12,491 13,313 11,517
12/31/89 12,598 13,423 11,536
1/31/90 12,494 13,359 11,655
2/28/90 12,636 13,478 11,709
3/31/90 12,633 13,482 11,774
4/30/90 12,516 13,385 11,793
5/31/90 12,808 13,677 11,820
6/30/90 12,919 13,798 11,884
7/31/90 13,135 14,002 11,929
8/31/90 12,819 13,799 12,038
9/30/90 12,917 13,807 12,140
10/31/90 13,109 14,057 12,212
11/30/90 13,385 14,339 12,239
12/31/90 13,425 14,403 12,239
1/31/91 13,645 14,596 12,313
2/28/91 13,733 14,722 12,331
3/31/91 13,786 14,728 12,350
4/30/91 13,985 14,926 12,368
5/31/91 14,075 15,059 12,405
6/30/91 14,068 15,044 12,441
7/31/91 14,258 15,227 12,460
8/31/91 14,375 15,428 12,496
9/30/91 14,567 15,629 12,551
10/31/91 14,659 15,769 12,570
11/30/91 14,652 15,813 12,606
12/31/91 14,948 16,153 12,615
1/31/92 15,004 16,191 12,634
2/29/92 15,022 16,195 12,680
3/31/92 15,066 16,202 12,744
4/30/92 15,187 16,346 12,762
5/31/92 15,413 16,539 12,780
6/30/92 15,615 16,817 12,826
7/31/92 16,184 17,321 12,853
8/31/92 15,961 17,152 12,889
9/30/92 15,991 17,263 12,925
10/31/92 15,726 17,094 12,970
11/30/92 16,104 17,400 12,988
12/31/92 16,323 17,577 12,979
1/31/93 16,543 17,781 13,043
2/28/93 17,023 18,425 13,088
3/31/93 16,916 18,230 13,134
4/30/93 17,029 18,414 13,171
5/31/93 17,100 18,517 13,189
6/30/93 17,393 18,826 13,208
7/31/93 17,421 18,851 13,208
8/31/93 17,772 19,243 13,245
9/30/93 17,970 19,462 13,273
10/31/93 17,997 19,499 13,327
11/30/93 17,940 19,327 13,337
12/31/93 18,255 19,735 13,337
1/31/94 18,428 19,960 13,373
2/28/94 18,067 19,443 13,418
3/31/94 17,484 18,652 13,464
4/30/94 17,558 18,810 13,482
5/31/94 17,675 18,974 13,492
6/30/94 17,615 18,858 13,538
7/31/94 17,897 19,203 13,574
8/31/94 17,942 19,271 13,629
9/30/94 17,774 18,987 13,665
10/31/94 17,544 18,649 13,675
11/30/94 17,255 18,312 13,693
12/31/94 17,602 18,715 13,693
1/31/95 18,011 19,250 13,748
2/28/95 18,437 19,810 13,803
3/31/95 18,590 20,038 13,848
4/30/95 18,634 20,062 13,894
5/31/95 19,053 20,702 13,922
6/30/95 18,957 20,522 13,949
7/31/95 19,050 20,717 13,949
8/31/95 19,223 20,980 13,986
9/30/95 19,316 21,112 14,014
10/31/95 19,554 21,418 14,060
11/30/95 19,825 21,774 14,050
12/31/95 20,001 21,983 14,040
1/31/96 20,113 22,150 14,123
2/29/96 20,029 21,999 14,150
Total Return 100.29% 119.99% 41.50%
GRAPHIC MATERIAL (11)
This bar chart shows the comparison between the fund's distribution rate of
5.12% and the taxable equivalent distribution rate of 8.48%, for Class II
shares.
GRAPHIC MATERIAL (12)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,901 10,000 10,000
5/31/95 10,122 10,319 10,020
6/30/95 10,075 10,229 10,040
7/31/95 10,119 10,326 10,040
8/31/95 10,206 10,458 10,066
9/30/95 10,259 10,523 10,086
10/31/95 10,379 10,676 10,120
11/30/95 10,509 10,853 10,112
12/31/95 10,605 10,957 10,105
1/31/96 10,659 11,041 10,165
2/29/96 10,511 10,966 10,184
Total Return 5.11% 9.66% 1.84%
GRAPHIC MATERIAL (13)
This bar chart shows the comparison between the fund's distribution rate of
5.42% and the taxable equivalent distribution rate of 10.19%, for Class I
shares.
GRAPHIC MATERIAL (14)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 3/1/86 to 2/29/96.
Period Ending Fund Index Index
3/1/86 9,574 10,000 10,000
3/31/86 9,752 10,003 9,954
4/30/86 9,553 10,011 9,936
5/31/86 9,387 9,848 9,964
6/30/86 9,455 9,941 10,019
7/31/86 9,489 10,002 10,019
8/31/86 9,892 10,450 10,037
9/30/86 9,899 10,476 10,083
10/31/86 10,076 10,657 10,092
11/30/86 10,163 10,868 10,101
12/31/86 10,179 10,838 10,110
1/31/87 10,359 11,164 10,174
2/28/87 10,439 11,219 10,210
3/31/87 10,379 11,100 10,256
4/30/87 9,758 10,543 10,312
5/31/87 9,457 10,490 10,348
6/30/87 9,676 10,799 10,384
7/31/87 9,821 10,909 10,411
8/31/87 9,892 10,933 10,466
9/30/87 9,297 10,529 10,521
10/31/87 9,313 10,566 10,548
11/30/87 9,646 10,842 10,558
12/31/87 9,865 10,999 10,558
1/31/88 10,330 11,391 10,585
2/29/88 10,477 11,511 10,613
3/31/88 10,250 11,378 10,658
4/30/88 10,280 11,464 10,714
5/31/88 10,310 11,431 10,750
6/30/88 10,491 11,598 10,796
7/31/88 10,522 11,673 10,842
8/31/88 10,592 11,684 10,887
9/30/88 10,796 11,895 10,960
10/31/88 11,052 12,105 10,996
11/30/88 10,958 11,993 11,005
12/31/88 11,082 12,116 11,024
1/31/89 11,280 12,366 11,079
2/28/89 11,195 12,226 11,124
3/31/89 11,173 12,196 11,189
4/30/89 11,385 12,485 11,262
5/31/89 11,630 12,745 11,326
6/30/89 11,780 12,918 11,353
7/31/89 11,898 13,094 11,380
8/31/89 11,799 12,966 11,398
9/30/89 11,754 12,927 11,435
10/31/89 11,852 13,084 11,490
11/30/89 12,005 13,313 11,517
12/31/89 12,093 13,423 11,536
1/31/90 11,980 13,359 11,655
2/28/90 12,102 13,478 11,709
3/31/90 12,102 13,482 11,774
4/30/90 11,977 13,385 11,793
5/31/90 12,228 13,677 11,820
6/30/90 12,332 13,798 11,884
7/31/90 12,529 14,002 11,929
8/31/90 12,296 13,799 12,038
9/30/90 12,273 13,807 12,140
10/31/90 12,426 14,057 12,212
11/30/90 12,674 14,339 12,239
12/31/90 12,710 14,403 12,239
1/31/91 12,937 14,596 12,313
2/28/91 12,997 14,722 12,331
3/31/91 13,058 14,728 12,350
4/30/91 13,240 14,926 12,368
5/31/91 13,326 15,059 12,405
6/30/91 13,339 15,044 12,441
7/31/91 13,524 15,227 12,460
8/31/91 13,636 15,428 12,496
9/30/91 13,799 15,629 12,551
10/31/91 13,899 15,769 12,570
11/30/91 13,899 15,813 12,606
12/31/91 14,166 16,153 12,615
1/31/92 14,230 16,191 12,634
2/29/92 14,226 16,195 12,680
3/31/92 14,261 16,202 12,744
4/30/92 14,386 16,346 12,762
5/31/92 14,578 16,539 12,780
6/30/92 14,797 16,817 12,826
7/31/92 15,281 17,321 12,853
8/31/92 15,078 17,152 12,889
9/30/92 15,101 17,263 12,925
10/31/92 14,815 17,094 12,970
11/30/92 15,187 17,400 12,988
12/31/92 15,413 17,577 12,979
1/31/93 15,626 17,781 13,043
2/28/93 16,073 18,425 13,088
3/31/93 16,068 18,230 13,134
4/30/93 16,188 18,414 13,171
5/31/93 16,239 18,517 13,189
6/30/93 16,499 18,826 13,208
7/31/93 16,537 18,851 13,208
8/31/93 16,842 19,243 13,245
9/30/93 17,006 19,462 13,273
10/31/93 17,042 19,499 13,327
11/30/93 16,979 19,327 13,337
12/31/93 17,231 19,735 13,337
1/31/94 17,413 19,960 13,373
2/28/94 17,132 19,443 13,418
3/31/94 16,559 18,652 13,464
4/30/94 16,596 18,810 13,482
5/31/94 16,691 18,974 13,492
6/30/94 16,653 18,858 13,538
7/31/94 16,897 19,203 13,574
8/31/94 16,935 19,271 13,629
9/30/94 16,763 18,987 13,665
10/31/94 16,574 18,649 13,675
11/30/94 16,311 18,312 13,693
12/31/94 16,607 18,715 13,693
1/31/95 17,027 19,250 13,748
2/28/95 17,448 19,810 13,803
3/31/95 17,579 20,038 13,848
4/30/95 17,648 20,062 13,894
5/31/95 17,998 20,702 13,922
6/30/95 17,927 20,522 13,949
7/31/95 18,045 20,717 13,949
8/31/95 18,196 20,980 13,986
9/30/95 18,314 21,112 14,014
10/31/95 18,529 21,418 14,060
11/30/95 18,761 21,774 14,050
12/31/95 18,946 21,983 14,040
1/31/96 19,035 22,150 14,123
2/29/96 18,978 21,999 14,150
Total Return 89.78% 119.99% 41.50%
GRAPHIC MATERIAL (15)
This bar chart shows the comparison between the fund's distribution rate of
4.98% and the taxable equivalent distribution rate of 9.36%, for Class II
shares.
GRAPHIC MATERIAL (16)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,904 10,000 10,000
5/31/95 10,100 10,319 10,020
6/30/95 10,064 10,229 10,040
7/31/95 10,125 10,326 10,040
8/31/95 10,213 10,458 10,066
9/30/95 10,265 10,523 10,086
10/31/95 10,380 10,676 10,120
11/30/95 10,513 10,853 10,112
12/31/95 10,611 10,957 10,105
1/31/96 10,655 11,041 10,165
2/29/96 10,519 10,966 10,184
Total Return 5.19% 9.66% 1.84%
GRAPHIC MATERIAL (17)
This bar chart shows the comparison between the fund's distribution rate of
5.42% and the taxable equivalent distribution rate of 9.39%, for Class I shares.
GRAPHIC MATERIAL (18)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 3/1/86 to 2/29/96.
Period Ending Fund Index Index
3/1/86 9,574 10,000 10,000
3/31/86 9,787 10,003 9,954
4/30/86 9,640 10,011 9,936
5/31/86 9,458 9,848 9,964
6/30/86 9,536 9,941 10,019
7/31/86 9,587 10,002 10,019
8/31/86 10,035 10,450 10,037
9/30/86 10,017 10,476 10,083
10/31/86 10,301 10,657 10,092
11/30/86 10,425 10,868 10,101
12/31/86 10,443 10,838 10,110
1/31/87 10,614 11,164 10,174
2/28/87 10,686 11,219 10,210
3/31/87 10,574 11,100 10,256
4/30/87 9,917 10,543 10,312
5/31/87 9,645 10,490 10,348
6/30/87 9,921 10,799 10,384
7/31/87 10,058 10,909 10,411
8/31/87 10,148 10,933 10,466
9/30/87 9,554 10,529 10,521
10/31/87 9,600 10,566 10,548
11/30/87 9,914 10,842 10,558
12/31/87 10,125 10,999 10,558
1/31/88 10,610 11,391 10,585
2/29/88 10,754 11,511 10,613
3/31/88 10,542 11,378 10,658
4/30/88 10,578 11,464 10,714
5/31/88 10,615 11,431 10,750
6/30/88 10,812 11,598 10,796
7/31/88 10,839 11,673 10,842
8/31/88 10,906 11,684 10,887
9/30/88 11,108 11,895 10,960
10/31/88 11,393 12,105 10,996
11/30/88 11,290 11,993 11,005
12/31/88 11,427 12,116 11,024
1/31/89 11,628 12,366 11,079
2/28/89 11,555 12,226 11,124
3/31/89 11,525 12,196 11,189
4/30/89 11,750 12,485 11,262
5/31/89 12,031 12,745 11,326
6/30/89 12,194 12,918 11,353
7/31/89 12,282 13,094 11,380
8/31/89 12,206 12,966 11,398
9/30/89 12,142 12,927 11,435
10/31/89 12,242 13,084 11,490
11/30/89 12,421 13,313 11,517
12/31/89 12,511 13,423 11,536
1/31/90 12,411 13,359 11,655
2/28/90 12,536 13,478 11,709
3/31/90 12,538 13,482 11,774
4/30/90 12,426 13,385 11,793
5/31/90 12,715 13,677 11,820
6/30/90 12,868 13,798 11,884
7/31/90 13,056 14,002 11,929
8/31/90 12,790 13,799 12,038
9/30/90 12,804 13,807 12,140
10/31/90 12,972 14,057 12,212
11/30/90 13,248 14,339 12,239
12/31/90 13,274 14,403 12,239
1/31/91 13,481 14,596 12,313
2/28/91 13,567 14,722 12,331
3/31/91 13,618 14,728 12,350
4/30/91 13,804 14,926 12,368
5/31/91 13,892 15,059 12,405
6/30/91 13,883 15,044 12,441
7/31/91 14,059 15,227 12,460
8/31/91 14,162 15,428 12,496
9/30/91 14,340 15,629 12,551
10/31/91 14,443 15,769 12,570
11/30/91 14,433 15,813 12,606
12/31/91 14,729 16,153 12,615
1/31/92 14,782 16,191 12,634
2/29/92 14,772 16,195 12,680
3/31/92 14,814 16,202 12,744
4/30/92 14,960 16,346 12,762
5/31/92 15,198 16,539 12,780
6/30/92 15,420 16,817 12,826
7/31/92 15,975 17,321 12,853
8/31/92 15,761 17,152 12,889
9/30/92 15,800 17,263 12,925
10/31/92 15,530 17,094 12,970
11/30/92 15,893 17,400 12,988
12/31/92 16,095 17,577 12,979
1/31/93 16,298 17,781 13,043
2/28/93 16,763 18,425 13,088
3/31/93 16,720 18,230 13,134
4/30/93 16,829 18,414 13,171
5/31/93 16,925 18,517 13,189
6/30/93 17,203 18,826 13,208
7/31/93 17,202 18,851 13,208
8/31/93 17,539 19,243 13,245
9/30/93 17,749 19,462 13,273
10/31/93 17,831 19,499 13,327
11/30/93 17,742 19,327 13,337
12/31/93 18,041 19,735 13,337
1/31/94 18,198 19,960 13,373
2/28/94 17,832 19,443 13,418
3/31/94 17,259 18,652 13,464
4/30/94 17,372 18,810 13,482
5/31/94 17,456 18,974 13,492
6/30/94 17,391 18,858 13,538
7/31/94 17,655 19,203 13,574
8/31/94 17,695 19,271 13,629
9/30/94 17,495 18,987 13,665
10/31/94 17,264 18,649 13,675
11/30/94 16,988 18,312 13,693
12/31/94 17,333 18,715 13,693
1/31/95 17,727 19,250 13,748
2/28/95 18,169 19,810 13,803
3/31/95 18,318 20,038 13,848
4/30/95 18,360 20,062 13,894
5/31/95 18,792 20,702 13,922
6/30/95 18,678 20,522 13,949
7/31/95 18,783 20,717 13,949
8/31/95 18,954 20,980 13,986
9/30/95 19,060 21,112 14,014
10/31/95 19,294 21,418 14,060
11/30/95 19,579 21,774 14,050
12/31/95 19,736 21,983 14,040
1/31/96 19,861 22,150 14,123
2/29/96 19,774 21,999 14,150
Total Return 97.74% 119.99% 41.50%
GRAPHIC MATERIAL (19)
This bar chart shows the comparison between the fund's distribution rate of
4.99% and the taxable equivalent distribution rate of 8.65%, for Class II
shares.
GRAPHIC MATERIAL (20)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,899 10,000 10,000
5/31/95 10,141 10,319 10,020
6/30/95 10,082 10,229 10,040
7/31/95 10,134 10,326 10,040
8/31/95 10,220 10,458 10,066
9/30/95 10,281 10,523 10,086
10/31/95 10,402 10,676 10,120
11/30/95 10,550 10,853 10,112
12/31/95 10,629 10,957 10,105
1/31/96 10,690 11,041 10,165
2/29/96 10,540 10,966 10,184
Total Return 5.40% 1.84%
GRAPHIC MATERIAL (21)
This bar chart shows the comparison between the fund's distribution rate of
5.30% and the taxable equivalent distribution rate of 9.58%, for Class I shares.
GRAPHIC MATERIAL (22)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 3/1/86 to 2/29/96.
Period Ending Fund Index Index
3/1/86 9,572 10,000 10,000
3/31/86 9,722 10,003 9,954
4/30/86 9,614 10,011 9,936
5/31/86 9,440 9,848 9,964
6/30/86 9,483 9,941 10,019
7/31/86 9,543 10,002 10,019
8/31/86 9,995 10,450 10,037
9/30/86 9,987 10,476 10,083
10/31/86 10,246 10,657 10,092
11/30/86 10,360 10,868 10,101
12/31/86 10,378 10,838 10,110
1/31/87 10,545 11,164 10,174
2/28/87 10,630 11,219 10,210
3/31/87 10,528 11,100 10,256
4/30/87 9,876 10,543 10,312
5/31/87 9,614 10,490 10,348
6/30/87 9,871 10,799 10,384
7/31/87 10,021 10,909 10,411
8/31/87 10,099 10,933 10,466
9/30/87 9,536 10,529 10,521
10/31/87 9,562 10,566 10,548
11/30/87 9,818 10,842 10,558
12/31/87 10,039 10,999 10,558
1/31/88 10,545 11,391 10,585
2/29/88 10,711 11,511 10,613
3/31/88 10,508 11,378 10,658
4/30/88 10,552 11,464 10,714
5/31/88 10,568 11,431 10,750
6/30/88 10,749 11,598 10,796
7/31/88 10,784 11,673 10,842
8/31/88 10,849 11,684 10,887
9/30/88 11,062 11,895 10,960
10/31/88 11,337 12,105 10,996
11/30/88 11,243 11,993 11,005
12/31/88 11,370 12,116 11,024
1/31/89 11,548 12,366 11,079
2/28/89 11,483 12,226 11,124
3/31/89 11,469 12,196 11,189
4/30/89 11,712 12,485 11,262
5/31/89 11,956 12,745 11,326
6/30/89 12,118 12,918 11,353
7/31/89 12,208 13,094 11,380
8/31/89 12,141 12,966 11,398
9/30/89 12,084 12,927 11,435
10/31/89 12,186 13,084 11,490
11/30/89 12,353 13,313 11,517
12/31/89 12,446 13,423 11,536
1/31/90 12,355 13,359 11,655
2/28/90 12,481 13,478 11,709
3/31/90 12,487 13,482 11,774
4/30/90 12,427 13,385 11,793
5/31/90 12,689 13,677 11,820
6/30/90 12,819 13,798 11,884
7/31/90 12,994 14,002 11,929
8/31/90 12,764 13,799 12,038
9/30/90 12,736 13,807 12,140
10/31/90 12,915 14,057 12,212
11/30/90 13,163 14,339 12,239
12/31/90 13,170 14,403 12,239
1/31/91 13,363 14,596 12,313
2/28/91 13,428 14,722 12,331
3/31/91 13,482 14,728 12,350
4/30/91 13,678 14,926 12,368
5/31/91 13,780 15,059 12,405
6/30/91 13,773 15,044 12,441
7/31/91 13,957 15,227 12,460
8/31/91 14,045 15,428 12,496
9/30/91 14,231 15,629 12,551
10/31/91 14,332 15,769 12,570
11/30/91 14,324 15,813 12,606
12/31/91 14,599 16,153 12,615
1/31/92 14,652 16,191 12,634
2/29/92 14,644 16,195 12,680
3/31/92 14,711 16,202 12,744
4/30/92 14,827 16,346 12,762
5/31/92 15,046 16,539 12,780
6/30/92 15,239 16,817 12,826
7/31/92 15,753 17,321 12,853
8/31/92 15,523 17,152 12,889
9/30/92 15,524 17,263 12,925
10/31/92 15,251 17,094 12,970
11/30/92 15,619 17,400 12,988
12/31/92 15,830 17,577 12,979
1/31/93 16,030 17,781 13,043
2/28/93 16,470 18,425 13,088
3/31/93 16,431 18,230 13,134
4/30/93 16,553 18,414 13,171
5/31/93 16,631 18,517 13,189
6/30/93 16,886 18,826 13,208
7/31/93 16,896 18,851 13,208
8/31/93 17,180 19,243 13,245
9/30/93 17,356 19,462 13,273
10/31/93 17,408 19,499 13,327
11/30/93 17,322 19,327 13,337
12/31/93 17,570 19,735 13,337
1/31/94 17,721 19,960 13,373
2/28/94 17,395 19,443 13,418
3/31/94 16,897 18,652 13,464
4/30/94 16,951 18,810 13,482
5/31/94 17,076 18,974 13,492
6/30/94 17,021 18,858 13,538
7/31/94 17,263 19,203 13,574
8/31/94 17,318 19,271 13,629
9/30/94 17,138 18,987 13,665
10/31/94 16,897 18,649 13,675
11/30/94 16,613 18,312 13,693
12/31/94 16,947 18,715 13,693
1/31/95 17,356 19,250 13,748
2/28/95 17,767 19,810 13,803
3/31/95 17,911 20,038 13,848
4/30/95 17,949 20,062 13,894
5/31/95 18,321 20,702 13,922
6/30/95 18,224 20,522 13,949
7/31/95 18,324 20,717 13,949
8/31/95 18,488 20,980 13,986
9/30/95 18,604 21,112 14,014
10/31/95 18,814 21,418 14,060
11/30/95 19,041 21,774 14,050
12/31/95 19,207 21,983 14,040
1/31/96 19,295 22,150 14,123
2/29/96 19,194 21,999 14,150
Total Return 91.94% 119.99% 41.50%
GRAPHIC MATERIAL (23)
This bar chart shows the comparison between the fund's distribution rate of
4.88% and the taxable equivalent distribution rate of 8.82%, for Class II
shares.
GRAPHIC MATERIAL (24)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,900 10,000 10,000
5/31/95 10,105 10,319 10,020
6/30/95 10,047 10,229 10,040
7/31/95 10,097 10,326 10,040
8/31/95 10,190 10,458 10,066
9/30/95 10,240 10,523 10,086
10/31/95 10,351 10,676 10,120
11/30/95 10,479 10,853 10,112
12/31/95 10,565 10,957 10,105
1/31/96 10,608 11,041 10,165
2/29/96 10,448 10,966 10,184
Total Return 4.48% 9.66% 1.84%
GRAPHIC MATERIAL (25)
This bar chart shows the comparison between the fund's distribution rate of
5.36% and the taxable equivalent distribution rate of 9.59%, for Class I shares.
GRAPHIC MATERIAL (26)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 3/1/86 to 2/29/96.
Period Ending Fund Index Index
3/1/86 9,577 10,000 10,000
3/31/86 9,764 10,003 9,954
4/30/86 9,628 10,011 9,936
5/31/86 9,449 9,848 9,964
6/30/86 9,528 9,941 10,019
7/31/86 9,564 10,002 10,019
8/31/86 9,968 10,450 10,037
9/30/86 9,977 10,476 10,083
10/31/86 10,245 10,657 10,092
11/30/86 10,361 10,868 10,101
12/31/86 10,398 10,838 10,110
1/31/87 10,561 11,164 10,174
2/28/87 10,662 11,219 10,210
3/31/87 10,526 11,100 10,256
4/30/87 9,849 10,543 10,312
5/31/87 9,602 10,490 10,348
6/30/87 9,880 10,799 10,384
7/31/87 10,012 10,909 10,411
8/31/87 10,088 10,933 10,466
9/30/87 9,474 10,529 10,521
10/31/87 9,525 10,566 10,548
11/30/87 9,834 10,842 10,558
12/31/87 10,029 10,999 10,558
1/31/88 10,534 11,391 10,585
2/29/88 10,691 11,511 10,613
3/31/88 10,486 11,378 10,658
4/30/88 10,517 11,464 10,714
5/31/88 10,558 11,431 10,750
6/30/88 10,768 11,598 10,796
7/31/88 10,800 11,673 10,842
8/31/88 10,861 11,684 10,887
9/30/88 11,065 11,895 10,960
10/31/88 11,362 12,105 10,996
11/30/88 11,261 11,993 11,005
12/31/88 11,406 12,116 11,024
1/31/89 11,594 12,366 11,079
2/28/89 11,532 12,226 11,124
3/31/89 11,502 12,196 11,189
4/30/89 11,725 12,485 11,262
5/31/89 11,991 12,745 11,326
6/30/89 12,153 12,918 11,353
7/31/89 12,241 13,094 11,380
8/31/89 12,167 12,966 11,398
9/30/89 12,115 12,927 11,435
10/31/89 12,204 13,084 11,490
11/30/89 12,371 13,313 11,517
12/31/89 12,461 13,423 11,536
1/31/90 12,352 13,359 11,655
2/28/90 12,488 13,478 11,709
3/31/90 12,490 13,482 11,774
4/30/90 12,402 13,385 11,793
5/31/90 12,687 13,677 11,820
6/30/90 12,829 13,798 11,884
7/31/90 13,040 14,002 11,929
8/31/90 12,814 13,799 12,038
9/30/90 12,842 13,807 12,140
10/31/90 13,010 14,057 12,212
11/30/90 13,237 14,339 12,239
12/31/90 13,289 14,403 12,239
1/31/91 13,507 14,596 12,313
2/28/91 13,559 14,722 12,331
3/31/91 13,600 14,728 12,350
4/30/91 13,797 14,926 12,368
5/31/91 13,887 15,059 12,405
6/30/91 13,880 15,044 12,441
7/31/91 14,069 15,227 12,460
8/31/91 14,173 15,428 12,496
9/30/91 14,364 15,629 12,551
10/31/91 14,469 15,769 12,570
11/30/91 14,461 15,813 12,606
12/31/91 14,743 16,153 12,615
1/31/92 14,799 16,191 12,634
2/29/92 14,775 16,195 12,680
3/31/92 14,815 16,202 12,744
4/30/92 14,957 16,346 12,762
5/31/92 15,165 16,539 12,780
6/30/92 15,362 16,817 12,826
7/31/92 15,897 17,321 12,853
8/31/92 15,685 17,152 12,889
9/30/92 15,697 17,263 12,925
10/31/92 15,430 17,094 12,970
11/30/92 15,815 17,400 12,988
12/31/92 16,042 17,577 12,979
1/31/93 16,269 17,781 13,043
2/28/93 16,769 18,425 13,088
3/31/93 16,768 18,230 13,134
4/30/93 16,862 18,414 13,171
5/31/93 16,943 18,517 13,189
6/30/93 17,245 18,826 13,208
7/31/93 17,257 18,851 13,208
8/31/93 17,576 19,243 13,245
9/30/93 17,769 19,462 13,273
10/31/93 17,808 19,499 13,327
11/30/93 17,735 19,327 13,337
12/31/93 18,044 19,735 13,337
1/31/94 18,227 19,960 13,373
2/28/94 17,822 19,443 13,418
3/31/94 17,185 18,652 13,464
4/30/94 17,269 18,810 13,482
5/31/94 17,397 18,974 13,492
6/30/94 17,335 18,858 13,538
7/31/94 17,611 19,203 13,574
8/31/94 17,652 19,271 13,629
9/30/94 17,425 18,987 13,665
10/31/94 17,152 18,649 13,675
11/30/94 16,880 18,312 13,693
12/31/94 17,236 18,715 13,693
1/31/95 17,685 19,250 13,748
2/28/95 18,136 19,810 13,803
3/31/95 18,283 20,038 13,848
4/30/95 18,309 20,062 13,894
5/31/95 18,766 20,702 13,922
6/30/95 18,638 20,522 13,949
7/31/95 18,726 20,717 13,949
8/31/95 18,925 20,980 13,986
9/30/95 19,014 21,112 14,014
10/31/95 19,246 21,418 14,060
11/30/95 19,526 21,774 14,050
12/31/95 19,713 21,983 14,040
1/31/96 19,820 22,150 14,123
2/29/96 19,703 21,999 14,150
Total Return 97.03% 119.99% 41.50%
GRAPHIC MATERIAL (27)
This bar chart shows the comparison between the fund's distribution rate of
4.94% and the taxable equivalent distribution rate of 8.84%, for Class II
shares.
GRAPHIC MATERIAL (28)
The following line graph hypothetically compares the performance of the fund
with the Consumer Price Index (CPI) and the Lehman Brothers Municipal Bond
Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,900 10,000 10,000
5/31/95 10,139 10,319 10,020
6/30/95 10,065 10,229 10,040
7/31/95 10,116 10,326 10,040
8/31/95 10,218 10,458 10,066
9/30/95 10,261 10,523 10,086
10/31/95 10,389 10,676 10,120
11/30/95 10,535 10,853 10,112
12/31/95 10,631 10,957 10,105
1/31/96 10,692 11,041 10,165
2/29/96 10,524 10,966 10,184
Total Return 5.24% 9.66% 1.84%
MESSAGE FROM THE CHAIRMAN
April 15, 1996
Dear Shareholder:
It's a pleasure to bring you the annual report of the Franklin Tax-Free Trust
for the period ended February 29, 1996.
Declining interest rates, low inflation and moderate growth characterized the
year under review. The nation's economic growth slowed significantly, prompting
the Federal Reserve Board to lower the federal funds rate on three occasions
during the reporting period. Bond markets in general anticipated the Fed's
actions; long-term bond yields had been decreasing steadily since the beginning
of 1995. Prices of fixed-income securities appreciated in response to the Fed's
moves in July and December 1995, and February 1996 to lower interest rates.
Hopes for further reductions dimmed as the economy began to show modest signs of
improvement, causing bond prices to give back some of their 1995 gains.
While striving to provide shareholders with a high level of current income, we
aim to avoid the effects of market volatility. In addition, we seek to reduce a
fund's exposure to credit risk by investing in securities issued by a broad
range of cities and counties throughout the nation, as well as from a variety of
municipal sectors.
We remain conservative in our management of the Trust's funds, emphasizing the
purchase of high-quality, investment-grade bonds. In addition, we evaluate each
issue individually, favoring highly rated "essential service" bonds. These
securities tend to have a reliable income stream generated from hospitals,
utilities, and transportation projects, to name a few. As a result, they tend to
be less affected by budgetary and political changes than other fixed-income
securities and are believed by many analysts to be very attractive in a
municipal cost-cutting environment. Please keep in mind, however, that the
principal value of each fund's holdings as well as the price of its shares, will
fluctuate with market conditions.
The Federal Reserve's policy appears to target slow to moderate economic growth
and controlled inflation, which bodes well for fixed-income securities. Interest
rates did rise following a stronger-than-expected employment report released in
early March, but we believe there is still no clear evidence pointing to a
breakout of inflation. In terms of the supply of municipal bonds, we think the
technical aspect of the market would indicate that demand will be slightly ahead
of supply in 1996. The fluctuation of interest rates in 1995 -- caused by the
Fed's activities -reinforced our philosophy that shareholders should view their
investments with a long-term perspective. While your fund may react to these
changes, we believe that the performance of tax-free income funds, including
those in the Franklin Tax-Free Trust, will be rewarding over the long term.
Tax-free securities continue to be an important component of one's overall
financial plan. You will find a discussion of each fund's performance on the
following pages.
As always, we appreciate your trust and support and look forward to serving your
investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
An Update on Tax Reform
Tax reform is an issue that has weighed heavy on everyone's mind -- including
ours. We have patiently waited for word from Washington and, in January, the
National Commission on Tax Reform and Economic Growth released its
long-anticipated report on tax reform. Although the Commission endorsed the idea
of sweeping tax reform, the report may have actually raised more questions than
it answered: What would be an acceptable tax rate? Would low-income families be
excluded? What would be the tax status of investment income? Would the rich and
poor gain at the expense of the middle class? While several, more detailed tax
reform plans are being discussed, investors should keep in mind that making such
dramatic change is not a simple process. We recognize that media attention on a
few of the high-profile proposals has caused some investor concern over
municipal investments, and we believe it is important to note that the municipal
bond market could be affected by tax reform. However, we feel that dramatic
changes, if any, are probably far down the road. For more information regarding
the effects of tax reform on the municipal market, please see the Portfolio
Update on page 3.
PORTFOLIO UPDATE - FRANKLIN'S TAX-FREE INCOME FUNDS
Tom Kenny, director of Franklin Templeton's Municipal Bond Department, and
portfolio managers Bernie Schroer, Sheila Amoroso and Don Duerson take a look at
the important issues that shaped the municipal bond market last year.
(PICTURE OMITTED)
Portfolio managers Don Duerson (left) and Sheila Amoroso (right) discuss aspects
of a new bond issue with Tom Kenny, director of Franklin Templeton's Municipal
Bond Department.
Did the municipal market measure up to your expectations in 1995?
Tom Kenny: In our last portfolio update, we told you we were anticipating a
strong municipal market in 1995. We expected that the supply of new municipal
bonds would continue to be low, and that the interest-rate environment would be
more favorable for bond investors, thereby increasing demand. Generally
speaking, we were right. Tax-free income funds fared well in 1995, and
Franklin's funds were no exception. After enduring one of the worst fixed-income
markets of the last 25 years in 1994, last year's rebound only reinforced our
philosophy that investors should keep a long-term perspective (see fig. 1 on
next page). That being said, the municipal market's performance wasn't quite as
robust as we had anticipated.
Why was that?
Tom: While investor demand was strong in the beginning of the year, it started
to decline in April, due in part to a "hangover" effect from the tough 1994
market. Additionally, the stock market performed so well that it pulled a lot of
assets into equities.
Bernie Schroer: There was also the fear of a "flat tax."
The media has focused considerable attention on a proposed "flat tax." What does
tax reform mean for individual municipal bonds and bond funds?
Don Duerson: It really depends upon which tax-reform proposal you are
discussing. There are several proposals out there, such as a flat tax, a
value-added tax, an unlimited savings allowance, and a consumption tax. The
popular appeal of most of these proposals is that they attempt to bring
simplicity to what is now a complex tax code.
Ultimately, however, no one proposal addresses every problem. So while we are
closely following the debate, we think it's too early to make any investment
decisions based purely on speculation.
Sheila Amoroso: The debate, however, has had an impact on the market, keeping
municipal securities' prices lower than they otherwise might have been.
What are the chances that some type of tax reform will be enacted this year?
Don: Because it is so complicated and the effects so far-reaching, tax reform
probably won't be addressed before 1997 -- although the political rhetoric will
certainly be a big part of the upcoming presidential election. Also, keep in
mind what happened to the health care reform proposals a few years ago. After
all the political debate and havoc that was wrought on health care securities,
the issue has quietly faded into the background.
Sheila: Change of this magnitude is not a simple process, as we have seen
recently with the balanced budget proposals. In that case, everyone agrees on
the goal of balancing the budget, but they disagree on how to get there. Tax
reform is much more difficult because the goals are not the same for all the
parties involved.
(PICTURE OMITTED)
Staying on top of the municipal market. (From left) Andrew Jennings, Sr., Bernie
Schroer, Tom Kenny and Don Duerson.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
How about Orange County? Did that situation continue to affect the market in
1995?
Tom: Generally speaking, the overall municipal market was impacted by Orange
County's bankruptcy for a relatively short time, rebounding very quickly. The
California market, on the other hand, was affected well into 1995, until Orange
County established a recovery plan. While the "Orange County effect" is
essentially behind us, it does point out one of the major benefits of owning a
Franklin tax-free mutual fund as our funds invest in a variety of issues, and
the impact of any one issue, sector or region is usually very limited.
Interestingly, one measurable effect of Orange County's financial difficulties
may be the increased volume of insured bonds in the market. Approximately 44% of
new municipal bonds in 1995 were insured, versus 37% in 1994 (see fig. 2).1 In
California that figure was even higher.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Does this mean the funds are buying more insured securities?
Bernie: Yes. Recently, we have been buying mostly insured bonds for many of the
Franklin tax-free funds, but that is primarily due to the narrow yield spread
between AAA and lesser-quality issues.2
What do you mean by "narrow spread"?
Bernie: In a declining or low interest-rate environment, investors tend to
"reach for yield," trying to obtain the same yield level they had in an earlier,
higher interest-rate environment. To accomplish this, investors have to buy
lesser-quality bonds, which are usually higher yielding. Paradoxically, this
added demand generally drives the prices of these securities higher and results
in lower relative yields. The end result is a much smaller yield difference, or
"narrow spread," between a AAA insured bond and a lesser-grade BBB bond. When
this happens, it makes more sense for us to buy the insured bonds.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Sheila, are you even purchasing insured bonds for the Franklin High Yield
Tax-Free Income Fund?3
Sheila: Yes, recently we have been. Higher risk should mean higher potential
reward, but there just isn't enough of a yield spread in the rated market to
warrant the added risk in lower-quality bonds right now. In addition, we have
been focusing heavily on non-rated issues where yields have remained attractive.
We have one of the largest teams of municipal market analysts of any fund group
in the nation.4 With their hard work, we can determine which bonds meet our
strict internal ratings criteria, and we still get paid the higher yield for
buying a "non-rated" security. We feel this can definitely be an advantage for
our shareholders.
1. Source:The Bond Buyer, 01/08/96.
2. Portfolio holdings are subject to change and may not represent future
portfolio composition.
3. Portfolio holdings are subject to change and may not represent future
portfolio composition.
Do you anticipate a continued low supply of new issues this year?
Tom: Municipal bonds finance the building and repair of infrastructure across
the country. While the need for these projects clearly exists, nationally there
has been a taxpayer revolt. Across the country, many new Republican governors
have been swept into office on a theme of lower taxes, and many states continue
to face budget pressures. As a result, states and municipalities simply can't
afford to issue new securities. So while the need is there, I think the
economics and politics of the matter bode well for continued low supply (see
fig. 3 on previous page).
That could be good news for our shareholders, because if supply continues to
remain low, stronger investor demand could make municipal securities attractive
investments.
What do you see in the months ahead?
Tom: We think the fundamentals look good for municipal bonds. But regardless of
changing market conditions, we will continue to focus on providing our
shareholders with high current income free from regular federal and, depending
on the fund, state personal income taxes.5
Franklin has become the largest tax-free fund manager in the nation by following
a very straightforward, "plain vanilla" investment philosophy, which has proved
successful in both strong and weak markets.6 Over time, income has provided a
much greater percentage of total return than has capital appreciation, based on
the unmanaged Lehman Brothers 20-Year Municipal Bond Index (see fig. 4). We plan
to maintain our approach and continue to make tax-free income our focus.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking ahead, I think municipal securities will remain an excellent investment
option for many individuals, and our 870,000 tax-free fund shareholders will
continue to find investing in our funds to be one of the most effective and
convenient ways to participate in the municipal securities market.
4. Source: Research and Ratings Review, 08/31/95.
5. For investors subject to federal or state alternative minimum tax, all or a
portion of this income may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
6. Past performance cannot guarantee future results.
FRANKLIN ALABAMA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Alabama
state personal income taxes through a portfolio consisting primarily of Alabama
municipal bonds.*
State Update
Alabama's economy continued to diversify away from the manufacturing sector
during the fiscal year, allowing its high unemployment rate to fall to levels
mirroring the national average of 5.6% in 1995, from 6.8% in 1994.+ In addition,
the state's low cost structure served to attract outside investment, such as
Mercedes-Benz Inc., which plans to open its new sport utility vehicle plant
there in 1997.
Alabama's debt levels remained low during the year, and its conservative fiscal
policies enabled it to maintain balanced financial operations. This stability
led to a AA rating of Alabama's general obligation bonds by Standard & Poor's, a
national credit rating agency.++
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.
+Source: Bureau of Labor Statistics
++Source: Standard & Poor's Creditweek Municipal, 5/15/95
Portfolio Notes
During the reporting period, we elected to remain more fully invested, primarily
in high-grade revenue bonds maturing in 25-30 years. We concentrated on utility
bonds in particular, increasing the fund's holdings in that sector, from 21.1%
of total long-term investments on February 28, 1995, to 28.0% on February 29,
1996. For example, we participated in the Alexander, Alabama Utility bond
offering earlier this year.
We continued to emphasize quality in the portfolio, concentrating a large
portion of the fund's total long-term investments on high-quality, AAA-rated
bonds. As a result, the AAA-rated portion of the portfolio remained roughly 60%
of total investments.
Franklin Alabama Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 28.1%
General Obligations 13.3%
Pre-Refunded 12.6%
Hospitals 11.9%
Industrial 10.5%
Housing 7.3%
Health Care 7.1%
Education 3.4%
Other Revenue 2.7%
Transportation 2.3%
Certificates of Participation 0.8%
For a complete list of portfolio holdings, please see page 73 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 11.)
We are pleased to report that the Franklin Alabama Tax-Free Income Fund's Class
I share price, as measured by net asset value, increased to $11.73 on February
29, 1996, from $11.31 on February 28, 1995.
We are also pleased to announce that due to increased income earned by the fund,
we were able to raise the dividend to 5.5 cents ($0.055) per share, from 5.4
cents ($0.054) per share, effective with the November 1995 distribution.
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not predictive of future results.
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Alabama Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.4 cents
October 5.4 cents
November 5.5 cents
December 5.5 cents
January 5.5 cents
February 5.5 cents
Total 65.2 cents
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.39%, based on an annualization of the current monthly dividend of
5.5 cents ($0.055) per share and the maximum offering price of $12.25 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Alabama state personal income tax bracket of
42.6%, you would have to earn 9.39% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Alabama Tax-Free Income Fund had been applied to this
index, the index's performance would have been lower. In addition, the index
consists of municipal bonds from across the country, while your fund consists
primarily of Alabama municipal bonds. Please remember that an index is simply a
measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Alabama Tax-Free Income Fund's Class
II share price, as measured by net asset value, increased to $11.77 on February
29, 1996, from $11.36on May 1, 1995, the date the fund began offering these
shares.
Due to increased income earned by the fund, we were able to raise the dividend
to 4.9 cents ($0.049) per share, from 4.8 cents ($0.048) per share, effective
with the November 1995 distribution. Dividends will vary based on the earnings
of the fund's portfolio, and past distributions are not predictive of future
results.
Franklin Alabama Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.6 cents
June 4.8 cents
July 4.8 cents
August 4.8 cents
September 4.8 cents
October 4.8 cents
November 4.9 cents
December 4.9 cents
January 4.9 cents
February 4.9 cents
Total 47.2 cents
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.95%, based on an annualization of the current monthly dividend of
4.9 cents ($0.049) per share and the offering price of $11.89 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Alabama state personal income tax bracket of 42.6%, you would have
to earn 8.62% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Alabama Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of Alabama municipal bonds. Please remember that an
index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Alabama Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
Inception Class II Shares
1-Year 5-Year (9/1/87) (5/1/95)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I 9.74% 47.38% 96.90%
Class II -- -- -- 8.01%
Average Annual Total Return2
Class I 5.10% 7.13% 7.74%
Aggregate Total Return2
Class II -- -- -- 5.99%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I 5.39% Class I 9.39%
Class II 4.95% Class II 8.62%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.67% Class I 8.14%
Class II 4.24% Class II 7.39%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.5 cent per share monthly dividend and the maximum offering price of $12.25 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.9 cent per share monthly dividend and the
offering price of $11.89 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN FLORIDA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal income 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
Rapid growth and increased diversification characterized Florida's economy
during the reporting period. Emphasis on agriculture and seasonal tourism
continued to decline, while the state's service and trade bases expanded into
substantial insurance, banking and export sectors.+
Despite Florida's rapid growth to the fourth largest state in the nation, its
debt levels have remained moderate and its financial operations balanced.++ As a
result, the state's general obligation bonds received a AA rating from Standard
& Poor's, a national credit rating agency.
We anticipate Florida's economy will continue to flourish in the coming year,
due to the state's well-managed financial program and historically steady
economic performance.
GRAPHIC MATERIAL 10 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: Standard & Poor's Creditweek Municipal, 1/22/96
++Source: Fitch, 1/8/96
Portfolio Notes
During the reporting period, we sought to reduce the number of pre-refunded
bonds in the fund's portfolio. Most of these bonds were due to be called by
their issuers over the next few years. We felt that the risk -- that the supply
of new issues and secondary bonds might be insufficient to satisfy demand on the
call dates, resulting in higher bond prices -- was too great to be left to
chance. We invested the proceeds in full coupon bonds (bonds with a coupon rate
near or above the current market rate) offering better call protection. This
strategy significantly decreased our pre-refunded exposure to 14.3% of total
long-term investments on February 29, 1996, from 20.2% one year earlier.
Furthermore, we elected to remain fully invested during the reporting period,
concentrating primarily on high-grade revenue bonds maturing in 25-30 years.
Regarding quality, more than half of the fund's total long-term investments
remained concentrated in AAA-rated bonds, the highest quality available.
Franklin Florida Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 23.7%
Pre-Refunded 14.3%
Transportation 13.5%
Hospitals 12.6%
Housing 8.5%
Special Assessment 7.6%
Certificates of Participation 4.9%
Other Revenue 4.0%
Education 2.9%
General Obligations 2.9%
Miscellaneous 2.5%
Sales Tax 1.4%
Health Care 0.7%
Industrial 0.5%
For a complete list of portfolio holdings, please see page 77 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 18.)
We are pleased to report the Franklin Florida Tax-Free Income Fund's Class I
share price, as measured by net asset value, increased to $11.69 on February 29,
1996, from $11.35 on February 28, 1995.
Franklin Florida Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.7 cents
October 5.7 cents
November 5.7 cents
December 5.7 cents
January 5.7 cents
February 5.7 cents
Total 68.4 cents
GRAPHIC MATERIAL 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.60%, based on an annualization of the current monthly dividend of
5.7 cents ($0.057) per share and the maximum offering price of $12.21 on
February 29, 1996. This tax-free rate is generally higher than the after-tax
return on a comparable taxable investment. For example, if you are in the
maximum federal personal income tax bracket of 39.6%, you would have to earn
9.27% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Florida Tax-Free Income Fund had been applied to this
index, the index's performance would have been lower. In addition, the index
consists of municipal bonds from across the country, while your fund consists
primarily of Florida municipal bonds. Please remember that an index is simply a
measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Florida Tax-Free Income Fund's Class
II share price, as measured by net asset value, increased to $11.76 on February
29, 1996, from $11.37 on May 1, 1995, the date the fund began offering these
shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 5.15%, based on an annualization of the current monthly dividend of
5.1 cents ($0.051) per share and the offering price of $11.88 on February 29,
1996. This tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum federal
personal income tax bracket of 39.6%, you would have to earn 8.53% from a
taxable investment of similar quality to match your fund's tax-free distribution
rate.
Franklin Florida Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.8 cents
June 5.1 cents
July 5.1 cents
August 5.1 cents
September 5.1 cents
October 5.1 cents
November 5.1 cents
December 5.1 cents
January 5.1 cents
February 5.1 cents
Total 49.7 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Florida Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of Florida municipal bonds. Please remember that an
index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Florida Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
Inception Class II Shares
1-Year 5-Year (9/1/87) (5/1/95)
Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I 9.28% 48.54% 102.41%
Class II -- -- -- 8.05%
Average Annual Total Return2
Class I 4.67% 7.49% 9.15%
Aggregate Total Return2
Class II -- -- -- 6.03%
</TABLE>
Distribution Rate3 Equivalent Taxable Distribution
Rate4
Class I 5.60% Class I 9.27%
Class II 5.15% Class II 8.53%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.68% Class I 7.75%
Class II 4.25% Class II 7.04%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.7 cent per share monthly dividend and the maximum offering price of $12.21 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 5.1 cent per share monthly dividend and the
offering price of $11.88 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN GEORGIA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Georgia
state personal income taxes through a portfolio consisting primarily of Georgia
municipal bonds.*
State Update
Georgia's stable and broad-based economy, which is primarily oriented in the
trade, service and transportation sectors, experienced significant employment
growth in 1995. A substantial budget surplus at the close of fiscal year 1995
also reflected the state's financial strength.+ As a result, Georgia's general
obligation bonds received a Aaa rating, the highest rating possible, from
Moody's, a national credit rating agency.
Looking forward, we expect Georgia's strong revenue growth to continue, with
further stimulation from the upcoming 1996 Olympic Games in Atlanta. Thus, our
outlook for the state is positive.
GRAPHIC MATERIAL 15 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 Municipal Credit Report, 8/21/95
Portfolio Notes
During the reporting period, we sought to reduce the number of pre-refunded
bonds in the fund's portfolio. Most of these bonds were due to be called by
their issuers over the next few years. We felt that the risk -- that the supply
of new issues and secondary bonds might be insufficient to satisfy demand on the
call dates, resulting in higher bond prices -- was too great to be left to
chance. We invested the proceeds in full coupon bonds (bonds with a coupon rate
near or above the current market rate) offering better call protection. This
strategy decreased our pre-refunded exposure to 11.3% of total long-term
investments on February 29, 1996, from 19.0% one year earlier.
We also maintained our emphasis on high-quality, AAA-rated bonds. These bonds,
which carry the highest rating available, continued to represent over 65% of the
fund's total long-term investments.
Franklin Georgia Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 25.8%
Pre-Refunded 11.3%
Hospitals 10.5%
Housing 10.3%
Education 9.8%
Industrial 7.0%
Transportation 6.6%
Sales Tax 5.5%
Other Revenue 4.6%
Certificates of Participation 4.0%
General Obligations 3.7%
Health Care 0.9%
For a complete list of portfolio holdings, please see page 86
of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 25.)
We are pleased to report that the Franklin Georgia Tax-Free Income Fund's Class
I share price, as measured by net asset value, increased to $11.88 on February
29, 1996, from $11.54 on February 28, 1995.
Franklin Georgia Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.5 cents
October 5.5 cents
November 5.5 cents
December 5.5 cents
January 5.5 cents
February 5.5 cents
Total 66.0 cents
GRAPHIC MATERIAL 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the Fund's Class I
shares was 5.32%, based on an annualization of the current monthly dividend of
5.5 cents ($0.055) per share and the maximum offering price of $12.41 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Georgia state personal income tax bracket of
43.2%, you would have to earn 9.37% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Georgia Tax-Free Income Fund had been applied to this
index, the index's performance would have been lower. In addition, the index
consists of municipal bonds from across the country, while your fund consists
primarily of Georgia municipal bonds. Please remember that an index is simply a
measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Georgia Tax-Free Income Fund's Class
II share price, as measured by net asset value, increased to $11.92 on February
29, 1996, from $11.57 on May 1, 1995, the date the fund began offering these
shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.88%, based on an annualization of the current monthly dividend of
4.9 cents ($0.049) per share and the offering price of $12.04 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Georgia state personal income tax bracket of 43.2%, you would have
to earn 8.59% from a taxable investment of similar quality to match your fund's
tax-free distribution rate.
Franklin Georgia Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.5 cents
June 4.9 cents
July 4.9 cents
August 4.9 cents
September 4.9 cents
October 4.9 cents
November 4.9 cents
December 4.9 cents
January 4.9 cents
February 4.9 cents
Total 47.6 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Georgia Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of Georgia municipal bonds. Please remember that an
index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 19 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Georgia Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
InceptionClass II Shares
1-Year 5-Year (9/1/87) (5/1/95)
Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I 8.90% 46.02% 97.60%
Class II -- -- -- 7.40%
Average Annual Total Return2
Class I 4.29% 6.92% 7.78%
Aggregate Total Return2
Class II -- -- -- 5.31%
</TABLE>
Distribution Rate3 Equivalent Taxable Distribution
Rate4
Class I 5.32% Class I 9.37%
Class II 4.88% Class II 8.59%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.39% Class I 7.73%
Class II 3.95% Class II 6.96%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.5 cent per share monthly dividend and the maximum offering price of $12.41 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.9 cent per share monthly dividend and the
offering price of $12.04 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Kentucky
state personal income taxes through a diversified portfolio consisting primarily
of Kentucky municipal bonds.*
Commonwealth Update
Kentucky's economy continued to grow during the reporting period, due to a
broadening economic base and refined financial management practices. The
Commonwealth's expanding economy included more service sectors, as it
diversified away from heavy manufacturing, tobacco, coal, and horse industries.
We anticipate Kentucky's modest, but improving, financial condition will
contribute to its continued economic success. Furthermore, new bond issuance in
the Commonwealth may remain low, adding scarcity value to Kentucky municipal
bonds.
Portfolio Notes
During the reporting period, we increased the number of high-quality bonds in
the fund's portfolio, due to the narrow yield spreads between AAA-rated issues
and lower-rated bonds. As a result, the portion of AAA-rated bonds in the fund
increased to 54.7% of total long-term investments on February 29, 1996, from
49.8% a year earlier.
*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.
GRAPHIC MATERIAL 20 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Kentucky Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 22.7%
Hospitals 15.0%
Other Revenue 14.9%
Housing 11.6%
Transportation 9.3%
Education 8.1%
Industrial 7.4%
Certificates of Participation 6.3%
SLT 2.3%
Pre-Refunded 1.2%
General Obligations 1.2%
For a complete list of portfolio holdings, please see page 90 of this report.
Performance Summary
We are pleased to report that the Franklin Kentucky Tax-Free Income Fund's share
price, as measured by net asset value, increased to $11.04 on February 29, 1996,
from $10.54 on February 28, 1995.
At the end of the reporting period, your fund's distribution rate was 5.31%,
based on an annualization of the current monthly dividend of 5.1 cents ($0.051)
per share and the maximum offering price of $11.53 on February 29, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum combined
federal and Kentucky state personal income tax bracket of 43.2%, you would have
to earn 9.35% from a taxable investment of similar quality to match your fund's
tax-free distribution rate.
Franklin Kentucky Tax-Free Income Fund
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.1 cents
October 5.1 cents
November 5.1 cents
December 5.1 cents
January 5.1 cents
February 5.1 cents
Total 61.2 cents
GRAPHIC MATERIAL 21 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart on the page 30, your fund has outperformed the
Consumer Price Index (CPI) since 1992, keeping your purchasing power well ahead
of inflation -- a primary goal of any investment. The fund underperformed the
unmanaged Lehman Brothers Municipal Bond Index since its inception in 1993. Of
course, such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, nor do they pay commissions or market
spreads to buy and sell bonds. Unlike unmanaged indices, mutual funds are never
100% fully invested because of the need to have cash on hand to redeem shares.
The fund's performance figures also include the maximum initial sales charge,
all fund expenses and account fees. If operating expenses such as those of the
Kentucky Tax-Free Income Fund had been applied to this index, the index's
performance would have been lower. In addition, the index includes over 25,000
municipal securities from across the country, while your fund consists primarily
of Kentucky municipal bonds. Please remember that an index is simply a measure
of performance, and one cannot invest in an index directly. Past performance is
not predictive of future results.
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
GRAPHIC MATERIAL 22 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Kentucky Tax-Free Income Fund
Periods ended February 29, 1996
Since
Inception
1-Year 3-Year (10/12/91)
Cumulative
Total Return1 10.73% 19.03% 39.98%
Average Annual
Total Return2 6.00% 4.46% 6.91%
Distribution Rate3 5.31%
Equivalent Taxable Distribution Rate4 9.35%
30-Day Standardized Yield5 5.03%
Equivalent Taxable Yield4 8.86%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods. The figures include the current,
maximum 4.25% initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current 5.1 cent per
share monthly dividend and the maximum offering price of $11.53 on February 29,
1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Kentucky state personal income tax bracket of 43.2%, based
on the maximum 39.6% federal income tax rate.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 29, 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 has agreed in advance to waive a portion of its management
fees, which reduces operating expenses and increases yield, distribution rate
and total return to shareholders. Without these reductions, the fund's
distribution rate and total return would have been lower, and yield for the
period would have been 4.68%. Fee waivers and expense reimbursements may be
discontinued at any time upon notice to the fund's Board of Trustees.
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Louisiana
state personal income taxes through a portfolio consisting primarily of
Louisiana municipal bonds.*
State Update
Louisiana's economy improved during the one-year reporting period, with
particular growth in the service and non-petroleum manufacturing industries.
Employment was further boosted by growth in the gaming industry, yet the state
still suffers from below-average wealth and income levels.+
Debt levels in Louisiana remained moderately high during the fund's fiscal year.
The state's fiscal 1996 budget is anticipated to close with a revenue shortfall
of $41 million. A recent $800 million cut in Medicaid funding forced Louisiana
to tap into several one-time, non-recurring revenue sources to fund its growing
health service programs. However, as Louisiana brings its debt under control and
prepares long-term solutions for the cuts in Medicaid funding, we anticipate its
overall economic situation will improve.
GRAPHIC MATERIAL 23 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: Standard & Poor's Creditweek Municipal, 1/8/96
Portfolio Notes
During the fund's fiscal year, we increased the number of AAA-rated bonds in the
fund's portfolio, due to the narrow yield spreads between AAA and lower-rated
municipal securites. As the year progressed, we took advantage of opportunities
to boost the number of AAA bonds in the fund to 51.8% of total long-term
investments on February 29, 1996, from 41.7% on February 28, 1995.
Franklin Louisiana Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 23.5%
Pre-Refunded 17.4%
Housing 15.9%
Hospitals 12.9%
Other Revenue 11.4%
Industrial 7.1%
Sales Tax Bonds 5.0%
General Obligations 3.8%
Certificates of Participation 1.7%
Transportation 1.3%
For a complete list of portfolio holdings, please see page 93 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 35.)
We are pleased to report that the Franklin Louisiana Tax-Free Income Fund's
Class I share price, as measured by net asset value, increased to $11.32 on
February 29, 1996, from $11.03 on February 28, 1995.
Franklin Louisiana Tax-Free Income Fund
Class I Shares
Dividend Distribution 3/01/95 - 2/29/96*
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
September 5.4 cents
October 5.4 cents
November 5.4 cents
December 5.4 cents
January 5.4 cents
February 5.4 cents
Total 64.8 cents
GRAPHIC MATERIAL 24 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.48%, based on an annualization of the current monthly dividend of
5.4 cents ($0.054) per share and the maximum offering price of $11.82 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Louisiana state personal income tax bracket of
43.2%, you would have to earn 9.65% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Louisiana Tax-Free Income Fund had been applied to this
index, the index's performance would have been lower. In addition, the index
consists of municipal bonds from across the country, while your fund consists
primarily of Louisiana municipal bonds. Please remember that an index is simply
a measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 25 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Louisiana Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $11.37 on
February 29, 1996, from $11.01 on May 1, 1995, the date the fund began offering
Class II shares.
Franklin Louisiana Tax-Free Income Fund
Class II Shares
Dividend Distribution 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.6 cents
June 4.8 cents
July 4.8 cents
August 4.8 cents
September 4.8 cents
October 4.8 cents
November 4.8 cents
December 4.8 cents
January 4.8 cents
February 4.8 cents
Total 46.8 cents
GRAPHIC MATERIAL 26 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 5.02%, based on an annualization of the current monthly dividend of
4.8 cents ($0.048) per share and the offering price of $11.48 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Louisiana state personal income tax bracket of 43.2%, you would have
to earn 8.84% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Louisiana Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of Louisiana municipal bonds. Please remember that
an index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 27 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Louisiana Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
InceptionClass II Shares
1-Year 5-Year (9/1/87) 5/1/95)
Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I 8.75% 44.19% 94.88%
Class II -- -- -- 7.76%
Average Annual Total Return2
Class I 4.13% 6.67% 7.61%
Aggregate Total Return2
Class II -- -- -- 5.71%
</TABLE>
Distribution Rate3 Equivalent Taxable Distribution
Rate4
Class I 5.48% Class I 9.65%
Class II 5.02% Class II 8.84%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.72% Class I 8.31%
Class II 4.30% Class II 7.57%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.4 cent per share monthly dividend and the maximum offering price of $11.82 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.8 cent per share monthly dividend and the
offering price of $11.48 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN MARYLAND TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Maryland
state personal income taxes through a portfolio consisting primarily of Maryland
municipal bonds.*+
State Update
Maryland's diverse economic base, well-managed finances, and below-average
unemployment levels have contributed to its overall economic strength. Largely
as a result, the state's general obligation bonds have earned superior credit
ratings of AAA from Standard & Poor's and Aaa from Moody's, two national rating
agencies.
Although the state's economy is heavily dependent on federal jobs, which
accounted for 19.6% of employment in 1994, continued diversification has allowed
it to recover many of the jobs lost in federal government restructuring.++ In
fact, Maryland's unemployment rate was just 4.9% as of November 1995, while the
national average was 5.3%.+++
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.
++Source: Standard & Poor's Creditweek Municipal, 11/13/95
+++Source: Moody's Daily Rating Recap, 2/12/96
Looking forward, we anticipate continued economic strength, despite permanent
federal restructuring. In light of Maryland's disciplined financial operations,
manageable debt burden, and well-diversified economic base, we maintain a
positive outlook for the state.
Portfolio Notes
During the reporting period, we continued to emphasize quality by boosting our
investments in high grade revenue bonds. As a result, AAA-rated bonds, the
highest-quality available, represented 46.6% of the fund's total long-term
investments, up nearly 15% from 31.5% one year earlier.
Franklin Maryland Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Housing 23.3%
Pre-Refunded 20.5%
Utilities 16.6%
Other Revenue 13.4%
Hospitals 9.6%
General Obligations 6.1%
Certificates of Participation 4.7%
Transportation 4.4%
Education 1.4%
For a complete list of portfolio holdings, please see page 97 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 42.)
We are pleased to report that the Franklin Maryland Tax-Free Income Fund's Class
I share price, as measured by net asset value, increased to $11.38 on February
29, 1996, from $10.92 on February 28, 1995.
Franklin Maryland Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.2 cents
October 5.2 cents
November 5.2 cents
December 5.2 cents
January 5.2 cents
February 5.2 cents
Total 62.4 cents
GRAPHIC MATERIAL 29 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares 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
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Maryland state personal income tax bracket of
45.4%, you would have to earn 9.62% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Maryland Tax-Free Income Fund had been applied to this
index, the index's performance would have been lower. In addition, the index
consists of municipal bonds from across the country, while your fund consists
primarily of Maryland municipal bonds. Please remember that an index is simply a
measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 30 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
The Franklin Maryland Tax-Free Income Fund's Class II share price, as measured
by net asset value, increased to $11.44 on February 29, 1996, from $10.93 on May
1, 1995, the date the fund began offering these shares.
We are also pleased to report that due to increased income in the fund, we were
able to raise the Class II share dividend to 4.65 cents ($0.0465) per share,
from 4.6 cents ($0.046) per share, effective with the February 1996
distribution.
Franklin Maryland Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.4 cents
June 4.6 cents
July 4.6 cents
August 4.6 cents
September 4.6 cents
October 4.6 cents
November 4.6 cents
December 4.6 cents
January 4.6 cents
February 4.65 cents
Total 44.85 cents
GRAPHIC MATERIAL 31 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.83%, based on an annualization of the current monthly dividend of
4.65 cents per share and the offering price of $11.56 on February 29, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum combined
federal and Maryland state personal income tax bracket of 45.4%, you would have
to earn 8.85% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Maryland Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of Maryland municipal bonds. Please remember that
an index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 32 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Maryland Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
InceptionClass II Shares
1-Year 5-Year (10/3/88) (5/1/95)
Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I 10.18% 47.72% 76.35%
Class II -- -- -- 9.06%
Average Annual Total Return2
Class I 5.54% 7.18% 7.33%
Aggregate Total Return2
Class II -- -- -- 6.98%
</TABLE>
Distribution Rate3 Equivalent Taxable Distribution
Rate4
Class I 5.25% Class I 9.62%
Class II 4.83% Class II 8.85%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.47% Class I 8.19%
Class II 4.04% Class II 7.40%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.2 cent per share monthly dividend and the maximum offering price of $11.89 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.65 cent per share monthly dividend and the
offering price of $11.56 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Maryland state personal income tax rate of 45.4%, 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN MISSOURI TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Missouri
state personal income taxes through a portfolio consisting primarily of Missouri
municipal bonds.*
State Update
Missouri is one of only five states to receive Aaa and AAA bond credit ratings
from both Moody's and Standard & Poor's, two national credit rating agencies.
The state earned these ratings due to its continued low levels of debt,
well-diversified economic base and sound financial policies. Over the past three
years, strong management efforts, coupled with a rebounding economy, have led to
a steadily strengthening financial position.+
Looking forward, we anticipate Missouri's economy will continue to outperform
the nation's, while its debt levels remain low. Additionally, we anticipate low
debt issuance in 1996 should make Missouri municipal bonds attractive
investments.
GRAPHIC MATERIAL 33 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: Standard & Poor's Creditweek Municipal, 3/20/95
Portfolio Notes
During the reporting period, we continued our emphasis on high-quality bonds.
Insured AAA-rated bonds were attractive because of the narrow yield spreads
between higher-rated and lower-rated bonds.
In January of this year, Sikeston, Missouri took advantage of lower interest
rates by refunding their electric system revenue bonds, which we held in the
portfolio. This led to a slight increase in the number of pre-refunded bonds in
the fund's portfolio, to 22.6% of total long-term investments on February 29,
1996, from 21.9% one year earlier. However, we plan to decrease the fund's
pre-refunded exposure to approximately 15% of total long-term investments in the
coming year, by selling some of our pre-refunded bonds and replacing them with
full coupon bonds (bonds with a coupon rate near or above the current market
rate) offering better call protection
Franklin Missouri Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Pre-Refunded 22.5%
Certificates of Participation 22.2%
Utilities 10.3%
Hospitals 10.2%
Housing 7.5%
Health Care 7.5%
Transportation 7.4%
Other Revenue 4.4%
Education 2.8%
Industrial 2.3%
Tax Allocation Bonds 1.5%
General Obligations 1.4%
For a complete list of portfolio holdings, please see page 101 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary located on page 49.)
We are pleased to report that the Franklin Missouri Tax-Free Income Fund's Class
I share price, as measured by net asset value, increased to $11.94 on February
29, 1996, from $11.44 on February 28, 1995.
We are also pleased to report that due to increased income earned by the fund,
we were able to raise the dividend to 5.4 cents ($0.054) per share, from 5.3
cents ($0.053) per share, effective with the November 1995 distribution.
Dividends will vary based on the earnings of the fund's portfolio, and past
distributions are not predictive of future results.
Franklin Missouri Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend
Month per Share
March 5.3 cents
April 5.3 cents
May 5.3 cents
June 5.3 cents
July 5.3 cents
August 5.3 cents
September 5.3 cents
October 5.3 cents
November 5.4 cents
December 5.4 cents
January 5.4 cents
February 5.4 cents
Total 64.0 cents
GRAPHIC MATERIAL 34 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.20%, based on an annualization of the current monthly dividend of
5.4 cents per share and the maximum offering price of $12.47 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Missouri state personal income tax bracket of 43.2%, you would have
to earn 9.15% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Missouri Tax-Free Income Fund had been applied to this
index, the index's performance would have been lower. In addition, the index
consists of municipal bonds from across the country, while your fund consists
primarily of Missouri municipal bonds. Please remember that an index is simply a
measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 35 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Missouri Tax-Free Income Fund's Class
II share price, as measured by net asset value, increased to $11.97 on February
29, 1996, from $11.47 on May 1, 1995, the date the fund began offering these
shares.
Due to increased income earned by the fund, we were able to raise the dividend
to 4.8 cents ($0.048) per share, from 4.7 cents ($0.047) per share, effective
with the November 1995 distribution. Dividends will vary based on the earnings
of the fund's portfolio, and past distributions are not predictive of future
results.
Franklin Missouri Tax-Free Income Fund
Class II Shares
Dividend Distribution 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.5 cents
June 4.7 cents
July 4.7 cents
August 4.7 cents
September 4.7 cents
October 4.7 cents
November 4.8 cents
December 4.8 cents
January 4.8 cents
February 4.8 cents
Total 46.2 cents
GRAPHIC MATERIAL 36 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.76%, based on an annualization of the current monthly dividend of
4.8 cents per share and the offering price of $12.09 on February 29, 1996. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum combined
federal and Missouri state personal income tax bracket of 43.2%, you would have
to earn 8.38% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Missouri Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of Missouri municipal bonds. Please remember that
an index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 37 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Missouri Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
InceptionClass II Shares
1-Year 5-Year (9/1/87) (5/1/95)
Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I 10.24% 49.34% 98.81%
Class II -- -- -- 8.52%
Average Annual Total Return2
Class I 5.54% 7.41% 7.86%
Aggregate Total Return2
Class II -- -- -- 6.55%
Distribution Rate3 Equivalent Taxable Distribution
Rate4
Class I 5.20% Class I 9.15%
Class II 4.76% Class II 8.38%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.48% Class I 7.89%
Class II 4.00% Class II 7.04%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.4 cent per share monthly dividend and the maximum offering price of $12.47 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.8 cent per share monthly dividend and the
offering price of $12.09 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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. Past expense reductions by
the fund's manager increased the fund's Class I total returns.
FRANKLIN NORTH CAROLINA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and North
Carolina state personal income taxes through a portfolio consisting primarily of
North Carolina municipal bonds.*
State Update
During the reporting period, North Carolina ranked among the top
ten states in the nation in terms of economic growth, as measured by changes in
job and personal income levels.+ Furthermore, the state's disciplined financial
operations provided it with debt ratios among the lowest in the country. Its
general obligation bonds enjoy superior credit ratings from two national rating
agencies: Aaa from Moody's, and AAA from Standard & Poor's.
Looking forward, we anticipate continued positive economic performance and low
debt levels. Further diversification into financial services, research and high
technology manufacturing, and away from traditional heavy manufacturing, textile
and agriculture industries, should contribute to a strong economy.
GRAPHIC MATERIAL 38 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 Municipal Credit Report, 6/13/95
Portfolio Notes
During the reporting period, we sought to reduce the number of pre-refunded
bonds in the fund's portfolio. Most of these bonds were due to be called by
their issuers over the next few years. We invested the proceeds in full coupon
bonds (bonds with a coupon rate near or above the current market rate) offering
better call protection. This strategy decreased our pre-refunded exposure to
9.8% of total long-term investments on February 29, 1996, from 16.7% one year
earlier.
During the reporting period, we elected to remain fully invested, primarily in
high-grade revenue bonds maturing in 25-30 years. We participated in several new
issues, including those of Charlotte Water and Sewer, North Carolina Housing
Finance, and University of North Carolina.
Franklin North Carolina Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 28.1%
Certificates of Participation 13.4%
Hospitals 13.2%
Housing 13.0%
Pre-Refunded 9.8%
Industrial 6.1%
General Obligations 5.1%
Other Revenue 3.8%
Education 3.4%
Transportation 3.3%
Health Care 0.8%
For a complete list of portfolio holdings, please see page 106 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 56.)
We are pleased to report that the Franklin North Carolina Tax-Free Income Fund's
Class I share price, as measured by net asset value, increased to $11.75 on
February 29, 1996, from $11.37 on February 28, 1995.
Franklin North Carolina Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.4 cents
October 5.4 cents
November 5.4 cents
December 5.4 cents
January 5.4 cents
February 5.4 cents
Total 64.8 cents
GRAPHIC MATERIAL 39 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The distribution rate of the fund's Class I shares was 5.28%, based on an
annualization of the current monthly dividend of 5.4 cents ($0.054) per share
and the maximum offering price of $12.27 on February 29, 1996. This double
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, if you are in the maximum combined federal and
North Carolina state personal income tax bracket of 44.3%, you would have to
earn 9.48% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the North Carolina Tax-Free Income Fund had been applied to
this index, the index's performance would have been lower. In addition, the
index consists of municipal bonds from across the country, while your fund
consists primarily of North Carolina municipal bonds. Please remember that an
index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 40 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin North Carolina Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $11.80 on
February 29, 1996, from $11.41 on May 1, 1995, the date the fund began offering
these shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.83%, based on an annualization of the current monthly dividend of
4.8 cents ($0.048) per share and the offering price of $11.92 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and North Carolina state personal income tax bracket of 44.3%, you would
have to earn 8.67% from a taxable investment of similar quality to match your
fund's tax-free distribution rate.
Franklin North Carolina Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.6 cents
June 4.8 cents
July 4.8 cents
August 4.8 cents
September 4.8 cents
October 4.8 cents
November 4.8 cents
December 4.8 cents
January 4.8 cents
February 4.8 cents
Total 46.8 cents
GRAPHIC MATERIAL 41 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the North Carolina Tax-Free Income Fund had
been applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of North Carolina municipal bonds. Please remember
that an index is simply a measure of performance, and one cannot invest in an
index directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 42 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin North Carolina Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
InceptionClass II Shares
1-Year 5-Year (9/1/87) (5/1/95)
Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I 9.28% 45.12% 97.02%
Class II -- -- -- 7.77%
Average Annual Total Return2
Class I 4.68% 6.80% 7.75%
Aggregate Total Return2
Class II -- -- -- 5.66%
Distribution Rate3 Equivalent Taxable Distribution
Rate4
Class I 5.28% Class I 9.48%
Class II 4.83% Class II 8.67%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.58% Class I 8.22%
Class II 4.17% Class II 7.48%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.4 cent per share monthly dividend and the maximum offering price of $12.27 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.8 cent per share monthly dividend and the
offering price of $11.92 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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. Past expense reductions by
the fund's manager increased the fund's Class I total returns.
FRANKLIN TEXAS TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal personal income
taxes through a portfolio consisting primarily of Texas municipal bonds.*
State Update
Texas' dependence on the gas and oil industries continued to
decline during the reporting period, as the state's economy diversified into the
construction, manufacturing and service sectors. In addition, its employment
growth outpaced the national average, yet Texas kept its debt levels low, which
further highlights its economic stability.+
Looking forward, the state's strong economy and well-managed debt lead us to
anticipate further strong economic performance and continued diversification. In
fact, anticipated employment growth of 2.2% through the end of 1997 should help
keep Texas' performance ahead of both the nation and the west south central
region of the country.++
GRAPHIC MATERIAL 43 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 Municipal Credit Report, 1/22/96
++Source: Standard & Poor's Creditweek Municipal, 1/29/96
Portfolio Notes
During the reporting period, we sought to reduce the number of pre-refunded
bonds in the fund's portfolio. Most of these bonds were due to be called by
their issuers over the next few years. We invested the proceeds in full coupon
bonds (bonds with a coupon rate near or above the current market rate) offering
better call protection. This strategy substantially decreased our pre-refunded
exposure to 18.9% of total long-term investments on February 29, 1996, from
28.3% one year earlier.
In addition, narrow yield spreads between high-quality, AAA-rated bonds and
lower-rated municipal securities allowed us to increase the number of AAA-rated
bonds in the fund's portfolio. These securities accounted for 65.6% of total
long-term investments as of February 29, 1996, up significantly from 58.4% the
previous year.
Franklin Texas Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long term investments
% of total
long-term
Sector investments
Utilities 24.8%
Pre-Refunded 18.9%
Hospitals 10.1%
Other Revenue 9.7%
Transportation 9.1%
Education 8.2%
Housing 6.9%
Industrial 5.6%
Health Care 3.5%
Sales Tax 1.9%
General Obligations 1.3%
For a complete list of portfolio holdings, please see page 111 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 63.)
We are pleased to report that the Franklin Texas Tax-Free Income Fund's Class I
share price, as measured by net asset value, increased to $11.58 on February 29,
1996, from $11.25 on February 28, 1995.
Franklin Texas Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.6 cents
October 5.6 cents
November 5.6 cents
December 5.6 cents
January 5.6 cents
February 5.6 cents
Total 67.2 cents
GRAPHIC MATERIAL 44 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.55%, based on an annualization of the current monthly dividend of
5.6 cents ($0.056) per share and the maximum offering price of $12.09 on
February 29, 1996. This tax-free rate is generally higher than the after-tax
return on a comparable taxable investment. For example, if you are in the
maximum federal personal income tax bracket of 39.6%, you would have to earn
9.19% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Texas Tax-Free Income Fund had been applied to this index,
the index's performance would have been lower. In addition, the index consists
of municipal bonds from across the country, while your fund consists primarily
of Texas municipal bonds. Please remember that an index is simply a measure of
performance, and one cannot invest in an index directly. Past performance is not
predictive of future results.
GRAPHIC MATERIAL 45 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
The Franklin Texas Tax-Free Income Fund's Class II share price, as measured by
net asset value, increased to $11.68 on February 29, 1996, from $11.27 on May 1,
1995, the date the fund began offering these shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 5.08%, based on an annualization of the current monthly dividend of
5.0 cents ($0.050) per share and the offering price of $11.80 on February 29,
1996. This tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum federal
income tax bracket of 39.6%, you would have to earn 8.41% from a taxable
investment of similar quality to match your fund's tax-free distribution rate.
Franklin Texas Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.7 cents
June 5.0 cents
July 5.0 cents
August 5.0 cents
September 5.0 cents
October 5.0 cents
November 5.0 cents
December 5.0 cents
January 5.0 cents
February 5.0 cents
Total 48.7 cents
GRAPHIC MATERIAL 46 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Texas Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of Texas municipal bonds. Please remember that an
index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 47 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Texas Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
InceptionClass II Shares
1-Year 5-Year (9/1/87) (5/1/95)
Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I 9.15% 46.64% 99.55%
Class II -- -- -- 8.08%
Average Annual Total Return2
Class I 4.60% 7.02% 7.91%
Aggregate Total Return2
Class II -- -- -- 6.19%
Distribution Rate3 Equivalent Taxable Distribution
Rate4
Class I 5.55% Class I 9.19%
Class II 5.08% Class II 8.41%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.20% Class I 6.95%
Class II 3.76% Class II 6.23%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.6 cent per share monthly dividend and the maximum offering price of $12.09 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 5.0 cent per share monthly dividend and the
offering price of $11.80 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Virginia
state personal income taxes through a portfolio consisting primarily of Virginia
municipal bonds.*
Commonwealth Update
Virginia continued to enjoy a long employment expansion
phase, after exceeding pre-recession employment levels three years ago.+ The
Commonwealth boasted a diverse economic base, consistently low unemployment
rates, and above-average income levels during the reporting period. In addition,
its strong financial management and low debt burden contributed to Virginia's
receipt of a superior AAA general obligation bond rating from Standard & Poor's,
a national rating agency.
GRAPHIC MATERIAL 48 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: Standard & Poor's Creditweek Municipal, 10/9/95
Virginia's strong financial position, indicated by its budget cash surpluses at
the close of three of the past four fiscal years, supports our positive outlook
for the Commonwealth. Furthermore, we anticipate the Commonwealth's economic and
employment growth will continue well into the coming year, as the governor seeks
growth by encouraging companies to build manufacturing plants in Virginia.
Franklin Virginia Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Pre-Refunded 21.6%
Housing 19.6%
Utilities 13.0%
Transportation 12.9%
Hospitals 12.8%
Industrial 6.8%
Education 5.0%
Certificates of Participation 5.0%
General Obligations 2.1%
Health Care 0.7%
Miscellaneous 0.4%
Other Revenue 0.1%
For a complete list of portfolio holdings, please see page 115 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 70.)
We are pleased to report that the Franklin Virginia Tax-Free Income Fund's Class
I share price, as measured by net asset value, increased to $11.72 on February
29, 1996, from $11.33 on February 28, 1995.
Franklin Virginia Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
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
September 5.4 cents
October 5.4 cents
November 5.4 cents
December 5.4 cents
January 5.4 cents
February 5.4 cents
Total 64.8 cents
GRAPHIC MATERIAL 49 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.29%, based on an annualization of the current monthly dividend of
5.4 cents ($0.054) per share and the maximum offering price of $12.24 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Virginia state personal income tax bracket of
43.1%, you would have to earn 9.30% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
outperformed the Consumer Price Index (CPI) since 1988, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. The fund's
Class I shares slightly underperformed the unmanaged Lehman Brothers Municipal
Bond Index. Of course, such unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover salaries of security analysts or portfolio managers, nor do they pay
commissions or market spreads to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% fully invested because of the need to have cash on
hand to redeem shares. The fund's performance figures also include the maximum
initial sales charge, all fund expenses and account fees. If operating expenses
such as those of the Virginia Tax-Free Income Fund had been applied to this
index, the index's performance would have been lower. In addition, the index
consists of municipal bonds from across the country, while your fund consists
primarily of Virginia municipal bonds. Please remember that an index is simply a
measure of performance, and one cannot invest in an index directly. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 50 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Virginia
Tax-Free Income Fund's Class II share price, as measured by net asset value,
increased to $11.77 on February 29, 1996, from $11.35 on May 1, 1995, the date
the fund began offering these shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.84%, based on an annualization of the current monthly dividend of
4.8 cents ($0.048) per share and the offering price of $11.89 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Virginia state personal income tax bracket of 43.1%, you would have
to earn 8.51% from a taxable investment of similar quality to match your fund's
tax-free distribution rate.
GRAPHIC MATERIAL 51 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Virginia Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend
Month per Share
May 3.6 cents
June 4.8 cents
July 4.8 cents
August 4.8 cents
September 4.8 cents
October 4.8 cents
November 4.8 cents
December 4.8 cents
January 4.8 cents
February 4.8 cents
Total 46.8 cents
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's Class II shares have
outperformed the Consumer Price Index (CPI) since they became available on May
1, 1995, keeping your purchasing power well ahead of inflation -- a primary goal
of any investment. The fund's Class II shares underperformed the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials in comparison with any fund. They do not
pay management fees to cover salaries of security analysts or portfolio
managers, nor do they pay commissions or market spreads to buy and sell bonds.
Unlike unmanaged indices, mutual funds are never 100% fully invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the initial sales charge, all fund expenses and account fees. If
operating expenses such as those of the Virginia Tax-Free Income Fund had been
applied to this index, the index's performance would have been lower. In
addition, the index consists of municipal bonds from across the country, while
your fund consists primarily of Virginia municipal bonds. Please remember that
an index is simply a measure of performance, and one cannot invest in an index
directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 52 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Virginia Tax-Free Income Fund
Periods ended February 29, 1996
<TABLE>
<CAPTION>
Since
Since Inception
InceptionClass II Shares
1-Year 5-Year (9/1/87) (5/1/95)
Cumulative Total Return1
<S> <C> <C> <C> <C>
Class I 9.41% 47.64% 98.92%
Class II -- -- -- 7.94%
Average Annual Total Return2
Class I 4.78% 7.18% 7.87%
Aggregate Total Return2
Class II -- -- -- 6.04%
Distribution Rate3 Equivalent Taxable Distribution
Rate4
Class I 5.29% Class I 9.30%
Class II 4.84% Class II 8.51%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I 4.45% Class I 7.82%
Class II 4.03% Class II 7.08%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge for Class I shares, or the 1.0% initial sales charge and the 1. 0%
contingent deferred sales charge (CDSC) for Class II shares, applicable to
shares redeemed within the first 18 months of investment. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and include the current, maximum 4.25%
initial sales charge. Aggregate total return includes the 1.0% initial sales
charge and represents the change in value of an investment since the inception
date of the fund's Class II shares. It also includes the 1.0% CDSC applicable to
shares redeemed within the first 18 months of investment. Since Class II shares
have existed for less than one year, average annual total returns are not
provided. See Note below.
3. Class I shares distribution rate is based on an annualization of the current
5.4 cent per share monthly dividend and the maximum offering price of $12.24 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.8 cent per share monthly dividend and the
offering price of $11.89 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Virginia state personal income tax rate of 43.1%, 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
<TABLE>
<CAPTION>
Face Value
Amount Franklin Alabama Tax-Free Income Fund (Note 1)
Investments 98.3%
<C> <C> <C>
$ 1,500,000 Alabama Building Renovation Financing Authority Revenue, 7.45%, 09/01/11 ....................... $ 1,690,185
670,000 Alabama HFA, MF Residential Development, Bragg, Series B, 7.75%, 07/15/31 ...................... 700,277
Alabama HFA, SFMR, GNMA Secured,
490,000 Series A, 7.50%, 10/01/10 ................................................................... 517,440
130,000 Series A, 8.00%, 10/01/20 ................................................................... 135,803
3,440,000 Series A-1, 6.50%, 04/01/17 ................................................................. 3,515,370
1,230,000 Series A-2, 6.80%, 04/01/25 ................................................................. 1,279,926
285,000 Series C, 7.45%, 10/01/21 ................................................................... 294,915
1,145,000 Series C-2, 7.75%, 04/01/22 ................................................................. 1,213,173
1,395,000 Alabama Judicial Building Authority Revenue, Judicial Facilities Project, AMBAC Insured, 7.25%,
01/01/14 ...................................................................................... 1,519,825
250,000 Alabama State University Dormitory Revenue, Pre-Refunded, 8.00%, 01/01/14 ...................... 282,400
Alabama Water Pollution Control Authority, Revolving Fund Loan,
1,130,000 Series A, AMBAC Insured, 5.25%, 08/15/16 .................................................... 1,084,823
3,290,000 Series B, 7.75%, 08/15/12 ................................................................... 3,555,733
2,215,000 Alabaster Water and Gas Board Revenue, AMBAC Insured, 6.35%, 09/01/14 .......................... 2,361,699
750,000 Albertville Warrants, MBIA Insured, 7.00%, 04/01/11 ............................................ 823,875
115,000 Alexander City GO, Warrants, Refunding, Series 1988, Pre-Refunded, 7.90%, 05/01/08 ............. 122,746
2,000,000 Alexander City Utility Revenue Warrants, FSA Insured, 6.20%, 08/15/10 .......................... 2,089,980
250,000 Anniston Regional Medical Center Board, Hospital Revenue, Refunding, Northeast Alabama Regional
Medical Center Project, Series A, 7.70%, 07/01/08.............................................. 257,345
1,000,000 Athens Electric Revenue, Warrants, MBIA Insured, 6.00%, 06/01/25 ............................... 1,027,040
1,500,000 Athens Water and Sewer Revenue, Warrants, AMBAC Insured, 6.10%, 08/01/18........................ 1,569,135
1,550,000 Auburn Governmental Utility Services Corp., Waste Water Revenue, Merscot-Auburn L.P., FGIC Insured,
7.30%, 01/01/12 ............................................................................... 1,674,806
2,000,000 Auburn University General Fee Revenue, Refunding, 7.00%, 06/01/11 .............................. 2,235,640
3,000,000 Baldwin County GO, Warrants, FSA Insured, 5.00%, 02/01/16 ...................................... 2,833,590
1,000,000 Bessemer Medical Clinic Board Revenue, Refunding, Bessemer Carraway Center, Series A,
MBIA Insured, 7.25%, 04/01/15 ................................................................. 1,090,920
Birmingham Airport Authority Revenue,
1,000,000 Refunding, Series B, AMBAC Insured, 5.25%, 07/01/20 ......................................... 941,090
500,000 Series 1990-A, AMBAC Insured, 7.375%, 07/01/10 .............................................. 556,855
1,870,000 Birmingham Baptist Medical Center, Special Care Facilities Financing Authority Revenue, Series A,
MBIA Insured, 7.00%, 01/01/21 ................................................................. 2,028,426
2,000,000 Birmingham Carraway Special Care Facilities, Financing Authority Revenue, Refunding Carraway
Methodist Health Systems, Connie Lee Insured, 5.875%, 08/15/25 ................................ 1,992,960
Birmingham GO, Refunding,
145,000 8.00%, 10/01/15 ............................................................................. 155,546
1,000,000 Series B, 6.25%, 04/01/12 ................................................................... 1,058,320
1,000,000 Series B, 6.25%, 04/01/16 ................................................................... 1,054,970
500,000 Birmingham Historical Preservation Authority Revenue, Kelly Ingram/Civil Rights Project, Pre-Refunded,
7.20%, 07/01/11 ............................................................................... 569,710
Birmingham-Jefferson Civic Center Authority, Special Tax, Capital Outlay,
285,000 7.40%, 01/01/08 ............................................................................. 311,120
640,000 7.25%, 01/01/12 ............................................................................. 679,302
1,200,000 Birmingham Special Care Facilities Financing Authority Revenue, Health Care Medical Center East,
MBIA Insured, 7.00%, 07/01/12 ................................................................. 1,314,504
2,000,000 Birmingham Special Care Facilities Financing Authority Revenue, Refunding, Medical Center East,
MBIA Insured, 7.25%, 07/01/15 ................................................................. 2,050,840
3,250,000 Camden IDB, PCR, Facilities Revenue, Refunding, MacMillian Bloedel Project, Series A, 7.75%,
05/01/09 ...................................................................................... 3,540,843
500,000 Citronelle IDB, PCR, Stauffer Chemical Project, Guaranteed by Imperial Chemical Plc., Series 1982,
8.00%, 12/01/12 ............................................................................... 568,895
$ 1,750,000 Colbert County Health Care Authority, Helen Keller Hospital, 8.75%, 06/01/09 ................... $ 1,933,593
Columbia IDB, PCR, Refunding, Alabama Power Co. Project,
5,000,000 AMBAC Insured, 6.50%, 09/01/23 .............................................................. 5,250,850
105,000 Farley Keller Hospital, Series G, 7.40%, 11/01/16 ........................................... 108,186
Courtland IDB, Solid Waste Disposal Revenue, Champion International Corp. Project,
505,000 7.75%, 01/01/20 ............................................................................. 539,916
5,000,000 Series A, 6.50%, 09/01/25 ................................................................... 5,052,300
4,000,000 Courtland IDBR, Refunding, Champion International Corp. Project, Series A, 7.20%, 12/01/13 ..... 4,361,640
2,000,000 Cullman Water Revenue Warrants, Series A, AMBAC Insured, 6.20%, 10/01/12 ....................... 2,082,940
2,000,000 Daphne Utilities Board, Water, Gas and Sewer Revenue, Refunding, Series A, FGIC Insured,
Pre-Refunded, 7.35%, 06/01/20 ................................................................. 2,271,460
200,000 Decatur GO, Warrants, Series A, Pre-Refunded, 7.60%, 05/01/09 .................................. 212,798
1,400,000 Demopolis HDC, MFHR, Refunding, Series 1990-A, CGIC Insured, 7.625%, 08/01/19 .................. 1,463,560
3,500,000 Fairfield IDB, Environmental Improvement Revenue, Refunding, USX Corp. Project, Series A, 6.70%,
12/01/24 ...................................................................................... 3,612,000
3,000,000 Fairfield Warrants, AMBAC Insured, 6.30%, 06/01/22 ............................................. 3,167,130
4,395,000 Florence GO, Warrants, Series A, MBIA Insured, 5.75%, 09/01/15 ................................. 4,436,313
1,565,000 Gadsden HDC, MFR, Refunding, Series A, 7.00%, 01/01/22 ......................................... 1,622,232
1,000,000 Guam Airport Authority Revenue, Refunding, Series A, 6.50%, 10/01/23 ........................... 1,003,460
485,000 Homewood Special Care Facilities Financing Authority Revenue, Refunding, Lakeshore Hospital Project,
Series B, Pre-Refunded, 8.25%, 02/01/04 ....................................................... 524,484
1,000,000 Hoover GO, Warrants, Series A, AMBAC Insured, Pre-Refunded, 7.30%, 03/01/14 .................... 1,127,730
2,070,000 Houston County Health Care Authority Revenue, Southeast Alabama Medical Center, MBIA Insured,
6.125%, 10/01/12 .............................................................................. 2,145,120
2,175,000 Huntsville Health Care Authority Facilities Revenue, Series B, MBIA Insured, 6.50%, 06/01/13 ... 2,338,016
230,000 Huntsville Solid Waste Disposal Authority and Resource Recovery Revenue, FGIC Insured, 7.00%,
10/01/14 ...................................................................................... 248,034
1,000,000 Jasper County Waterworks & Sewer Board, Water and Sewer Revenue, AMBAC Insured, 6.15%,
06/01/14 ...................................................................................... 1,051,060
200,000 Jefferson County GO, Warrants, Pre-Refunded, 7.50%, 04/01/07 ................................... 217,882
200,000 Jefferson County Sewer Revenue Warrants, ETM 09/01/11, 7.50%, 09/01/13 ......................... 220,552
440,000 Lauderdale County and City of Florence Public Hospital Board Revenue, Eliza Coffee Memorial Hospital,
7.00%, 07/01/19 ............................................................................... 448,822
1,255,000 LCM Housing Assistance Corp. Project, MFR, Refunding, Series A, 7.875%, 01/01/22 ............... 1,312,103
1,050,000 Limestone County Water Authority Revenue, FGIC Insured, 7.70%, 12/01/19 ........................ 1,139,229
500,000 Madison County PBA Revenue, Warrants, 6.90%, 11/01/11 .......................................... 540,415
Madison GO, Warrants,
2,000,000 MBIA Insured, 6.00%, 04/01/23 ............................................................... 2,076,960
975,000 Series 1990, Pre-Refunded, 7.25%, 01/01/15 .................................................. 1,090,031
1,560,000 Series B, MBIA Insured, 6.25%, 02/01/15 ..................................................... 1,650,776
2,290,000 Madison School, Warrants, MBIA Insured, 6.25%, 02/01/14 ........................................ 2,423,255
Marshall County Health Care Authority Hospital Revenue,
2,530,000 Crossover Refunding, Guntersville-Arab Medical Center, 7.60%, 10/01/07 ...................... 2,767,289
10,810,000 Refunding, Boaz-Albertville Medical Center, 6.50%, 01/01/18 ................................. 10,733,898
2,500,000 Marshall County Warrants, AMBAC Insured, Pre-Refunded, 7.00%, 02/01/12 ......................... 2,830,175
1,000,000 Mobile Airport Authority Revenue, Mae Project, 7.375%, 11/01/12 ................................ 1,020,550
1,500,000 Mobile Commissioner Water and Sewer Revenue, Refunding, 6.50%, 01/01/09 ........................ 1,634,010
Mobile GO, Warrants, Pre-Refunded,
45,000 Capital Improvement, 7.90%, 08/15/11 ........................................................ 48,553
900,000 Convention Center Project, AMBAC Insured, 7.125%, 08/15/10 .................................. 1,018,683
1,000,000 Convention Center Project, AMBAC Insured, 7.125%, 08/15/20 .................................. 1,131,870
1,340,000 Mobile Housing Assistance Corp., MFHR, Refunding, Series 1990-A, CGIC Insured, 7.625%, 02/01/21. 1,402,766
$ 8,000,000 Mobile IDB, Mobile Energy Service Co. Project, Solid Waste Disposal Revenue, Refunding, 6.95%,
01/01/20 ...................................................................................... $ 8,396,160
155,000 Montgomery Downtown RDAR, Mortgage, State of Alabama Project, BIG Insured, Pre-Refunded, 7.75%,
10/01/13 ...................................................................................... 172,270
5,750,000 Morgan County Decatur Health Care Revenue, Refunding, Decatur General Hospital, Connie Lee Insured,
6.375%, 03/01/24 .............................................................................. 5,997,940
1,500,000 Moulton Waterworks Board, Water Revenue, Series A, 6.30%, 01/01/18 ............................. 1,485,960
Northeast Alabama Water, Sewer and Fire Protection District Revenue, AMBAC Insured, Pre-Refunded,
30,000 7.90%, 05/01/15 ............................................................................. 33,041
2,000,000 6.375%, 05/01/22 ............................................................................ 2,108,200
200,000 Northport GO, Warrants, FGIC Insured, Pre-Refunded, 7.70%, 12/01/13 ............................ 223,142
5,000,000 Oneonta Utilities Board Revenue, CGIC Insured, 6.90%, 11/01/24 ................................. 5,437,700
3,640,000 Orange Beach Water, Sewer and Fire Protection Authority Revenue, Pre-Refunded, 7.50%, 05/01/22 . 4,256,143
Pelham, Warrants, AMBAC Insured,
1,000,000 6.25%, 11/01/12 ............................................................................. 1,059,480
2,500,000 6.25%, 11/01/22 ............................................................................. 2,657,600
780,000 Piedmont IDB, IDR, Springs Industrial Project, 8.25%, 09/01/10 ................................. 861,752
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
500,000 7.90%, 07/01/07 ............................................................................. 556,055
175,000 7.875%, 07/01/17 ............................................................................ 194,523
3,200,000 7.00%, 07/01/19 ............................................................................. 3,495,232
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources, Refunding,
350,000 Series L, Pre-Refunded, 8.00%, 07/01/08 ..................................................... 389,596
15,000 Series L, Pre-Refunded, 8.40%, 07/01/15 ..................................................... 16,237
355,000 Series N, 7.00%, 07/01/07 ................................................................... 383,464
Puerto Rico Commonwealth Highway Authority Revenue,
155,000 Series P, Pre-Refunded, 8.125%, 07/01/13 .................................................... 172,961
600,000 Series R, 7.15%, 07/01/00 ................................................................... 656,592
175,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A, 7.90%,
07/01/07 ...................................................................................... 189,863
300,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 .......... 337,110
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project, 7.50%,
12/01/23 ...................................................................................... 219,006
40,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded, 7.875%,
07/01/16 ...................................................................................... 43,084
Russell County PBA Revenue,
1,900,000 Phenix City Jail Project Warrants, 7.125%, 01/01/14 ......................................... 1,952,573
200,000 Russell County Jail Project, Pre-Refunded, 8.50%, 01/01/14 .................................. 226,776
4,925,000 Tuscaloosa Warrants, AMBAC Insured, 6.75%, 07/01/20 ............................................ 5,279,649
1,500,000 University of Alabama, Student Housing Revenue, Series A, MBIA Insured, Pre-Refunded, 7.10%,
06/01/15 ...................................................................................... 1,715,190
100,000 University of Puerto Rico Revenue, Refunding, Series J, Pre-Refunded 7.75%, 06/01/07 ........... 103,122
5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant, Series C, MBIA Insured, 6.05%,
05/01/23 ...................................................................................... 5,083,750
3,500,000 Wilsonville IDB, PCR, Refunding, Southern Electric Generating System, Series C, MBIA Insured, 6.75%,
02/01/15 ...................................................................................... 3,759,630
--------------
Total Investments (Cost $173,561,500) 98.3% ......................................... 184,424,469
Other Assets and Liablities, Net 1.7% ............................................... 3,218,345
--------------
Net Assets 100.0% ................................................................... $187,642,814
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $173,562,250 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 11,001,187
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (138,968)
--------------
Net unrealized appreciation .................................................................. $ 10,862,219
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
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.
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
RDAR - Redevelopment Agency Revenue
SFMR - Single Family Mortgage Revenue
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Florida Tax-Free Income Fund (Note 1)
Long Term Investments 98.6%
Bonds 95.0%
<C> <C> <C>
$ 6,705,000 Alachua County Health Facilities Authority Revenue, Refunding, Santa Fe Health Care Facilities
Project, Pre-Refunded, 7.60%, 11/15/13 ...................................................... $ 7,761,239
5,755,000 Alachua County Public Improvement Revenue, Refunding, FSA Insured, 5.375%, 08/01/17 .......... 5,601,284
11,205,000 Bay County Hospital System Revenue, Refunding, Bay Medical Center Project, 8.00%, 10/01/12 ... 12,630,500
Bay County Resource Recovery Revenue,
3,710,000 Refunding, Series A, MBIA Insured, 6.60%, 07/01/11 ....................................... 4,088,717
18,150,000 Refunding, Series B, MBIA Insured, 6.60%, 07/01/12 ....................................... 19,992,225
2,265,000 Series 1984, Pre-Refunded, 8.00%, 07/01/12 ............................................... 2,386,744
Bay County Water System Revenue, Refunding, AMBAC Insured,
525,000 6.50%, 09/01/07 .......................................................................... 581,348
675,000 6.60%, 09/01/11 .......................................................................... 745,200
4,000,000 Boynton Beach Public Service Tax Revenue, MBIA Insured, Pre-Refunded, 7.50%, 11/01/10 ........ 4,573,760
5,000,000 Brevard County Health Facilities Authority Revenue, Refunding, Wuesthoff Memorial Hospital,
Series B, 7.20%, 04/01/13 ................................................................... 5,347,350
1,895,000 Brevard County HFA, SFMR, Refunding, Series B, FSA Insured, 7.00%, 03/01/13 .................. 1,993,957
2,250,000 Broward County Educational Facilities Authority Revenue, Refunding, Nova Southeastern University
Project, Connie Lee Insured, 6.125%, 04/01/17 ............................................... 2,322,383
Broward County Health Facility Authority Revenue, Nursing Home, Refunding,
2,080,000 7.40%, 08/15/10 .......................................................................... 2,247,627
1,475,000 7.50%, 08/15/20 .......................................................................... 1,612,175
Broward County HFAR, GNMA Secured,
4,390,000 Series B, 7.55%, 03/01/15 ................................................................ 4,649,405
1,365,000 Series C, 8.00%, 03/01/21 ................................................................ 1,442,027
430,000 Series D, 6.90%, 06/01/09 ................................................................ 455,804
1,035,000 Series D, 7.375%, 06/01/21 ............................................................... 1,103,786
Broward County Resource Recovery Revenue,
6,095,000 Broward Waste Energy Co., L.P., North Project, 7.95%, 12/01/08 ........................... 6,785,929
11,580,000 SES Waste Energy Co., L.P., South Project, 7.95%, 12/01/08 ............................... 12,892,709
200,000 Broward County Tourist Development, Special Tax Revenue, Convention Center Project,
FGIC Insured, Pre-Refunded, 7.75%, 10/01/13 ................................................. 222,806
585,000 Broward County Water and Sewer Utility Revenue, Series B, AMBAC Insured, Pre-Refunded, 7.50%,
10/01/18 .................................................................................... 631,075
1,500,000 Cape Canaveral Hospital District Revenue, Certificates, AMBAC Insured, 6.875%, 01/01/21 ...... 1,644,045
Cape Coral Health Facilities Authority, Hospital Revenue, Cape Coral Medical Center, Inc. Project,
19,000,000 7.80%, 11/15/18 .......................................................................... 15,200,000
2,000,000 7.50%, 11/15/21 .......................................................................... 1,600,000
Celebration Community Development District, Special Assessment, MBIA Insured,
5,500,000 6.00%, 05/01/10 .......................................................................... 5,788,200
4,000,000 6.10%, 05/01/16 .......................................................................... 4,190,960
Citrus County PCR, Florida Power and Light Co., Crystal River, Refunding,
11,100,000 Series A, 6.625%, 01/01/27 ............................................................... 11,892,873
20,400,000 Series B, 6.35%, 02/01/22 ................................................................ 21,595,440
Clay County HFAR, SFM, Series A, GNMA Secured,
2,075,000 8.20%, 06/01/21 .......................................................................... 2,185,722
4,675,000 7.80%, 06/01/22 .......................................................................... 4,983,457
1,310,000 7.45%, 09/01/23 .......................................................................... 1,376,745
2,930,000 Clearwater MFR, Rental Housing, Drew Gardens Projects, Refunding, Series A, FHA Insured, 6.50%,
10/01/25 .................................................................................... 2,993,435
1,000,000 Clewiston Water and Sewer Revenue, Refunding, AMBAC Insured, Pre-Refunded, 7.65%, 10/01/10 ... 1,135,900
305,000 Collier County Water and Sewer District Revenue, Sewer Assessment, East and South Naples
Project, MBIA Insured, 7.15%, 10/01/11 ...................................................... 314,553
3,505,000 Coral Springs ID, Special Water and Sewer Project, 6.75%, 11/01/02 ........................... 3,617,195
Dade County GO, Unlimited Tax, Series DD, MBIA Insured,
$ 1,000,000 7.70%, 10/01/13 .......................................................................... $ 1,039,530
380,000 7.75%, 10/01/18 .......................................................................... 394,904
Dade County Health Facilities Authority Revenue,
400,000 Baptist Hospital of Miami Project, Pre-Refunded, 7.375%, 05/01/13 ........................ 425,296
75,000 Mt. Sinai Medical Center Project, CGIC Insured, Pre-Refunded, 8.40%, 12/01/17 ............ 82,418
7,475,000 Refunding, Catholic Health and Rehabilitation, Inc. Project, 7.625%, 08/15/20 ............ 8,161,355
1,930,000 Dade County HFA, MFMR, GNMA Secured, Hialeah Center, Series 5, Pre-Refunded, 7.875%,
12/01/32 .................................................................................... 2,222,434
Dade County HFA, SFMR,
40,000 Refunding, Series A, 8.125%, 07/01/07 .................................................... 40,824
1,500,000 Refunding, Series D, FSA Insured, 6.95%, 12/15/12 ........................................ 1,584,480
300,000 Refunding, Series E, FNMA Insured, 7.00%, 03/01/24 ....................................... 313,440
2,835,000 Series A, GNMA Secured, 7.50%, 09/01/13 .................................................. 2,937,684
1,555,000 Series A, GNMA Secured, 7.10%, 03/01/17 .................................................. 1,627,494
260,000 Series B, GNMA Secured, 7.25%, 09/01/23 .................................................. 273,788
125,000 Dade County IDA, IDR, Epworth Village West, FHA Insured, 8.25%, 02/01/28 ..................... 131,085
5,695,000 Dade County IDA, Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%,
02/01/23 .................................................................................... 6,161,136
Dade County Public Facilities Revenue, Jackson Memorial Hospital, Series A, MBIA Insured,
140,000 7.30%, 06/01/12 .......................................................................... 143,661
1,110,000 Pre-Refunded, 7.30%, 06/01/12 ............................................................ 1,143,211
5,960,000 Dade County School District GO, Pre-Refunded, 7.375%, 07/01/08 ............................... 6,693,914
4,100,000 Dade County Seaport Revenue, Refunding, Series 95, MBIA Insured, 5.75%, 10/01/15 ............. 4,172,611
5,000,000 Dade County, Special Obligation, Courthouse Center Project, 6.10%, 04/01/20 .................. 5,166,400
Dade County Water and Sewer System Revenue, FGIC Insured,
8,245,000 5.75%, 10/01/22 .......................................................................... 8,320,854
11,500,000 5.50%, 10/01/25 .......................................................................... 11,317,840
Dovera Community Development District Revenue, Special Assessment,
1,555,000 7.625%, 05/01/03 ......................................................................... 1,631,895
2,235,000 7.875%, 05/01/12 ......................................................................... 2,348,985
670,000 Dunes Community Development District Revenue, Water and Sewer Project, Pre-Refunded, 8.25%,
10/01/18 .................................................................................... 752,772
Duval County HFA, SFMR, GNMA Secured,
75,000 Series 1988, 8.625%, 12/01/19 ............................................................ 77,367
90,000 Series A, 8.50%, 09/01/19 ................................................................ 94,654
2,625,000 Series A, 7.85%, 12/01/22 ................................................................ 2,783,051
635,000 Series B, 7.70%, 11/01/11 ................................................................ 664,401
1,460,000 Series C, FGIC Insured, 7.70%, 09/01/24 .................................................. 1,561,295
Escambia County HFA, SFMR,
15,000 Refunding, 8.75%, 10/01/15 ............................................................... 15,495
4,235,000 Series A, GNMA Secured, 7.40%, 10/01/23 .................................................. 4,421,255
4,350,000 Escambia County HFAR, Refunding, Baptist Hospital and Manor, 6.75%, 10/01/14 ................. 4,520,477
1,190,000 Escambia County PCR, Refunding, Gulf Power Co. Project, 8.25%, 06/01/17 ...................... 1,261,103
4,000,000 Escambia County Revenue, Series B, Sub-Series 1, MBIA Insured, 7.20%, 01/01/15 ............... 4,323,480
3,255,000 Escambia County School Board COP, FSA Insured, 6.375%, 02/01/12 .............................. 3,418,466
90,000 Escambia County Tourist Development Revenue, Pre-Refunded, 8.40%, 12/01/12 ................... 98,821
2,500,000 Escambia County Utilities Authority, Sanitary System Revenue, FSA Insured, 6.00%, 01/01/23 ... 2,573,875
2,000,000 Escambia County Utilities Authority System Revenue, Refunding, FGIC Insured, 7.75%, 01/01/15 . 2,198,820
Florida HFA,
3,700,000 General Mortgage, Refunding, Series A, 6.40%, 06/01/24 ................................... 3,824,542
865,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.80%, 09/01/10 ......................... 921,839
$ 370,000 Homeownership Revenue, Series G-1, GNMA Secured, 8.30%, 06/01/20 ......................... $ 390,169
8,095,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.90%, 03/01/22 ......................... 8,609,194
4,000,000 MF Housing, Citrus Meadows Apartments Project, Series Q, GNMA Secured, 7.65%, 06/20/31 ... 4,165,480
3,445,000 MF Housing, Driftwood Terrace Project, Series I, 7.65%, 12/20/31 ......................... 3,606,295
4,000,000 MF Mortgage, Lake Carlton Arms, Guaranteed, Refunding, Series F, Mandatory Put 12/01/99,
7.375%, 12/01/07 ...............................................................4,099,680
2,900,000 MFHR, Refunding, Series A, 6.95%, 10/01/21 ............................................... 3,039,838
435,000 SFMR, Series A, 8.60%, 07/01/16 .......................................................... 445,675
Florida State Board of Education, Capital Outlay,
4,500,000 Public Education, Series A, 5.875%, 06/01/16 ............................................. 4,594,365
8,990,000 Public Education, Series B, 5.875%, 06/01/24 ............................................. 9,123,771
7,000,000 Public Education, Series B, 5.875%, 06/01/25 ............................................. 7,104,160
650,000 Public Education, Series B-1, Pre-Refunded, 7.875%, 06/01/19 ............................. 718,965
8,775,000 Refunding, Public Education, Series A, 7.25%, 06/01/23 ................................... 9,758,414
9,225,000 Refunding, Public Education, Series A, Pre-Refunded, 7.25%, 06/01/23 ..................... 10,480,246
18,445,000 Series C, 5.875%, 06/01/23 ............................................................... 18,677,038
2,550,000 Florida State Community Services Corp., Walton County Water and Sewer Revenue, South Walton
County Regional Utilities, 7.00%, 03/01/18 .................................................. 2,815,787
Florida State Correctional Privatization Commission COP,
3,655,000 350 Bed Youth Facility, Palm Beach, Series C, AMBAC Insured, 5.00%, 08/01/17 ............. 3,422,177
6,000,000 Correctional Facility Bay Project, MBIA Insured, 6.00%, 08/01/15 ......................... 6,225,300
2,960,000 Florida State Department of Corrections COP, Okeechobee Correctional Facility, AMBAC Insured,
6.25%, 03/01/15 ............................................................................. 3,148,789
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 .......................................... 3,292,950
100,000 Florida State Department of General Services, Board of Finance Division, GO, Seminole County Road,
Refunding, Pre-Refunded, 7.75%, 11/01/18 .................................................... 104,847
145,000 Florida State Department of General Services, Facilities Management Division Revenue, Florida
Facilities Pool, Pre-Refunded, 8.125%, 09/01/17 ............................................. 162,399
3,715,000 Florida State GO, Pre-Refunded, 7.375%, 07/01/19 ............................................. 4,172,465
Florida State Mid Bay Bridge Authority Revenue,
13,505,000 Crossover Refunding, Series A, 6.00%, 10/01/13 ........................................... 13,460,704
7,000,000 Crossover Refunding, Series A, 6.10%, 10/01/22 ........................................... 6,926,920
11,100,000 Refunding, Series D, 6.125%, 10/01/22 .................................................... 11,020,080
2,600,000 Series A, 8.00%, 10/01/06 ................................................................ 2,959,060
14,250,000 Series A, 7.50%, 10/01/17 ................................................................ 15,880,485
6,000,000 Series A, 6.875%, 10/01/22 ............................................................... 7,097,640
Florida State Turnpike Authority Revenue, Department of Transportation, Series A,
8,780,000 AMBAC Insured, Pre-Refunded, 7.125%, 07/01/18 ............................................ 10,110,697
17,350,000 FGIC Insured, 5.50%, 07/01/21 ............................................................ 17,138,157
13,275,000 FGIC Insured, 5.625%, 07/01/25 ........................................................... 13,207,696
2,375,000 Pre-Refunded, 7.75%, 07/01/09 ............................................................ 2,694,913
14,950,000 Pre-Refunded, 7.50%, 07/01/19 ............................................................ 16,848,501
Fort Myers Revenue,
7,635,000 ID No. 15, Series A, 8.125%, 05/01/01 .................................................... 7,798,542
3,640,000 ID No. 17, Series B, 8.125%, 05/01/01 .................................................... 3,717,969
Gainesville Utility System Revenue, Pre-Refunded,
1,520,000 Series A, 6.50%, 10/01/22 ................................................................ 1,718,573
1,600,000 Sub-Series A, AMBAC Insured, 7.25%, 10/01/13 ............................................. 1,763,024
8,675,000 Gateway Services District Revenue, Transportation Roadway Service Charges, 8.75%, 05/01/14 ... 9,371,603
2,000,000 Gulf Breeze Local Government Loan Program Revenue, FGIC Insured, 7.75%, 12/01/15 ............. 2,267,660
Halifax Hospital and Medical Center Revenue, Refunding, Series A, MBIA Insured,
$ 5,000,000 5.20%, 10/01/13 .......................................................................... $ 4,837,600
3,685,000 Pre-Refunded, 6.75%, 10/01/11 ............................................................ 4,205,838
Hillsborough County Aviation Authority Revenue, Refunding,
14,945,000 Special Purpose, Delta Airlines, Inc., 7.75%, 01/01/24 ................................... 15,749,190
8,500,000 Tampa International Airport, Series A, FGIC Insured, 6.90%, 10/01/11 ..................... 9,260,750
Hillsborough County Capital Improvement Revenue, County Center Project, Second Series,
Pre-Refunded,
8,300,000 6.625%, 07/01/12 ......................................................................... 9,410,291
1,250,000 6.75%, 07/01/22 .......................................................................... 1,425,738
5,300,000 Hillsborough County IDA, IDR, Colonial Penn Insurance Project, 7.35%, 08/01/13 ............... 5,879,237
3,000,000 Hillsborough County Port District Revenue, Tampa Port Authority, Pre-Refunded, 8.25%, 06/01/09 3,558,990
Hillsborough County School Board COP, MBIA Insured,
9,500,000 6.00%, 07/01/12 .......................................................................... 9,930,350
5,500,000 6.00%, 07/01/14 .......................................................................... 5,749,150
Hillsborough County Utilities Revenue, Refunding,
10,400,000 Series A, 6.625%, 08/01/11 ............................................................... 11,090,040
5,515,000 Series A, 7.00%, 08/01/14 ................................................................ 5,965,686
3,000,000 Series A, 6.50%, 08/01/16 ................................................................ 3,161,640
1,135,000 Series A, Pre-Refunded, 7.00%, 08/01/14 .................................................. 1,299,382
1,000,000 Series B, 6.50%, 08/01/16 ................................................................ 1,053,880
Jacksonville Electric Authority Revenue,
4,750,000 Refunding, St. John's River Park System, Issue 2, Series 11, 5.25%, 10/01/20 ............. 4,523,235
5,000,000 Refunding, St. John's River Park System, Series 1, 6.00%, 10/01/16 ....................... 5,000,950
1,750,000 Series 3-A, Pre-Refunded, 7.70%, 10/01/28 ................................................ 1,820,000
45,000 Jacksonville Excise Tax and Revenue, Series A, Pre-Refunded, 8.375%, 10/01/11 ................ 47,165
Jacksonville Health Facilities Authority, Hospital Revenue, Refunding,
2,500,000 Baptist Medical Center Project, Series A, MBIA Insured, 7.30%, 06/01/19 .................. 2,729,600
8,480,000 Riverside Hospital Project, 7.625%, 10/01/13 ............................................. 8,966,922
1,750,000 Jacksonville Hospital Revenue, University Medical Center, Inc. Project, Connie Lee Insured, 6.60%,
02/01/21 .................................................................................... 1,871,223
930,000 Jacksonville PCR, Anheuser Busch Cos., Inc. Project, 7.375%, 12/01/15 ........................ 967,154
550,000 Jacksonville Port Authority Facilities Revenue, BIG Insured, Pre-Refunded, 7.875%, 11/01/18 .. 577,467
Jupiter Sales Tax Revenue, Pre-Refunded,
100,000 Series 1988, 7.875%, 09/01/13 ............................................................ 104,293
1,000,000 Series 1990, 7.40%, 09/01/20 ............................................................. 1,146,270
5,000,000 Kissimmee Water and Sewer Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/15 ................. 5,179,150
4,500,000 Lakeland Utility Tax Revenue, Refunding & Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 4,689,315
1,000,000 Lee County Capital Bonds, Refunding, Series A, MBIA Insured, 7.30%, 10/01/07 ................. 1,109,510
Lee County IDA, Sewer IDR, Bonita Springs Project, Asset Guaranty, Insured,
5,000,000 7.20%, 11/01/11 .......................................................................... 5,483,950
2,000,000 7.25%, 11/01/20 .......................................................................... 2,183,060
2,000,000 Lee County Local Option Gas Tax Revenue, FGIC Insured, 5.75%, 10/01/20 ....................... 2,026,900
Lee County Solid Waste System Revenue, Series A, MBIA Insured,
1,945,000 7.00%, 10/01/04 .......................................................................... 2,195,069
1,175,000 7.00%, 10/01/05 .......................................................................... 1,322,980
1,305,000 7.00%, 10/01/06 .......................................................................... 1,469,352
4,600,000 7.00%, 10/01/11 .......................................................................... 5,155,266
Leesburg Hospital Revenue, Capital Improvement, Leesburg Regional Medical Center Project,
Series 1991-A, Pre-Refunded,
1,250,000 7.375%, 07/01/11 ......................................................................... 1,472,175
2,115,000 7.50%, 07/01/21 .......................................................................... 2,505,366
$ 7,000,000 Leesburg Hospital Revenue, Refunding, Leesburg Regional Medical Center Project, Series A,
6.125%, 07/01/18 ............................................................................ $ 7,001,680
500,000 Leesburg Utilities Revenue, Refunding, FGIC Insured, 7.60%, 10/01/09 ......................... 549,100
1,070,000 Leon HFA, SFMR, Series A, GNMA Secured, 7.30%, 04/01/21 ...................................... 1,119,070
Manatee County HFA, SFMR, Series A, GNMA Secured,
1,415,000 8.10%, 11/01/20 .......................................................................... 1,480,953
4,320,000 6.85%, 11/01/23 .......................................................................... 4,460,184
Manatee County IDR, Manatee Hospital and Health System, Inc.,
1,500,000 8.25%, 03/01/01 .......................................................................... 1,636,245
6,700,000 Pre-Refunded, 9.25%, 03/01/21 ............................................................ 8,249,174
4,000,000 Martin County Consolidated Utilities System Revenue, Refunding & Improvement, FGIC Insured,
6.00%, 10/01/24 ............................................................................. 4,152,000
14,500,000 Martin County PCR, Refunding, Florida Power and Light Co. Project, MBIA Insured, 7.30%, 07/01/20 16,086,590
3,335,000 Mary Esther Water and Sewer Revenue, 6.875%, 01/01/18 ........................................ 3,534,300
2,000,000 Miami Beach Special Obligation, Subordinated, FGIC Insured, 7.375%, 12/01/08 ................. 2,239,080
Miami Health Facilities Authority Revenue, Mercy Hospital Project, Refunding,
250,000 8.125%, 08/01/11 ......................................................................... 270,558
7,500,000 Series A, Pre-Refunded, 7.35%, 08/01/15 .................................................. 8,436,000
6,500,000 Miramar Waste Water Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25 ............ 7,207,460
5,990,000 Nassau County PCR, Refunding, ITT Rayonier, Inc. Project, 6.25%, 06/01/10 .................... 6,140,229
1,500,000 North Port Utilities Revenue, FGIC Insured, 6.25%, 10/01/22 .................................. 1,584,390
1,520,000 North Springs ID Revenue, Special Assessment, 6.75%, 05/01/03 ................................ 1,565,585
Northern Palm Beach County Water Control District, Unit Development No. 31, Project 2,
725,000 6.75%, 11/01/07 .......................................................................... 754,094
1,470,000 6.625%, 11/01/13 ......................................................................... 1,505,074
1,000,000 Ocala Gas Tax Revenue, MBIA Insured, Pre-Refunded, 7.40%, 12/01/09 ........................... 1,083,100
Orange County Capital Improvement Revenue, MBIA Insured,
170,000 Series A, 7.70%, 10/01/18 ................................................................ 187,719
30,000 Series A, Pre-Refunded, 7.70%, 10/01/18 .................................................. 33,385
180,000 Series B, Pre-Refunded, 7.70%, 10/01/18 .................................................. 200,308
Orange County Health Facilities Authority Revenue,
1,000,000 Adventist/Sunbelt, Series A, AMBAC Insured, 6.875%, 11/15/15 ............................. 1,107,970
3,000,000 Adventist/Sunbelt, Series A, CGIC Insured, 7.00%, 11/15/14 ............................... 3,241,350
1,000,000 Crossover Refunding, Orlando Regional Health Care, Series A, MBIA Insured, 6.00%, 11/01/24 1,036,070
9,790,000 Refunding, Pooled Hospital Loan, Series A, FGIC Insured, 7.875%, 12/01/25 ................ 10,338,730
10,710,000 Refunding, Pooled Hospital Loan, Series B, BIG Insured, 7.875%, 12/01/25 ................. 11,310,296
Orange County HFAR, GNMA Secured,
4,730,000 Refunding, Series A, FGIC Insured, 7.60%, 01/01/24 ....................................... 4,989,299
2,135,000 Series A, 7.75%, 11/01/12 ................................................................ 2,251,101
410,000 Series A, 7.375%, 09/01/24 ............................................................... 433,645
865,000 Series D, 7.80%, 10/01/22 ................................................................ 904,115
5,050,000 Orange County Public Service, Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ..................... 5,254,980
5,000,000 Orange County Sales Tax Revenue, Series B, FGIC Insured, 5.375%, 01/01/24 .................... 4,780,850
Orange County Tourist Development Tax Revenue,
3,000,000 AMBAC Insured, Pre-Refunded, 7.25%, 10/01/10 ............................................. 3,433,290
24,675,000 Series B, MBIA Insured, 6.00%, 10/01/24 .................................................. 25,612,650
Orlando and Orange County Expressway Authority Revenue,
2,000,000 Junior Lien, Pre-Refunded, 7.375%, 07/01/06 .............................................. 2,067,280
3,850,000 Refunding, Senior Lien, FGIC Insured, 5.50%, 07/01/18 .................................... 3,830,057
265,000 Senior Lien, AMBAC Insured, ETM 07/01/11, 7.625%, 07/01/18 ............................... 292,788
5,000,000 Senior Lien, Pre-Refunded, 7.50%, 07/01/16 ............................................... 5,170,200
Orlando Community RDA, Tax Increment Revenue, Series A,
$ 2,155,000 6.50%, 10/01/11 .......................................................................... $ 2,301,820
2,585,000 6.75%, 10/01/16 .......................................................................... 2,778,927
3,500,000 Osceola County Gas Tax Revenue, Refunding & Improvement, FGIC Insured, 6.00%, 04/01/13 ....... 3,643,780
Osceola County IDAR, Community Provider Pooled Loan Program, CGIC Insured,
4,634,000 Series A, 7.75%, 07/01/10 ................................................................ 4,984,238
795,000 Series C, 7.60%, 07/01/10 ................................................................ 861,335
200,000 Osceola County Transportation Revenue, Series A, FGIC Insured, Pre-Refunded, 7.70%, 04/01/13 . 219,304
Pace Property Finance Authority, Utilities System Revenue, Refunding & Improvement,
1,000,000 6.125%, 09/01/07 ......................................................................... 1,029,320
2,545,000 6.25%, 09/01/13 .......................................................................... 2,576,024
1,490,000 6.125%, 09/01/17 ......................................................................... 1,485,575
Palm Beach County Criminal Justice Facilities Revenue, FGIC Insured,
5,000,000 6.00%, 06/01/15 .......................................................................... 5,205,150
6,950,000 Pre-Refunded, 7.25%, 06/01/11 ............................................................ 7,895,687
Palm Beach County HFA, SFM Purchase Revenue, GNMA Secured,
7,485,000 Series A, 7.70%, 03/01/22 ................................................................ 7,833,576
5,270,000 Series B, 7.60%, 03/01/23 ................................................................ 5,571,022
2,000,000 Palm Beach County School Board COP, Series A, AMBAC Insured, 5.375%, 08/01/15 ................ 1,949,340
Palm Beach County Solid Waste Authority Revenue,
65,000 GO, 8.75%, 07/01/10 ...................................................................... 70,260
535,000 Refunding, BIG Insured, 7.40%, 12/01/05 .................................................. 589,527
1,965,000 Refunding, BIG Insured, Pre-Refunded, 7.40%, 12/01/05 .................................... 2,182,643
Palm Beach County Solid Waste, IDR, Okeelanta Power and Light Co. Project, Series A,
3,600,000 6.50%, 02/15/09 .......................................................................... 3,657,744
11,700,000 6.70%, 02/15/15 .......................................................................... 11,928,852
26,000,000 6.85%, 02/15/21 .......................................................................... 26,504,920
1,025,000 Pensacola-Westwood Homes Development Corp. Revenue, Refunding, Mortgage Loan, FHA Insured,
6.40%, 07/15/23 ............................................................................. 1,036,870
Pinellas County HFA, SFMR, GNMA Secured,
1,500,000 Multi County Program, Series B, 6.875%, 08/01/10 ......................................... 1,572,330
5,890,000 Multi County Program, Series B, 7.375%, 02/01/24 ......................................... 6,250,291
1,950,000 Series A, 7.30%, 08/01/22 ................................................................ 2,026,733
1,600,000 Series A, 7.75%, 08/01/23 ................................................................ 1,693,328
12,200,000 Pinellas County PCR, Refunding, Florida Power and Light Co., 7.20%, 12/01/14 ................. 13,479,658
Plantation Health Facilities Authority Revenue, Covenant Retirement Community, Inc.,
1,500,000 7.625%, 12/01/12 ......................................................................... 1,623,855
3,000,000 7.75%, 12/01/22 .......................................................................... 3,250,800
2,035,000 Polk County HFA, Refunding, Series A, GNMA Secured, 7.15%, 09/01/23 .......................... 2,146,803
Port Everglades Authority, Port Improvement Revenue,
18,050,000 Refunding, Series A, 7.50%, 09/01/12 ..................................................... 19,255,018
575,000 Series 1986, ETM 11/01/02, 7.50%, 11/01/06 ............................................... 698,430
65,000 Royal Palm Beach, Utility System Revenue, Series A, AMBAC Insured, Pre-Refunded, 8.875%,
10/15/13 .................................................................................... 71,543
Santa Rosa County Health Facilities Authority Revenue, Refunding,
40,000 Gulf Breeze Hospital, Inc., 8.60%, 10/01/02 .............................................. 43,119
520,000 Gulf Breeze Hospital, Inc., Pre-Refunded, 8.70%, 10/01/14 ................................ 588,541
14,350,000 Gulf Breeze Hospital, Inc., Series A, 6.20%, 10/01/14 .................................... 14,116,239
4,290,000 Santa Rosa County IDR, Holley Navarre Water System Project, 6.75%, 05/01/24 .............. 4,471,939
Sarasota County Utility System Revenue,
2,000,000 Capital Appreciation, AMBAC Insured, Pre-Refunded, 7.50%, 06/01/10 ....................... 2,135,580
9,000,000 bRefunding, Series A, FGIC Insured, 5.25%, 10/01/25 ...................................... 8,559,360
$ 150,000 Sarasota Water and Sewer Utility Revenue, Refunding, MBIA Insured, Pre-Refunded, 7.625%,
10/01/08 .................................................................................... $ 156,674
Seminole County School Board COP, MBIA Insured,
1,150,000 Series A, 6.125%, 07/01/14 ............................................................... 1,213,342
5,000,000 Series B, Pre-Refunded, 6.50%, 07/01/21 .................................................. 5,721,900
7,500,000 Seminole County Solid Waste Disposal System Revenue, MBIA Insured, Pre-Refunded, 7.25%,
10/01/20 .................................................................................... 8,583,225
7,250,000 bSouth Broward Hospital District Revenue, Refunding, MBIA Insured, 5.40%, 05/01/16 ........... 7,101,230
3,000,000 South Indian River Water Control District, Refunding, Series C, Pre-Refunded, 7.50%, 10/01/06 3,319,980
100,000 St. Augustine Water and Sewer Utility Revenue, Refunding, 8.125%, 10/01/12 ................... 103,563
2,995,000 St. Johns County Water and Sewer Revenue, Series B-1, FGIC Insured, 7.00%, 06/01/11 .......... 3,137,263
7,500,000 St. Lucie County Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%,
02/01/23 .................................................................................... 8,106,450
6,790,000 St. Lucie, West Services District, Capital Improvement Revenue, Lake Charles Project, 7.50%,
02/01/00 .................................................................................... 6,929,059
St. Petersburg Health Facilities Authority Revenue,
10,500,000 Allegany Health System, Series A, MBIA Insured, 7.00%, 12/01/15 .......................... 11,816,910
8,630,000 Allegany Health System, St. Mary, Series B, Pre-Refunded, 7.75%, 12/01/15 ................ 9,875,309
2,500,000 Bon Secours-Maria Manor Project, Series B, Pre-Refunded, 7.875%, 08/15/18 ................ 2,781,175
2,940,000 Refunding, Allegany Health System, St. Anthony, Series C, 7.75%, 01/01/14 ................ 3,165,763
340,000 Refunding, Allegany Health System, St. Anthony, Series C, Pre-Refunded, 7.75%, 01/01/14 .. 370,698
Sunrise Lakes Recreation District, Phase 4, Series A,
3,080,000 6.75%, 08/01/15 .......................................................................... 3,173,601
6,120,000 6.75%, 08/01/24 .......................................................................... 6,256,231
Sunrise Special Tax District No. 1, Refunding,
3,485,000 6.375%, 11/01/08 ......................................................................... 3,742,366
12,390,000 6.375%, 11/01/21 ......................................................................... 13,035,146
3,400,000 Tallahassee Consolidated Utility System Revenue, Series 1994, 6.20%, 10/01/19 ................ 3,564,797
Tampa Allegany Health System Revenue, St. Joseph,
8,000,000 FGIC Insured, Pre-Refunded, 7.375%, 12/01/23 ............................................. 9,051,280
1,180,000 MBIA Insured, 6.75%, 12/01/17 ............................................................ 1,295,226
7,000,000 MBIA Insured, 6.50%, 12/01/23 ............................................................ 7,763,070
Tampa Capital Improvement Program Revenue,
6,300,000 Series A, 8.25%, 10/01/18 ................................................................ 6,803,873
31,670,000 Series B, 8.375%, 10/01/18 ............................................................... 33,863,147
2,000,000 Tampa Guaranteed Entitlement Revenue, Refunding, AMBAC Insured, 7.15%, 10/01/18 .............. 2,250,680
Tampa Sports Authority Revenue, Guaranteed Package, Tampa Bay Arena Project, MBIA Insured,
1,000,000 6.00%, 10/01/15 .......................................................................... 1,078,210
1,715,000 6.05%, 10/01/20 .......................................................................... 1,860,688
2,695,000 6.10%, 10/01/26 .......................................................................... 2,954,151
Tampa Sports Authority Revenue, Interlock Agreement, Tampa Bay, MBIA Insured,
4,250,000 6.05%, 10/01/15 .......................................................................... 4,452,470
5,160,000 6.10%, 10/01/20 .......................................................................... 5,405,202
6,800,000 6.125%, 10/01/26 ......................................................................... 7,119,871
Tampa Water and Sewer Revenue, Sub-Lien, Series A, AMBAC Insured,
340,000 7.75%, 10/01/14 .......................................................................... 373,737
3,000,000 7.25%, 10/01/16 .......................................................................... 3,231,090
1,655,000 Temple Terrace Water and Sewer Revenue, FGIC Insured, 6.30%, 10/01/17 ........................ 1,743,873
6,000,000 Titusville Water and Sewer Revenue, MBIA Insured, 6.20%, 10/01/14 ............................ 6,397,440
University Community Hospital, Inc., Florida Hospital Revenue, Refunding, FSA Insured,
Pre-Refunded,
$ 5,000,000 7.375%, 09/01/07 ......................................................................... $ 5,737,350
5,000,000 7.50%, 09/01/11 .......................................................................... 5,762,700
1,425,000 Venice Capital Improvement Revenue, MBIA Insured, Pre-Refunded, 7.80%, 11/01/13 .............. 1,494,995
Viera East Community Development District, Special Assessment,
2,505,000 7.50%, 05/01/03 .......................................................................... 2,657,954
4,360,000 8.50%, 05/01/04 .......................................................................... 4,986,008
5,225,000 7.50%, 05/01/12 .......................................................................... 5,544,247
10,640,000 8.625%, 05/01/14 ......................................................................... 12,244,192
11,295,000 Refunding, Series A, 6.00%, 05/01/14 ..................................................... 11,484,755
7,490,000 Series B, 6.75%, 05/01/14 ................................................................ 7,606,470
3,990,000 Viera East Community Development District, Water and Sewer Revenue, 7.875%, 05/01/03 ......... 4,201,630
500,000 Volusia County Educational Facility Authority Revenue, Embry-Riddle Aeronautical University,
Connie Lee Insured, 6.625%, 10/15/22 ........................................................ 538,640
Volusia County School Board COP, Florida Master Lease Program, Refunding, FSA Insured,
2,480,000 5.30%, 08/01/10 .......................................................................... 2,450,363
1,300,000 5.375%, 08/01/11 ......................................................................... 1,287,168
Westgate/Belvedere Homes Community RDAR, Series 1992,
410,000 6.50%, 11/01/09 .......................................................................... 435,751
1,410,000 6.60%, 11/01/17 .......................................................................... 1,458,052
--------------
Total Bonds (Cost $1,209,965,108) ..................................................... 1,293,207,284
--------------
aZero Coupon Bonds 3.6%
3,670,000 Broward County Water and Sewer Utility Revenue, Refunding, Series A, AMBAC Insured, (original
accretion rate 7.50%), 10/01/08 ............................................................. 1,887,371
17,020,000 Dade County Guaranteed Entitlement Revenue, Capital Appreciation, AMBAC Insured, Pre-Refunded,
(original accretion rate 7.70%), 08/01/18 ................................................... 4,240,873
1,625,000 Hillsborough County Utilities Revenue, Refunding, Series A, (original accretion rate 6.97%), 08/01/98 1,459,673
5,770,000 Lakeland Electric and Water Revenue, Capital Appreciation, (original accretion rate 7.00%), 10/01/14 2,053,774
Port Everglades Authority, Port Improvement Revenue, Refunding, Series A,
10,575,000 (original accretion rate 7.40%), 09/01/02 ................................................ 7,598,138
9,075,000 (original accretion rate 7.40%), 09/01/03 ................................................ 6,151,489
3,550,000 (original accretion rate 7.40%), 09/01/04 ................................................ 2,265,788
50,000,000 (original accretion rate 7.45%), 09/01/10 ................................................ 21,082,000
Sarasota Special Obligated Revenue, Refunding, AMBAC Insured,
1,365,000 (original accretion rate 6.69%), 11/01/09 ................................................ 661,998
1,780,000 (original accretion rate 6.74%), 11/01/12 ................................................ 712,890
2,180,000 (original accretion rate 6.74%), 11/01/15 ................................................ 726,398
Total Zero Coupon Bonds (Cost $42,156,094) ............................................ 48,840,392
--------------
Total Long Term Investments (Cost $1,252,121,202) ..................................... 1,342,047,676
--------------
cShort Term Investments .3%
500,000 Dade County Health Facilities Authority Revenue, Miami Children's Hospital Project, Daily VRDN and
Put, 3.55%, 09/01/20 ........................................................................ 500,000
300,000 Hillsborough County IDA, PCR, Refunding, Tampa Electric Co., Daily VRDN and Put, 3.35%,
05/15/18 .................................................................................... 300,000
$ 200,000 Jacksonville PCR, Refunding, Florida Power and Light Co. Project, Daily VRDN and Put, 3.35%,
05/01/29 .................................................................................... $ 200,000
2,500,000 Manatee County PCR, Refunding, Florida Power and Light Co. Project, Daily VRDN and Put, 3.45%,
09/01/24 .................................................................................... 2,500,000
--------------
Total Short Term Investments (Cost $3,500,000) ........................................ 3,500,000
--------------
Total Investments (Cost $1,255,621,202) 98.9% ................................... 1,345,547,676
Other Assets and Liabilities, Net 1.1% ........................................... 15,636,651
--------------
Net Assets 100.0% ................................................................ $1,361,184,327
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,255,621,202 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 94,897,886
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (4,971,412)
--------------
Net unrealized appreciation ................................................................ $ 89,926,474
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDR - Industrial Development Revenue
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
RDAR - Redevelopment Agency Revenue
SFM - Single-Family Mortgage
SFMR - Single-Family Mortgage Revenue
aZero coupon bonds. The current effective yield may vary. The original accretion
rate will remain constant.
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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).
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Georgia Tax-Free Income Fund (Note 1)
Long Term Investments 95.6%
<C> <C> <C>
$ 500,000 Albany-Dougherty County Hospital Authority Revenue, Anticipation Certificates, Series B,
AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10 ................................................. $ 575,160
50,000 Albany-Dougherty Inner City Authority, Improvement Revenue, Municipal Auditorium Project,
Series 1988-B, 7.875%, 01/01/09 .............................................................. 53,985
50,000 Athens Housing Authority, MFHR, Oakwood Forest Apartments Project, 8.125%, 12/01/05 ........... 50,827
1,400,000 Atlanta Board of Education, COP, FGIC Insured, Pre-Refunded, 7.125%, 06/01/12 ................. 1,580,838
Atlanta COP, Pretrial Detention Center, MBIA Insured,
1,000,000 6.25%, 12/01/11 ............................................................................ 1,064,940
3,800,000 6.25%, 12/01/17 ............................................................................ 3,987,188
420,000 Atlanta Downtown Development Authority, IDR, Underground Atlanta Project, Pre-Refunded, 7.75%,
10/01/16 ..................................................................................... 438,858
2,000,000 Atlanta Downtown Development Authority Revenue, Refunding, Underground Atlanta Project, 6.25%,
10/01/16 ..................................................................................... 2,118,140
3,500,000 Atlanta Special Purpose Facilities Revenue, Delta Air Lines, Inc. Project, Series 1989-B,
7.90%, 12/01/18.............................................................................. 3,748,605
75,000 Atlanta Urban Residential Finance Authority, SFMR, GNMA Secured, 8.25%, 10/01/21 .............. 78,766
1,000,000 Barnesville Water and Sewer Revenue, Refunding, 6.85%, 09/01/17 ............................... 1,070,980
100,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded, 8.00%,
09/01/15 ..................................................................................... 111,578
Burke County Development Authority, PCR, Georgia Power Co.,
160,000 Plant Vogtle Project, 8.00%, 10/01/16 ...................................................... 166,416
10,000,000 Refunding, Plant Vogtle, First Series, MBIA Insured, 6.60%, 07/01/24 ....................... 10,653,000
1,700,000 Chatham County Hospital Authority Revenue, Memorial Medical Center, Inc., Series A, MBIA Insured,
7.00%, 01/01/21 .............................................................................. 1,840,998
400,000 Chatham County School District, Refunding, Series B, FGIC Insured, 5.50%, 08/01/20 ............ 394,164
90,000 Cherokee County Hospital Authority Revenue, Certificates, MBIA Insured, 8.00%, 12/01/13 ....... 97,914
1,595,000 Cherokee County Water and Sewage Authority Revenue, Refunding, MBIA Insured, 6.90%, 08/01/18 .. 1,750,959
200,000 Clark County Hospital Authority Revenue, Certificates, Series A, MBIA Insured, 7.10%, 01/01/08 . 208,420
1,400,000 Clayton County Development Authority, Special Facility Revenue, Refunding, Delta Air Lines, Inc.
Project, 7.625%, 01/01/20 .................................................................... 1,472,338
2,400,000 Clayton County Hospital Authority Revenue, Anticipation Certificates, Southern Regional Medical
Center, MBIA Insured, 7.00%, 08/01/13 ........................................................ 2,673,600
100,000 Cobb County, Kennestone Hospital Authority Revenue, Series A, MBIA Insured, ETM, 7.75%, 02/01/07 117,631
1,000,000 Cobb County Residential Care Facilities Authority Revenue, Refunding, 7.50%, 08/01/15 ......... 1,074,160
1,000,000 Colquitt County Hospital Authority Revenue, Certificates, Colquitt Regional Medical Center,
MBIA Insured, 6.70%, 03/01/12 ................................................................ 1,089,960
1,300,000 Columbia County Water and Sewer Revenue, Series A, AMBAC Insured, 6.90%, 06/01/11 ............. 1,431,274
45,000 Columbus Hospital Authority Revenue, Anticipation Certificates, St. Francis Hospital Project,
Series 1987, BIG Insured, Pre-Refunded, 8.25%, 01/01/07 ...................................... 47,588
100,000 Commerce, City of, Combined Public Utility Revenue, Refunding & Improvement, AMBAC Insured,
Pre-Refunded, 7.50%, 12/01/20 ................................................................ 113,384
1,000,000 Conyers Water and Sewer Revenue, Series A, AMBAC Insured, 6.60%, 07/01/15 ..................... 1,086,700
750,000 Coweta County Association, County Commissioners of Georgia Leasing Program, MBIA Insured,
Pre-Refunded, 7.00%, 12/01/10 ................................................................ 830,700
500,000 Crisp County Hospital Authority Revenue, Anticipation Certificates, Refunding, Crisp Regional Hospital,
FSA Insured, 5.40%, 07/01/12 .................................................................. 496,210
300,000 Dade County Water and Sewer Authority Revenue, Refunding, FGIC Insured, Pre-Refunded, 7.60%,
07/01/15 ..................................................................................... 338,520
2,000,000 Dalton Building Authority Revenue, Northwest Trade and Convention, Pre-Refunded, 7.10%, 07/01/11 2,290,440
100,000 Dekalb County Hospital Authority Revenue, Anticipation Certificates, Dekalb Medical Center,
Pre-Refunded, 7.00%, 08/01/09 ................................................................ 111,036
440,000 Dekalb County Housing Authority, SFMR, GNMA Secured, 7.70%, 02/01/24 .......................... 458,370
600,000 Dekalb County Water and Sewer Revenue, Series 1990, Pre-Refunded, 7.00%, 10/01/10 ............. 679,122
$ 1,315,000 Dekalb Private Hospital Authority Revenue, Anticipation Certificates, Emory University Project, 7.00%,
04/01/21 ..................................................................................... $ 1,423,001
1,215,000 East Point Building Authority Revenue, Public Facilities and Equipment Project, AMBAC Insured,
Pre-Refunded, 6.70%, 02/01/11 ................................................................. 1,365,259
95,000 Ellijay-Gilmer County Water and Sewer Authority Revenue, Pre-Refunded, 7.875%, 01/01/14 ....... 103,608
965,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A, MBIA Insured,
6.50%, 07/01/24 .............................................................................. 986,838
100,000 Fulco Hospital Authority Revenue, Anticipation Certificates, Shepherd Spinal Center Project,
Series 1988-A, 7.75%, 10/01/08 ............................................................... 106,771
Fulton County Building Authority Revenue,
750,000 Human Resources and Government Facilities Program, 7.10%, 01/01/15 ......................... 827,475
65,000 Judicial Center Facilities Project, Pre-Refunded, 8.20%, 01/01/15 .......................... 68,713
1,000,000 Refunding, Judicial Center Facilities Project, 6.50%, 01/01/15 ............................. 1,060,640
1,700,000 Fulton County Development Authority Revenue, Clark Atlanta University Project, Connie Lee Insured,
5.375%, 01/01/20 ............................................................................. 1,617,703
Fulton County School District,
2,200,000 5.625%, 01/01/21 ........................................................................... 2,220,460
60,000 Unlimited Tax, GO, Pre-Refunded, 7.625%, 05/01/17 .......................................... 64,504
115,000 Fulton County Water and Sewer Revenue, Pre-Refunded, 8.25%, 01/01/14 .......................... 126,172
1,480,000 Fulton Dekalb Hospital Authority Revenue, Grady Memorial Hospital Project, Series A, AMBAC Insured,
Pre-Refunded, 7.25%, 01/01/20 ................................................................ 1,662,987
455,000 Gainesville Hospital Authority Revenue, Anticipation Certificates, Refunding, Northeast Georgia Health
Care Project, Series B, MBIA Insured, 7.20%, 10/01/20 ........................................ 490,422
Georgia Municipal Electric Authority, Special Obligation, Refunding,
140,000 Second Crossover Series, 8.125%, 01/01/17 .................................................. 151,738
1,000,000 Third Crossover Series, 6.60%, 01/01/18 .................................................... 1,111,470
Georgia Municipal Electric Power Authority Revenue,
390,000 Refunding, Senior Lien, Series Z, 5.50%, 01/01/20 .......................................... 374,958
800,000 Refunding, Series R, Pre-Refunded, 7.40%, 01/01/25 ......................................... 887,288
400,000 Series A, Pre-Refunded, 7.40%, 01/01/25 .................................................... 443,644
7,500,000 Series E, AMBAC Insured, 6.65%, 01/01/21 ................................................... 7,739,325
100,000 Series S, Pre-Refunded, 7.25%, 01/01/09 .................................................... 110,514
Georgia State HFAR, Homeownership Opportunity Program,
2,895,000 Series A-1, 6.75%, 06/01/17 ................................................................ 3,016,966
880,000 Series C, 6.60%, 12/01/23 .................................................................. 909,955
1,000,000 Georgia State HFAR, MFMR, Club Candlewood Project, FSA Insured, 7.15%, 01/01/25 ............... 1,047,440
1,995,000 Georgia State HFAR, SFMR, Refunding, Series A, 6.60%, 12/01/23 ................................ 2,057,623
Georgia State Residential Finance Authority, Homeownership Mortgage,
1,230,000 Series B, FHA/VA, 7.00%, 12/01/12 .......................................................... 1,313,406
265,000 Series B, Sub-Series B-1, Convertible Loans, 7.50%, 06/01/17 ............................... 283,290
395,000 Series E, Sub-Series E-1, FHA Insured, 7.50%, 06/01/17 ..................................... 421,382
Georgia State Residential Finance Authority, SF Mortgage, FHA Insured, VA/GML,
5,000 Series A, 8.375%, 12/01/19 ................................................................. 5,271
75,000 Series A-2, 8.40%, 12/01/18 ................................................................ 77,636
1,000,000 Georgia State Tollway Authority Revenue, Guaranteed, Georgia 400 Project, 6.80%, 07/01/10 ..... 1,105,910
200,000 Gwinette County Hospital Authority Revenue, Anticipation Certificates, AMBAC Insured, Pre-Refunded,
7.125%, 09/01/19 ............................................................................. 223,646
3,300,000 Hogansville Combined Public Utility System Revenue, Refunding, FSA Insured, 6.00%, 10/01/23 ... 3,422,562
2,000,000 Houston County School District, Intergovernmental Contract Trust, MBIA Insured, 6.00%, 03/01/14 2,065,180
1,000,000 La Grange Water and Sewerage Revenue, Pre-Refunded, 7.375%, 01/01/12 .......................... 1,126,120
850,000 Liberty County IDR, Refunding, Leconte Property, Inc. Project, 7.875%, 12/01/14 ............... 945,217
1,000,000 Macon-Bibb County Urban Development Authority Revenue, MFHR, Collateralized, Series A,
FNMA Secured, 7.50%, 01/01/24 ................................................................ 1,059,800
Marietta Development Authority Revenue, Life College, Refunding, First Mortgage, Series A,
FSA Insured,
$ 3,300,000 5.75%, 09/01/14 ............................................................................ $ 3,327,555
600,000 5.80%, 09/01/19 ............................................................................ 604,998
1,000,000 5.95%, 09/01/19 ............................................................................ 1,020,850
1,500,000 Medical Center Hospital Authority Revenue, Anticipated Certificates, Columbus Regional Healthcare
System, MBIA Insured, 5.50%, 08/01/15 ........................................................ 1,482,285
Metropolitan Atlanta Rapid Transit Authority, Sales Tax Revenue,
6,230,000 Series A, MBIA Insured, 6.90%, 07/01/20 .................................................... 6,924,707
630,000 Series K, 7.25%, 07/01/10 .................................................................. 675,770
250,000 Series L, Pre-Refunded, 7.20%, 07/01/10 .................................................... 278,605
1,000,000 Series O, 6.55%, 07/01/20 .................................................................. 1,067,540
Monroe County Development Authority, PCR, Scherer Project,
250,000 Georgia Power Co. Plant, 8.375%, 07/01/17 .................................................. 265,470
1,500,000 Refunding, Oglethorpe Power Co. Plant, Series A, 6.80%, 01/01/12 ........................... 1,668,675
100,000 Polk County Water Authority, Water and Sewerage Revenue, Refunding, MBIA Insured, 7.00%, 12/01/15 107,897
50,000 Private Colleges and Universities, Facilities Authority Revenue, Spelman College Project, 7.75%,
06/01/13 ..................................................................................... 54,302
250,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A, Pre-Refunded,
7.875%, 07/01/17 ............................................................................. 277,890
Puerto Rico Commonwealth Highway Authority Revenue,
230,000 Refunding, Series R, 7.15%, 07/01/00 ....................................................... 251,694
100,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ................................................... 111,588
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
175,000 7.90%, 07/01/07 ............................................................................ 189,863
50,000 7.50%, 07/01/09 ............................................................................ 53,813
80,000 Puerto Rico Commonwealth Public Improvement GO, Series A, Pre-Refunded, 7.75%, 07/01/13 ....... 88,704
1,500,000 Puerto Rico Commonwealth, Refunding, Series A, 6.00%, 07/01/14 ................................ 1,531,335
150,000 Puerto Rico Electric Power Authority Revenue, Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 166,970
Puerto Rico Electric Power Authority Revenue, Water Resources,
50,000 Refunding, Series N, 7.125%, 07/01/14 ...................................................... 54,376
130,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14 ........................................ 144,866
165,000 Series O, 7.125%, 07/01/14 ................................................................. 179,439
235,000 Series O, Pre-Refunded, 7.125%, 07/01/14 ................................................... 261,872
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs,
Series A, 8.00%, 09/01/12 .................................................................... 221,376
110,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 120,025
Puerto Rico PBA, Guaranteed, Public Education and Health Facilities, Pre-Refunded,
80,000 Series H, 7.875%, 07/01/16 ................................................................. 86,169
100,000 Series J, 7.00%, 07/01/19 .................................................................. 108,766
1,500,000 Putnam County Development Authority PCR, Georgia Power Co. Plant, FGIC Insured, 7.25%, 07/01/21 1,543,185
200,000 Royston Downtown Development Authority Revenue, Cobb Memorial Hospital Project, Pre-Refunded,
8.20%, 07/01/08 .............................................................................. 217,620
1,000,000 Savannah EDA, IDR, Refunding, Hershey Foods Corp. Project, 6.60%, 06/01/12 .................... 1,079,290
3,000,000 Savannah Hospital Authority Revenue, Refunding, St. Joseph's Hospital Project, 6.20%, 07/01/23 3,003,870
4,600,000 Savannah Port Authority PCR, Refunding, Union Carbide Plastic Co., Inc. 7.55%, 08/01/04 ....... 4,667,528
St. Mary's Housing Authority MFMR, FNMA Secured,
700,000 Pine Apartments, Series C, 7.375%, 04/01/22 ................................................ 725,186
500,000 Refunding, Cumberland Oaks Apartments, Series A, 7.375%, 09/01/22 .......................... 532,545
200,000 Sugar Hill Combined Public Utility Revenue, MBIA Insured, Pre-Refunded, 7.35%, 01/01/14 ....... 210,143
2,330,000 Tilt County School District, MBIA Insured, 6.125%, 02/01/15 ................................... 2,416,675
250,000 University of Puerto Rico Revenue, Refunding, Series J, Pre-Refunded, 7.75%, 06/01/07 ......... 257,804
$ 1,500,000 Walker, Dade and Catoosa County Hospital Authority Revenue, Anticipation Certificates, Series A,
FGIC Insured, 7.00%, 10/01/10 ................................................................ $ 1,678,710
1,780,000 White County IDAR, Refunding, Clark Schwebel Fiber Glass, 6.85%, 06/01/10 ..................... 1,905,241
--------------
Total Long Term Investments (Cost $118,209,492) ......................................... 125,892,860
--------------
cShort Term Investments 1.1%
200,000 Georgia Municipal Association Pool Bond, COP, Tax Exempt Grantor Trust, MBIA Insured, Weekly
VRDN and Put, 3.20%, 12/15/20 ................................................................ 200,000
100,000 Georgia State HFAR, Georgia Pooled Hospital Loan Program, Daily VRDN and Put, 3.40%, 03/01/01 . 100,000
100,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.80%, 12/01/15 .............................................................................. 100,000
1,000,000 Savannah EDA, IDR, Fuji Vegetable Oil Project, Weekly VRDN and Put, 3.65%, 10/01/99 ........... 1,000,000
--------------
Total Short Term Investments (Cost $1,400,000) .......................................... 1,400,000
--------------
Total Investments (Cost $119,609,492) 96.7% ........................................ 127,292,860
Other Assets and Liabilities, Net 3.3% ............................................. 4,422,420
--------------
Net Assets 100.0% .................................................................. $131,715,280
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $119,609,492 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 7,728,992
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (45,624)
--------------
Net unrealized appreciation ................................................................. $ 7,683,368
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
COP - Certificate of Participation
EDA - Economic Development Authority
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GML - Guaranteed Mortgage Loan
GNMA - Government National Mortgage Association
GO - General Obligation
HFAR - Housing Finance Agency Revenue
IDAR - Industrial Development Authority Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SF - Single-Family
SFMR - Single-Family Mortgage Revenue
VA - Veterans Administration
cVariable 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).
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Kentucky Tax-Free Income Fund (Note 1)
Long Term Investments 97.8%
<C> <C> <C>
$ 700,000 Ashland PCR, Refunding, Ashland Oil, Inc. Project, 6.65%, 08/01/09 .............................. $ 749,658
1,000,000 Ashland Solid Waste Revenue, Ashland Oil, Inc. Project, 7.20%, 10/01/20 ......................... 1,063,980
Boone County PCR, Refunding, Collateralized, Series A,
1,300,000 Cincinnati Gas and Electric Co., MBIA Insured, 5.50%, 01/01/24 ............................... 1,255,033
710,000 Dayton Power and Light Co., 6.50%, 11/15/22 .................................................. 760,495
200,000 Campbell County Water Revenue, District No. 1, 6.60%, 12/01/11 .................................. 215,352
325,000 Carroll County PCR, Collateralized, Kentucky Utilities Co. Project, Series B, 6.25%, 02/01/18 ... 341,923
750,000 Carroll County Solid Waste Disposal Facilities Revenue, Collateralized, Kentucky Utility Co. Project,
Series A, 5.75%, 12/01/23 ...................................................................... 731,655
Danville Multi-City Lease Revenue,
1,500,000 Campbellsville, Series B, MBIA Insured, 6.15%, 07/01/12 ...................................... 1,584,345
125,000 Housing Authority, Jefferson County, 6.50%, 02/01/12 ......................................... 130,323
100,000 Shelbyville, Series H, MBIA Insured, 6.70%, 07/01/11 ......................................... 109,600
Daviess County Hospital Revenue, Odch, Inc., Series A, MBIA Insured,
100,000 6.25%, 08/01/12 .............................................................................. 105,124
210,000 6.25%, 08/01/22 .............................................................................. 219,324
545,000 Daviess County Public Improvement Corp. Revenue, Refunding, First Mortgage, Court Facilities Project,
Series A, 5.70%, 10/01/14 ...................................................................... 554,156
100,000 Eastern University Revenues, Consolidated Educational Building, Series Q, AMBAC Insured, 6.40%,
05/01/08 ....................................................................................... 107,762
200,000 Edgewood Public Properties Corp. Revenue, First Mortgage, Public Facilities Project, 6.70%, 12/01/21 214,070
500,000 Fulton County Industrial Building Revenue, H.I.S., Inc. Project, 7.50%, 02/01/10 ................ 531,855
400,000 Guam Airport Authority Revenue, Refunding, Series A, 6.50%, 10/01/23 ............................ 401,384
225,000 Guam Power Authority Revenue, Series A, 6.30%, 10/01/22 ......................................... 225,871
125,000 Hopkins County Hospital Revenue, Trover Clinic Foundation, Inc., MBIA Insured, 6.625% 11/15/11 .. 136,118
Jefferson County Health Facilities Revenue, Jewish Hospital Health Care Services, Inc., AMBAC Insured,
750,000 6.50%, 05/01/15 .............................................................................. 799,193
720,000 6.55%, 05/01/22 .............................................................................. 769,565
100,000 Jefferson County Hospital Revenue, Alliant Health System Project, Series C, MBIA Insured, 6.20%,
10/01/04 ....................................................................................... 107,509
2,000,000 Jefferson County MFHR, Watterson Park Apartments Project, Series A, 6.35%, 11/15/11 ............. 2,038,880
Jefferson County PCR,
450,000 DuPont, Series A, 6.30%, 07/01/12 ............................................................ 489,920
1,000,000 Louisville Gas and Electric Co. Project, Series B, 5.625%, 0815/19 ........................... 991,600
100,000 Refunding, Louisville Gas and Electric Co. Project, Series A, 7.45%, 06/15/15 ................ 110,571
250,000 Jefferson County School District Finance Corp., School Building Revenue, Refunding, Series B,
MBIA Insured, 6.20%, 01/01/07 .................................................................. 268,880
Kenton County Airport Board Revenue, Delta Airlines Project, Special Facilities,
445,000 Series A, 7.50%, 02/01/20 .................................................................... 478,954
150,000 Series A, 7.125%, 02/01/21 ................................................................... 157,410
445,000 Series B, 7.25%, 02/01/22 .................................................................... 473,244
Kenton County Water District No. 001, Waterworks Revenue,
155,000 Refunding, FGIC Insured, 6.375%, 02/01/17 .................................................... 165,287
500,000 Series A, MBIA Insured, 5.80%, 02/01/15 ...................................................... 513,320
500,000 Series B, FGIC Insured, 5.70%, 02/01/20 ...................................................... 505,600
750,000 Kentucky Development Finance Authority, Hospital Revenue, Refunding & Improvement, St. Elizabeth
Medical Center, Series A, FGIC Insured, 6.00%, 11/01/10 ........................................ 769,778
Kentucky EDA, Hospital Facilities Revenue,
650,000 Refunding, Baptist Healthcare Systems, MBIA Insured, 5.00%, 08/15/24 ......................... 589,674
625,000 St. Elizabeth Medical Center Project, Series A, FGIC Insured, 6.00%, 12/01/22 ................ 645,925
500,000 Kentucky EDA Revenue, Refunding & Improvement, Ashland Hospital Corp. Medical Center, Series A,
CGIC Insured, 6.125%, 02/01/12 ................................................................. 522,455
Kentucky HFC, Housing Revenue,
$ 1,500,000 Series C, FHA Insured, 6.40%, 01/01/17 ....................................................... $ 1,560,735
500,000 Series F, 5.95%, 07/01/17 .................................................................... 508,185
40,000 SFMR, Series A, 6.60%, 07/01/11 .............................................................. 42,220
150,000 SFMR, Series B, 6.60%, 07/01/11 .............................................................. 158,324
140,000 SFMR, Series D, FHA/VA, 7.45%, 01/01/23 ...................................................... 143,863
Kentucky Infrastructure Authority Revenue,
100,000 Revolving Fund Program, Series E, 6.50%, 06/01/11 ............................................ 105,711
100,000 Revolving Fund Program, Series G, 6.30%, 06/01/12 ............................................ 104,491
500,000 Revolving Fund Program, Series J, 6.375%, 06/01/14 ........................................... 530,230
300,000 Wastewater Revolving Fund Program, Series D, 5.75%, 06/01/15 ................................. 302,688
1,400,000 Kentucky Local Correctional Facilities Construction Authority Revenue, Refunding, FSA Insured, 5.50%,
11/01/14 ....................................................................................... 1,388,604
Kentucky State Development Finance Authority Revenue,
100,000 Refunding, Sisters of Charity of Nazareth Health Corp., 6.75%, 11/01/12 ...................... 107,619
110,000 St. Claire Medical Center Project, Pre-Refunded, 7.125%, 09/01/21 ............................ 125,340
Kentucky State Property and Buildings Commission Revenue,
45,000 Project No. 50, Pre-Refunded, 6.00%, 02/01/10 ................................................ 48,246
700,000 Project No. 56, 6.00%, 09/01/14 .............................................................. 720,853
100,000 Kentucky State Turnpike Authority, EDR, Revitalization Road Project, Pre-Refunded, 7.25%, 05/15/10 112,663
660,000 Lexington-Fayette Urban County Government, Public Facilities Corp., Mortgage Revenue, FSA Insured,
5.10%, 11/01/15 ................................................................................ 620,921
Lexington-Fayette Urban County Government Revenue, University of Kentucky Library Project,
MBIA Insured,
500,000 6.625%, 11/01/13 ............................................................................. 541,495
750,000 6.75%, 11/01/24 .............................................................................. 818,835
700,000 Louisville and Jefferson County Metropolitan Sewer District Revenue, Refunding, Series A, MBIA Insured,
5.50%, 05/15/21 ................................................................................ 676,794
Louisville and Jefferson County Metropolitan Sewer District, Sewer and Drain System Revenue, Series A,
500,000 FGIC Insured, 5.40%, 05/15/22 ................................................................ 476,410
500,000 Refunding, AMBAC Insured, 6.75%, 05/15/25 .................................................... 547,824
Louisville and Jefferson County Regional Airport Authority System Revenue, Series A, MBIA Insured,
450,000 5.60%, 07/01/13 .............................................................................. 451,255
1,350,000 Louisville International Airport, 5.625%, 07/01/25 ........................................... 1,305,680
905,000 Louisville and Jefferson County Visitors and Convention Commission, Dedicated Tax Revenue,
Senior Series A, Senior Lien, FSA Insured, 5.25%, 07/01/15 ..................................... 872,990
500,000 McCracken County Hospital Revenue, Refunding, Mercy Health System, Series A, MBIA Insured, 6.40%,
11/01/07 ....................................................................................... 553,310
625,000 Mount Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 6.10%, 03/01/08 ......... 654,468
1,050,000 Pendleton Multi-County Association Trust, Lease Revenue, Series A, 6.50%, 03/01/19 .............. 1,091,968
430,000 Puerto Rico Commonwealth GO, 6.45%, 07/01/17 .................................................... 460,452
100,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series V,
6.625%, 07/01/12 ............................................................................... 109,121
140,000 Puerto Rico Commonwealth Highway Authority Revenue, Refunding, Series R, 6.75%, 07/01/05 ........ 153,040
Puerto Rico Electric Power Authority Revenue,
100,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ...................................................... 115,083
1,000,000 Series X, 5.50%, 07/01/25 .................................................................... 957,850
50,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series L, Pre-Refunded, 6.875%,
07/01/21 ....................................................................................... 57,781
350,000 Russell Health System Facilities Revenue, Franciscan Health Center, Series B, 8.10%, 07/01/15 ... 402,080
100,000 Somerset Water Project Revenue, MBIA Insured, 6.40%, 12/01/06 ................................... 102,994
University of Kentucky Revenues, Community College Educational Buildings,
$ 350,000 Refunding, Series J, 5.10%, 05/01/10 ......................................................... $ 349,275
100,000 Series I, 6.40%, 05/01/08 .................................................................... 108,172
145,000 University of Kentucky Revenues, Consolidated Educational Buildings, Series M, 6.40%, 05/01/10 .. 156,180
750,000 University of Louisville Revenues, Refunding, Consolidated Educational Buildings, Series I, 5.40%,
05/01/16 ....................................................................................... 749,940
--------------
Total Long Term Investments (Cost $36,663,183) ............................................ 38,129,483
--------------
cShort Term Investments .3%
100,000 Kentucky Development Financing Authority Revenue, Pooled Loan Program, Series A, FGIC Insured,
Weekly VRDN and Put, 3.20%, 12/01/15 (Cost $100,000) ........................................... 100,000
--------------
Total Investments (Cost $36,763,183) 98.1% ........................................... 38,229,483
Other Assets and Liabilities, Net 1.9% ............................................... 761,641
--------------
Net Assets 100.0% .................................................................... $38,991,124
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $36,763,183 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................. $ 1,617,955
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................. (151,655)
--------------
Net unrealized appreciation ................................................................... $ 1,466,300
==============
</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
cVariable 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).
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Louisiana Tax-Free Income Fund (Note 1)
Long Term Investments 98.1%
Bonds 96.3%
<C> <C> <C>
Ascension Parish Sales and Use Tax, Gravity Drainage District No. 1,
$ 300,000 7.25%, 12/01/06 ............................................................................. $ 325,398
300,000 7.25%, 12/01/07 ............................................................................. 326,361
200,000 7.25%, 12/01/08 ............................................................................. 217,288
500,000 Bastrop, Inc., IDB, PCR, Refunding, International Paper Co. Project, 6.90%, 03/01/07 ........... 543,865
150,000 Baton Rouge Public Improvement, Sales and Use Tax Revenue, AMBAC Insured, 7.00%, 08/01/08 ...... 163,790
200,000 Caddo Parish School District GO, Refunding, MBIA Insured, Pre-Refunded, 7.20%, 03/01/05 ........ 207,030
400,000 Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Memorial Hospital Project,
BIG Insured, Pre-Refunded, 7.50%, 12/01/18 .................................................... 425,336
50,000 Calcasieu Parish Public School ID No. 30, GO, Ward 4, Unlimited Tax, Pre-Refunded, 8.00%, 08/01/04 54,340
Calcasieu Parish Public Trust Mortgage Authority Revenue, Refunding,
1,265,000 Series A, 7.75%, 06/01/12 ................................................................... 1,347,035
1,205,000 Series B, 6.875%, 11/01/12 .................................................................. 1,251,236
1,380,000 Denham Springs-Livingston Housing and Mortgage Finance Authority, SFMR, ETM 08/01/00, 7.20%,
08/01/10 ...................................................................................... 1,603,698
1,500,000 DeSoto Parish Environmental Improvement Revenue, International Paper Co. Project, Series A, 7.70%,
11/01/18 ...................................................................................... 1,708,815
DeSoto Parish GO,
150,000 School District No. 1, Pre-Refunded, 8.00%, 01/01/09 ........................................ 165,218
50,000 School District No. 2, 8.00%, 08/01/06 ...................................................... 55,147
East Baton Rouge Mortgage Finance Authority,
840,000 MBS, Series A, 7.875%, 08/01/23 ............................................................. 890,257
1,305,000 SF Purchase, Series F, GNMA Secured, 7.875%, 12/01/21 ....................................... 1,395,919
East Baton Rouge Parish Public Improvement, Sales and Use Tax, MBIA Insured,
145,000 7.25%, 02/01/09 ............................................................................. 155,678
425,000 7.25%, 02/01/13 ............................................................................. 452,608
750,000 East Baton Rouge Parish, Sales and Use Tax, FGIC Insured, 5.90%, 02/01/18 ...................... 768,675
50,000 Franklin Public Improvement GO, Sales and Use Tax Revenue, Refunding, 8.40%, 12/01/03 .......... 53,779
Iberville Parish Consolidated School District No. 005, Pre-Refunded,
125,000 8.125%, 10/01/08 ............................................................................ 139,736
245,000 GO, Unlimited Tax, 8.00%, 10/01/04 .......................................................... 273,143
120,000 Jefferson Parish Home Mortgage Authority, SFMR, GNMA Secured, Series A, 8.30%, 04/01/20 ........ 126,670
Jefferson Parish Road District No. 1, GO, FGIC Insured, Pre-Refunded,
100,000 7.40%, 03/01/06 ............................................................................. 106,833
50,000 7.40%, 03/01/08 ............................................................................. 53,417
500,000 Jefferson Parish School Board, Sales and Use Tax Revenue, Series A, ETM 02/01/02, 7.35%, 02/01/03 517,715
400,000 Lafayette Parish Consolidated School District No. 1, FGIC Insured, Pre-Refunded, 7.70%, 03/01/07 443,660
415,000 Lafayette Public Electric Power Authority Revenue, Refunding, 7.25%, 11/01/12 .................. 435,069
25,000 Lafayette Public Improvement, Sales Tax Revenue, Refunding, Series 1988, FGIC Insured,
Pre-Refunded, 8.00%, 03/01/08 ................................................................. 27,432
Lafayette Public Trust Financing Authority, SFMR, Series A,
30,000 ETM 04/01/11, 7.20%, 04/01/11 ............................................................... 34,674
443,474 Refunding, 8.50%, 11/15/12 .................................................................. 473,178
95,000 Lafourche Parish Home Mortgage Authority, SFMR, ETM 07/01/00, 7.40%, 07/01/10 .................. 110,653
3,000,000 Lake Charles Harbor and Terminal District, Port Facilities Revenue, Refunding, Occidental Petroleum
Corp., 7.20%, 12/01/20 ........................................................................ 3,291,360
750,000 Lake Charles Nonprofit HDC, Section 8 Assisted, Mortgage Revenue, Refunding, Chateau Project,
Series 1990-A, CGIC Insured, 7.875%, 02/15/25 ................................................. 783,450
1,750,000 Leesville, Inc., IDBR, Refunding, Wal-Mart Stores, Inc. Project, 7.10%, 03/01/11 ............... 1,873,060
500,000 Louisiana Gas Fuel Tax Revenue, 7.25%, 11/15/04 ................................................ 549,720
Louisiana Mortgage, HFAR,
$ 2,795,000 MF, Refunding, Series A, FHA Insured, 7.00%, 07/01/22 ....................................... $ 2,895,396
750,000 MF, Westview Project, FHA Insured, 7.80%, 04/01/30 .......................................... 788,430
20,000 SF, GNMA Secured, 9.125%, 11/01/18 .......................................................... 20,923
715,000 SF, GNMA Secured, 8.30%, 11/01/20 ........................................................... 744,387
1,160,000 SF, Refunding, Series C-1, MBIA Insured, 5.75%, 06/01/17 .................................... 1,143,099
1,600,000 Louisiana Office Capital Facility Corp., Non-Profit Corp., 7.75%, 12/01/10 ..................... 1,789,840
Louisiana Public Facilities Authority, Hospital Revenue, Refunding,
75,000 Touro Infirmary Project, Series A, BIG Insured, Pre-Refunded, 8.00%, 06/01/09 ............... 82,814
3,000,000 Women's Hospital Foundation Project, 7.25%, 10/01/22 ........................................ 3,153,930
65,000 Women's Hospital Foundation Project, FGIC Insured, Pre-Refunded, 8.125%, 10/01/14 ........... 72,663
Louisiana Public Facilities Authority Revenue,
930,000 Alton Ochsner Medical Foundation Project, Series C, MBIA Insured, 6.50%, 05/15/22 ........... 980,555
63,074 MFHR, Pontchartrain Apartments, Carriage House Apartments Project, Series A, GNMA Secured,
8.375%, 07/20/23 ........................................................................... 66,754
200,000 Refunding, Jefferson Parish Eastbank Office, FGIC Insured, 7.70%, 08/01/10 .................. 223,574
2,184,276 SFM Purchase, Series C, 8.45%, 12/01/12 ..................................................... 2,336,323
1,500,000 Student Loan, Series A, Sub-Series 3, 7.00%, 09/01/06 ....................................... 1,595,550
50,000 Tulane University, Series B, Pre-Refunded, 8.00%, 08/15/15 .................................. 53,944
35,000 Louisiana Public Facilities Authority, SFM Purchase, Series C, GNMA Secured, 8.80%, 04/01/13 ... 36,641
Louisiana Stadium and Exposition District, Hotel Occupancy Tax and Stadium Revenue, FGIC Insured,
5,000,000 Series A, 6.00%, 07/01/16 ................................................................... 5,174,500
2,500,000 Series B, 5.25%, 07/01/20 ................................................................... 2,368,425
400,000 Louisiana State GO, Series A, CGIC Insured, Pre-Refunded, 7.375%, 05/01/05 ..................... 410,524
Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Loop, Inc. Project First Stage,
Refunding,
1,000,000 Series B, 7.20%, 09/01/08 ................................................................... 1,106,990
1,000,000 Series E, 7.60%, 09/01/10 ................................................................... 1,109,590
1,050,000 Mississipi River Bridge Authority Revenue, 6.75%, 11/01/12 ..................................... 1,145,403
50,000 Morgan City GO, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%, 12/01/03 ............ 54,767
Natchitoches Parish GO, Consolidated School, District No. 7, Pre-Refunded,
125,000 8.30%, 03/01/10 ............................................................................. 140,545
230,000 Series B, 7.50%, 03/01/09 ................................................................... 256,268
235,000 Series B, 7.50%, 03/01/10 ................................................................... 261,839
65,000 New Orleans Audubon Park Commission, Aquarium Project, MBIA Insured, Pre-Refunded, 7.90%,
10/01/08 ...................................................................................... 70,357
2,000,000 New Orleans GO, Refunding, AMBAC Insured, 6.00%, 09/01/21 ...................................... 2,043,960
560,000 New Orleans Home Mortgage Authority, SFMR, Series A, ETM 04/01/00, 7.50%, 10/01/18 ............. 595,549
50,000 New Orleans International Airport Revenue, Series A, FGIC Insured, Pre-Refunded, 8.875%, 08/01/17 54,387
300,000 New Orleans Public Improvement GO, CGIC Insured, Pre-Refunded, 7.125%, 10/01/03 ................ 321,444
1,000,000 New Roads Electric System Revenue, 7.00%, 07/01/17 ............................................. 1,068,690
Orleans Levee District,
1,000,000 GO, Levee Improvement, FSA Insured, 5.95%, 11/01/14 ......................................... 1,020,500
50,000 Refunding, Public Improvement, Series A, 8.25%, 11/01/15 .................................... 51,342
925,000 bOrleans Parish GO, Parishwide School District, FGIC Insured, 5.00%, 09/01/16 .................. 866,401
Orleans Parish Law Enforcement District, GO, AMBAC Insured,
185,000 7.10%, 05/01/05 ............................................................................. 200,407
750,000 7.10%, 05/01/10 ............................................................................. 812,753
3,500,000 Ouachita Parish Hospital Service Revenue, District No. 1, Glenwood Regional Medical Center, 7.50%,
07/01/21 ...................................................................................... 3,781,855
75,000 Plaquemines Parish GO, Unlimited Tax, Pre-Refunded, 8.40%, 08/01/06 ............................ 82,492
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
$ 500,000 7.90%, 07/01/07 ............................................................................. $ 556,055
1,000,000 7.875%, 07/01/17 ............................................................................ 1,111,560
350,000 7.00%, 07/01/19 ............................................................................. 382,291
500,000 Puerto Rico Commonwealth GO, Series 1990, Pre-Refunded, 7.70%, 07/01/20 ........................ 580,060
220,000 Puerto Rico Commonwealth Highway Authority Revenue, Series R, 7.20%, 07/01/01 .................. 246,613
1,000,000 Puerto Rico Commonwealth Highway Transportation Authority Revenue, Series S, Pre-Refunded, 8.00%,
07/01/18 ...................................................................................... 1,169,730
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
525,000 7.90%, 07/01/07 ............................................................................. 569,588
100,000 7.75%, 07/01/08 ............................................................................. 108,167
Puerto Rico Electric Power Authority Revenue, Pre-Refunded,
100,000 Refunding, Series M, 8.00%, 07/01/08 ........................................................ 111,313
1,400,000 Series P, 7.00%, 07/01/21 ................................................................... 1,611,176
560,000 Puerto Rico Electric Power Authority Revenue, Refunding, Water Resources, Series N, 7.125%, 07/01/14 609,006
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
85,000 Series A, 7.80%, 10/15/21 ................................................................... 89,106
280,000 Series B, 7.65%, 10/15/22 ................................................................... 296,526
665,000 Series C, 6.85%, 10/15/23 ................................................................... 698,662
150,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs.,
Series A, 8.00%, 09/01/12 ..................................................................... 166,032
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Pre-Refunded,
100,000 Series H, 7.875%, 07/01/16 .................................................................. 107,711
1,000,000 Series J, 7.25%, 07/01/17 ................................................................... 1,093,170
75,000 Rapides Parish GO, Consolidated School District No. 52, Pineville, 8.40%, 03/01/03 ............. 81,499
1,370,000 Rapides Parish Housing and Mortgage Finance Authority, SFM, ETM 08/01/00, 7.25%, 08/01/10 ...... 1,510,165
St. Bernard Parish Home Mortgage Authority Revenue, SFMR, Series A,
435,000 FGIC Insured, ETM 09/01/00, 7.50%, 09/01/10 ................................................. 521,591
946,290 Refunding, 8.00%, 03/25/12 .................................................................. 988,248
2,500,000 St. Charles Parish, PCR, Louisiana Power and Light Co. Project, 7.50%, 06/01/21 ................ 2,678,275
430,000 St. Charles Parish Public Improvement, Sales Tax, Refunding, Series ST-96, MBIA Insured, 5.30%,
12/01/10 ...................................................................................... 423,911
St. Charles Parish, Solid Waste Disposal Revenue, Louisiana Power and Light Co. Project,
1,500,000 7.05%, 04/01/22 ............................................................................. 1,571,130
750,000 Series A, 7.00%, 12/01/22 ................................................................... 789,398
2,365,000 St. James Parish COP, Juvenile Detention Facility, Pre-Refunded, 7.50%, 07/01/10 ............... 2,397,093
St. John's Baptist Parish, Sales Tax District,
430,000 7.30%, 12/01/08 ............................................................................. 472,936
275,000 7.30%, 12/01/09 ............................................................................. 300,677
50,000 St. Mary's Parish Public Improvement, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%,
12/01/03 ...................................................................................... 54,767
536,093 St. Mary's Public Trust Financing Authority, SFMR, Refunding, Series A, 7.625%, 03/25/12 ....... 576,686
125,000 St. Tammany's Parish Hospital Service Revenue, District No. 2, Pre-Refunded, 8.00%, 10/01/08 ... 139,358
St. Tammany's Public Trust Financing Authority, SFMR, Series A,
165,000 ETM 07/01/00, 7.20%, 07/01/10 ............................................................... 196,537
50,000 ETM 07/01/11, 7.20%, 07/01/11 ............................................................... 57,412
150,000 Shreveport GO, Series A, Pre-Refunded, 7.50%, 01/01/09 ......................................... 163,448
3,500,000 Shreveport Water and Sewer Revenue, Refunding, Series A, FGIC Insured, 5.95%, 12/01/14 ......... 3,596,844
5,500,000 Tangipahoa Parish Hospital Service Revenue, District No. 1, Refunding, AMBAC Insured, 6.25%,
02/01/24 ...................................................................................... 5,696,680
125,000 Terrebonne Parish Hospital Service Revenue, District No. 1, Refunding, Terrebonne General Medical
Center Project, BIG Insured, 7.50%, 04/01/15 .................................................. 134,123
$ 205,000 Ville Platte Utilities Revenue, Refunding, Pre-Refunded, 7.80%, 05/01/02 ....................... $ 228,700
West Feliciana Parish, PCR, Gulf States Utilities,
6,500,000 7.70%, 12/01/14 ............................................................................. 7,091,304
5,000,000 Refunding, 8.00%, 12/01/24 .................................................................. 5,387,250
--------------
Total Bonds (Cost $98,248,987) ........................................................... 104,899,852
--------------
aZero Coupon Bonds 1.8%
5,000,000 Shreveport Water and Sewer Revenue, Refunding, Series B, FGIC Insured, (original accretion rate
7.05%), 12/01/11 (Cost $1,274,600) ............................................................ 1,917,650
--------------
Total Long Term Investments (Cost $99,523,587) ........................................... 106,817,502
--------------
cShort Term Investments 1.2%
East Baton Rouge Parish, PCR, Rhone Poulenc, Inc. Project, Refunding, Daily VRDN and Put,
400,000 3.40%, 06/01/11 ............................................................................. 400,000
300,000 3.40%, 12/01/11 ............................................................................. 300,000
300,000 Louisiana State Recovery District, Sales Tax Revenue, Various, FGIC Insured, Daily VRDN and Put,
3.50%, 07/01/97 ............................................................................... 300,000
200,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put, 2.80%,
12/01/15 ...................................................................................... 200,000
100,000 West Feliciana Parish, PCR, Gulf States Utilities Co., Series D, Daily VRDN and Put, 3.45%, 12/01/15 100,000
--------------
Total Short Term Investments (Cost $1,300,000) ........................................... 1,300,000
--------------
Total Investments (Cost $100,823,587) 99.3% ......................................... 108,117,502
Other Assets and Liabiltities, Net .7% .............................................. 781,662
--------------
Net Assets 100.0% .................................................................... $108,899,164
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $100,823,587 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 7,313,018
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (19,103)
--------------
Net unrealized appreciation .................................................................. $ 7,293,915
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFAR - Housing Finance Agency Revenue
HFC - Housing Finance Corp.
ID - Improvement District
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MBS - Mortgage-Backed Securities
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
PBA - Public Building Authority
PCR - Pollution Control Revenue
PCFA - Pollution Control Financing Authority
SF - Single-Family
SFM - Single-Family Mortgage
SFMR - Single-Family Mortgage Revenue
aZero coupon bonds. The current effective yield may vary. The original accretion
rate will remain constant.
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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).
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Maryland Tax-Free Income Fund (Note 1)
Long Term Investments 96.6%
<C> <C> <C>
$ 200,000 Anne Arundel County GO, Second Issue, 7.75%, 03/15/08 ......................................... $ 221,940
1,650,000 Anne Arundel County Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.00%, 01/01/26 ...... 1,668,595
9,500,000 Anne Arundel County PCR, Refunding, Baltimore Gas and Electric Co. Project, 6.00%, 04/01/24 ... 9,781,580
4,250,000 Baltimore Convention Center Revenue, FGIC Insured, 6.15%, 09/01/19 ............................ 4,447,030
545,000 Baltimore COP, Refunding, Series C, MBIA Insured, 7.25%, 04/01/16 ............................. 606,246
90,000 Baltimore County Authority Revenue, Series 1989, Pre-Refunded, 7.20%, 07/01/19 ................ 97,511
Baltimore County Mortgage Revenue, Old Orchard Apartments Project, Refunding, Series A,
MBIA Insured,
1,000,000 7.00%, 07/01/16 ............................................................................ 1,060,980
3,000,000 7.125%, 01/01/27 ........................................................................... 3,211,230
Baltimore Economic Development Lease Revenue, Refunding, Armistead Partnership, Series A,
1,640,000 6.75%, 08/01/02 ............................................................................ 1,790,863
3,225,000 Series A, 7.00%, 08/01/11 .................................................................. 3,525,892
1,000,000 Baltimore GO, Series B, 7.15%, 10/15/08 ....................................................... 1,198,210
1,850,000 Baltimore Port Facilities Revenue, Consolidated Coal Sales, Series A, 6.50%, 10/01/11 ......... 2,017,443
250,000 Bel Air COP, Parking Facilities, CGIC Insured, Pre-Refunded, 7.80%, 06/01/10 .................. 280,264
350,000 Frederick County College Revenue, Hood College Project, 7.20%, 07/01/09 ....................... 378,815
500,000 Frederick County EDR, Refunding, Manekin Frederick Project, Series A, 7.50%, 12/01/14 ......... 556,940
10,000,000 Gaithersburg Hospital Facilities Improvement Revenue, Shady Grove Hospital, Series A,
Pre-Refunding, 8.25%, 09/01/21 ............................................................... 11,989,600
5,000,000 Gaithersburg Hospital Facilities Revenue, Refunding & Improvement, Shady Grove Hospital,
SA Insured, 6.00%, 09/01/21 ................................................................... 5,159,150
3,420,000 Gaithersburg Nursing Home Revenue, Refunding, Shady Grove Adventist, Series A, Pre-Refunded,
.00%, 09/01/22 ................................................................................ 3,582,757
3,000,000 Hartford County Mortgage Revenue, Refunding, Greenbrier V Apartments Project, FHA Insured, 6.50%,
1/01/26 ....................................................................................... 3,071,370
1,250,000 Howard County EDR, Refunding, 7.75%, 06/01/12 ................................................. 1,356,425
215,000 Howard County Metropolitan District, Series A, Pre-Refunded, 7.40%, 02/15/18 .................. 236,788
300,000 Kent County College Revenue, Refunding, Washington College Project, 7.70%, 07/01/18 ........... 327,447
1,900,000 Maryland Environmental Services, COP, Water and Waste Facilities, Series A, 6.70%, 06/01/11 ... 2,058,061
650,000 Maryland Local Government Insurance Trust Capitalization Program, Series A, 7.125%, 08/01/09 .. 717,964
350,000 Maryland State CDA, Department of Economic and Community Development, SF Program, First Series,
.00%, 04/01/14 ................................................................................ 362,331
1,000,000 Maryland State CDA, Department of Economic and Community Development, SFHR Program,
ourth Series, 7.30%, 04/01/17 ................................................................. 1,055,130
Maryland State CDA, Department of Housing and Community Development,
130,000 Infrastructure Financing, Series A, AMBAC Insured, 7.25%, 06/01/09 ......................... 141,007
675,000 MFH Mortgage, Series E, 7.10%, 05/15/28 .................................................... 708,149
990,000 MFHR Mortgage, Series A, 7.80%, 05/15/32 ................................................... 1,047,093
1,800,000 MFHR Mortgage, Series A, 6.85%, 05/15/33 ................................................... 1,863,540
1,000,000 MFHR Mortgage, Series D, 7.70%, 05/15/20 ................................................... 1,070,960
995,000 SF Program, First Series, 7.375%, 04/01/10 ................................................. 1,044,631
140,000 SF Program, First Series, 7.40%, 04/01/17 .................................................. 146,464
750,000 SF Program, Second Series, 7.60%, 04/01/23 ................................................. 793,080
325,000 SF Program, Second Series, 7.85%, 04/01/29 ................................................. 344,624
300,000 SF Program, Third Series, 7.375%, 04/01/26 ................................................. 310,251
1,435,000 SF Program, Third Series, 7.25%, 04/01/27 .................................................. 1,501,756
1,000,000 SF Program, Fourth Series, 7.45%, 04/01/32 ................................................. 1,046,200
1,990,000 SF Program, Fifth Series, 6.85%, 04/01/11 .................................................. 2,099,072
30,000 SF Program, Sixth Series, 8.125%, 04/01/17 ................................................. 31,214
Maryland State Community Development Administration, MFHR, Series A,
200,000 Department of Economics and Community Development, 7.375%, 05/15/26 ........................ 205,236
30,000 Department of Housing and Community Development, 7.50%, 05/15/31 ........................... 31,301
$ 1,000,000 Maryland State EDC Lease Revenue, Hilton Street Facilities, Series A, 7.00%, 01/01/10 ......... $ 1,112,000
Maryland State Health and Higher Educational Facilities Authority Revenue,
750,000 Bon Secours Heartland, Issue A, Pre-Refunded, 7.375%, 09/01/17 ............................. 854,093
1,000,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/12 .................................. 1,192,550
250,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/22 .................................. 298,138
150,000 Franklin Square Hospital, MBIA Insured, 7.50%, 07/01/19 .................................... 167,057
700,000 Good Samaritan Hospital, Pre-Refunded, 7.50%, 07/01/21 ..................................... 787,724
100,000 Hartford Memorial Hospital and Fallston General Hospital, 8.50%, 07/01/14 .................. 104,968
500,000 Holy Cross Hospital, Series A, AMBAC Insured, 7.125%, 07/01/10 ............................. 555,480
100,000 Howard County General Hospital, Pre-Refunded, 7.00%, 07/01/17 .............................. 106,387
1,500,000 Johns Hopkins Hospital, Pre-Refunded, 7.00%, 07/01/23 ...................................... 1,689,375
1,700,000 Kernan Hospital, Connie Lee Insured, 6.10%, 07/01/24 ....................................... 1,761,744
1,095,000 Mercy Medical Center, Pre-Refunded, 8.00%, 07/01/20 ........................................ 1,247,249
100,000 North Arundel Hospital, BIG Insured, Pre-Refunded, 7.875%, 07/01/21 ........................ 110,800
3,000,000 Refunding, Doctors Community Hospital, 5.75%, 07/01/13 ..................................... 2,779,560
150,000 Refunding, Johns Hopkins Hospital, 7.375%, 07/01/09 ........................................ 160,095
100,000 Refunding, Johns Hopkins University, 7.375%, 07/01/08 ...................................... 108,460
2,710,000 Refunding, Junior Lien, Francis Scott Key Facility, 5.625%, 07/01/25........................ 2,646,993
3,000,000 Refunding, University of Maryland Medical System Project, FGIC Insured, 5.375%, 07/01/13.... 2,919,030
1,000,000 Sinai Hospital of Baltimore, AMBAC Insured, Pre-Refunded, 7.00%, 07/01/19 .................. 1,126,250
1,350,000 Maryland State IDA Financing, EDR, FSA Insured, 7.10%, 07/01/18 ............................... 1,513,134
6,000,000 Maryland State IDAR Financing, American Center Physics Headquarters, 6.625%, 01/01/17 ......... 6,224,160
4,655,000 Maryland State Stadium, Authority Lease Revenue, Convention Center Expansion AMBAC Insured,
.875%, 12/15/14 ............................................................................... 4,814,201
500,000 Maryland State Stadium Authority, Sports Facilities Lease Revenue, Series D, 7.60%, 12/15/19 .. 554,865
5,400,000 Maryland State Transportation Facilities Authority Revenue, Refunding, Series 1992, 5.75%, 07/01/13 5,439,258
Maryland Water Quality Financing Administration Revenue, Revolving Loan Fund,
1,000,000 Series A, 6.55%, 09/01/14 .................................................................. 1,095,730
1,245,000 Series A, Pre-Refunded, 7.25%, 09/01/11 .................................................... 1,419,537
1,565,000 Series B, Pre-Refunded, 6.70%, 09/01/13 .................................................... 1,771,674
Montgomery County Housing Opportunities Commission, MFMR, Series A,
1,580,000 7.25%, 07/01/11 ........................................................................... 1,682,795
2,410,000 7.00%, 07/01/23 ........................................................................... 2,514,498
Montgomery County Housing Opportunities Commission, SFMR, Series A,
2,055,000 6.80%, 07/01/17 ........................................................................... 2,122,774
460,000 7.50%, 07/01/17 ........................................................................... 486,680
195,000 7.625%, 07/01/17 .......................................................................... 202,597
275,000 Montgomery County Parking Revenue, Silver Spring Parking Lot District, Series A, Pre-Refunded,
7.00%, 06/01/08 .............................................................................. 293,695
500,000 Morgan State University Academic and Auxiliary Facilities Fees Revenue, Series A, MBIA Insured,
Pre-Refunded, 7.00%, 07/01/20 ................................................................. 563,125
Northeast Solid Waste Disposal Authority Revenue, Montgomery County Resources Recreation
Project, Series A,
3,100,000 6.20%, 07/01/10 ........................................................................... 3,254,008
6,000,000 6.30%, 07/01/16 ........................................................................... 6,217,440
Ocean City, Refunding, MBIA Insured,
1,880,000 5.75%, 03/15/12 ............................................................................ 1,940,686
1,120,000 5.75%, 03/15/13 ............................................................................ 1,151,763
1,180,000 5.75%, 03/15/14 ............................................................................ 1,208,875
2,050,000 Prince George's County COP, Real Estate Acquisition Program II, MBIA Insured, 6.00%, 09/15/14 . 2,147,744
130,000 Prince George's County GO, Consolidated Public Improvement, Series A, Pre-Refunded, 7.20%,
02/01/08 ..................................................................................... 142,644
Prince George's County Hospital Revenue, Dimensions Health Corp., Pre-Refunded,
$ 3,500,000 7.25%, 07/01/17 ........................................................................... $ 4,098,185
1,000,000 7.00%, 07/01/22 ........................................................................... 1,157,240
5,500,000 Prince George's County Housing Authority, MFHR, Emerson House Project, Series A, 7.00%, 04/15/19 5,725,005
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 ............................................. 3,006,227
2,750,000 Prince George's County IDA Lease Revenue, Upper Marlboro Justice Center Project, MBIA Insured,
5.80%, 06/30/14 .............................................................................. 2,825,405
500,000 Prince George's County, Maryland Parking Authority Revenue, Refunding, Justice Center Facilities
Project, 6.45%, 05/01/05 ..................................................................... 552,555
Prince George's County PCR, Refunding, Potomac Electric Project,
1,200,000 6.00%, 09/01/22 ........................................................................... 1,232,064
2,975,000 6.375%, 01/15/23 .......................................................................... 3,174,742
1,570,000 Prince George's County Solid Waste Management System Revenue, Series 1990, Pre-Refunded,
7.00%, 06/30/08 .............................................................................. 1,768,118
4,500,000 Puerto Rico Commonwealth GO, 5.50%, 07/01/17 .................................................. 4,373,100
1,145,000 Rockville Mortgage Revenue, Refunding, Summit Apartments Project, Series A, MBIA Insured, 5.70%,
01/01/26 ..................................................................................... 1,122,375
Washington Suburban Sanitary District,General Construction,
100,000 7.25%, 12/01/09 ........................................................................... 110,551
1,330,000 5.25%, 06/01/19 ........................................................................... 1,271,440
--------------
Total Long Term Investments (Cost $159,680,457) ........................................ 170,051,983
--------------
cShort Term Investments 1.4%
200,000 Baltimore County, MF Revenue, Refunding, Lincoln Woods Apartments, Weekly VRDN and Put, 3.65%,
11/01/16 ..................................................................................... 200,000
200,000 Baltimore County Revenue, Sheppard & Enoch Pratt Hospital, Weekly VRDN and Put, 3.25%, 07/01/21 200,000
100,000 Frederick County Revenue, Sheppard Pratt Residential Treatment Facility, Weekly VRDN and Put,
3.25%, 07/01/25 .............................................................................. 100,000
100,000 Frederick GO, Improvement, Weekly VRDN and Put, 3.447%, 08/01/11 .............................. 100,000
Maryland State Health & Higher Educational Facilities Authority Revenue, Pooled Loan Program,
Weekly VRDN and Put,
1,300,000 Series A, 3.25%, 04/01/35................................................................... 1,300,000
500,000 Series B, 3.25%, 04/01/35................................................................... 500,000
100,000 Maryland State Industrial Development Financing Authority Revenue, Liberty Medical Center Project,
Weekly VRDN and Put, 3.35%, 07/01/18 ......................................................... 100,000
--------------
Total Short Term Investments (Cost $2,500,000) .......................................... 2,500,000
--------------
Total Investments (Cost $162,180,457) 98.0% ........................................ 172,551,983
Other Assets and Liablities, Net 2.0% .............................................. 3,439,255
--------------
Net Assets 100.0% .................................................................. $175,991,238
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $162,180,457 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 10,751,704
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (380,180)
--------------
Net unrealized appreciation ................................................................. $ 10,371,526
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CDA - Community Development Authority/Agency
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
EDC - Economic Development Corp.
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assistance
GO - General Obligation
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
MBIA - Municipal Bond Investors Assurance Corp.
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
cVariable 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).
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Missouri Tax-Free Income Fund (Note 1)
Long Term Investments 98.7%
<C> <C> <C>
$ 500,000 Audrain County Hospital Revenue, Refunding, Audrain Medical Center Project, AMBAC Insured, 7.35%,
11/01/08 ..................................................................................... $ 573,585
600,000 Bi-State Development Agency, Missouri-Illinois Metropolitan District Revenue, Refunding, Arch Parking
Facility, 7.25%, 01/02/13 .................................................................... 615,594
3,000,000 Bi-State Development Agency, Missouri-Illinois Metropolitan No. 5, Refunding, American Commercial
Terminals, 7.75%, 06/01/10 ................................................................... 3,302,820
1,400,000 Bowling Green School District R1, Building Corp. Leasehold Revenue, MBIA Insured, 6.50%, 03/01/13 1,488,914
1,180,000 Christian County Reorganized School District No. R-6, AMBAC Insured, 7.05%, 03/01/11 .......... 1,321,494
Franklin County Consolidated School District No. 2 GO, FGIC Insured, Pre-Refunded,
500,000 7.20%, 03/01/05 ........................................................................... 533,750
500,000 7.25%, 03/01/06 ........................................................................... 534,225
Guam Airport Authority Revenue,
1,075,000 Refunding, Series A, 6.50%, 10/01/23 ...................................................... 1,078,720
500,000 Series B, 6.60%, 10/01/10 ................................................................. 507,040
4,000,000 Series B, 6.70%, 10/01/23 ................................................................. 4,041,880
3,000,000 Jackson County IDAR, St. Joseph's Health Care Center Corp., MBIA Insured, 6.50%, 07/01/19 ..... 3,201,990
880,000 Jackson County Lease COP, Longview Recreation Complex Project, Pre-Refunded, 8.00%, 11/01/07 .. 955,222
370,000 Jefferson County Reorganized School District No. R-3, AMBAC Insured, 7.00%, 03/01/09 .......... 400,451
Joplin Catholic Health Facilities Corp. Revenue, IDA, St. John's Regional Medical Center Project,
Series 1987,
150,000 COP, 7.125%, 06/01/14 ..................................................................... 155,979
200,000 Refunding, MBIA Insured, 7.125%, 06/01/14 ................................................. 209,848
Joplin School District Building Corp., Leasehold Revenue, Capital Improvement Project, FGIC Insured,
200,000 7.40%, 09/01/03 ........................................................................... 207,628
100,000 7.45%, 03/01/04 ........................................................................... 103,838
605,000 Kansas City Airport Revenue, General Improvement, Series B, CGIC Insured, 6.875%, 09/01/12 .... 662,475
3,345,000 Kansas City IDA, MFHR, Mews Apartments Project, Series A, 6.30%, 07/01/20 ..................... 3,385,107
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 ..................................... 5,122,600
Kansas City MAC, Leasehold Revenue, Capital Improvement,
7,790,000 Citywide Infrastructure, Series B, CGIC Insured, 6.50%, 03/01/14 .......................... 8,339,974
1,750,000 Refunding, Roe Bartle, Series B-1, AMBAC Insured, Pre-Refunded, 7.125%, 04/15/16 .......... 1,977,920
2,905,000 Roe Bartel, Series B, AMBAC Insured, Pre-Refunded, 6.625%, 04/15/15 ....................... 3,272,802
1,665,000 Truman Medical Center, Series A, 7.00%, 11/01/11 .......................................... 1,811,753
1,850,000 Kansas City School District, Building Corp. Leasehold Revenue, Capital Improvement Project, Series A,
FGIC Insured, Pre-Refunded, 7.90%, 02/01/08 .................................................. 2,027,896
3,525,000 Kansas City Tax Increment Financing Commission, Tax Increment Revenue, Briarcliff West Project,
Series B, 7.00%, 11/01/14 .................................................................... 3,705,339
1,800,000 Kansas City Water Revenue, 7th Issue, Series A, 7.00%, 12/01/08 ............................... 1,857,996
Lake of The Ozarks Community Bridge Corp., Bridge System Revenue,
3,035,000 6.25%, 12/01/16 ........................................................................... 2,980,006
7,000,000 b6.40%, 12/01/25 .......................................................................... 6,889,330
75,000 Lee's Summit COP, 8.50%, 08/01/02 ............................................................. 78,869
Lee's Summit, IDAR, John Knox Village Project,
1,000,000 6.55%, 08/15/10 ........................................................................... 1,040,810
2,000,000 6.625%, 08/15/13 .......................................................................... 2,067,160
40,000 Marion County Nursing Home District Revenue, Refunding, Pre-Refunded, 9.00%, 08/01/03 ......... 43,318
1,000,000 Missouri School Board Association COP, Lease Participation, North St. Francois County Project,
MBIA Insured, Pre-Refunded, 7.375%, 04/01/10 ................................................. 1,086,780
Missouri School Board Association COP, Pooled Finance Program, BIG Insured,
130,000 Series A-3, 7.875%, 03/01/06 .............................................................. 136,726
225,000 Series A-5, 7.375%, 03/01/06 .............................................................. 238,795
Missouri State Environmental Improvement and Energy Resources Authority, PCR,
$ 950,000 Revolving Fund, Lee's Summit, Series B, 7.125%, 12/01/10 .................................. $ 1,070,650
4,500,000 Revolving Fund, Series A, 6.55%, 07/01/14 ................................................. 4,858,020
1,945,000 Revolving Fund, Springfield Project, Series A, 7.00%, 10/01/10 ............................ 2,175,580
1,000,000 Revolving Fund Program, Series A, CGIC Insured, 6.05%, 07/01/16 ........................... 1,041,980
2,000,000 Revolving Fund Program, Series B, 7.20%, 07/01/16 ......................................... 2,330,340
Missouri State Environmental Improvement and Energy Resources Authority, PCR, National Rural
Association Electric Project,
45,000 Series 1984 G-4, 8.25%, 11/15/14 .......................................................... 46,781
20,000 Series 1984 G-5, 7.90%, 11/15/14 .......................................................... 20,715
225,000 Series 1984 G-6, 7.90%, 11/15/14 .......................................................... 233,611
2,100,000 Series 1984 G-6, AMBAC Insured, 5.85%, 02/01/13 ........................................... 2,147,229
2,390,000 Missouri State Environmental Improvement and Energy Resources Authority, Union Electric Project,
7.40%, 05/01/20 .............................................................................. 2,638,680
1,630,000 Missouri State Health and Educational Facilities Authority, Educational Facilities Revenue, Central
Missouri State University Project, AMBAC Insured, 5.75%, 10/01/25 ............................ 1,637,058
Missouri State Health and Educational Facilities Authority, Health Facilities Revenue,
2,000,000 Barnes Hospital, Pre-Refunded, 7.125%, 12/15/20 ........................................... 2,288,160
100,000 Bethesda Health Group, Inc. Project, Pre-Refunded, 8.00%, 04/01/13 ........................ 109,214
3,500,000 Lake of The Ozarks General Hospital, 8.00%, 02/15/11 ...................................... 3,711,855
200,000 Memorial Community Hospital, Association of Jefferson City, 8.25%, 04/15/99 ............... 204,854
125,000 Refunding, Charles E. Still Osteopathic Hospital Project, 7.625%, 02/01/08 ................ 126,711
865,000 Refunding, Heartland Health Systems Project, 8.125%, 10/01/10 ............................. 971,715
570,000 Refunding, St. John's Regional Medical Center, MBIA Insured, Pre-Refunded, 7.70%, 09/01/15 596,944
2,000,000 Refunding & Improvement, Christian Health, Series A, FGIC Insured, Pre-Refunded, 6.875%,
02/15/21 ................................................................................. 2,264,320
950,000 Sisters of St. Mary's Health Care Project, BIG Insured, Pre-Refunded, 7.75%, 06/01/16 ..... 1,048,278
175,000 Spelman-St. Luke's Hospital Corp. Project, Pre-Refunded, 7.875%, 10/01/18 ................. 195,258
Missouri State Health and Educational Facilities Authority Revenue,
5,000,000 Health Midwest, Series A, MBIA Insured, 6.40%, 02/15/15 ................................... 5,403,650
700,000 Health Midwest, Series B, MBIA Insured, 6.10%, 06/01/11 ................................... 743,743
1,990,000 Health Midwest, Series B, MBIA Insured, 6.25%, 06/01/14 ................................... 2,127,967
1,100,000 Health Midwest, Series B, MBIA Insured, 6.25%, 02/15/22 ................................... 1,180,432
2,745,000 Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 ........................... 2,976,458
4,000,000 Jefferson Memorial Hospital Obligated Group, 6.75%, 05/15/15 .............................. 4,027,560
3,000,000 Jefferson Memorial Hospital Obligated Group, 6.80%, 05/15/25 .............................. 3,008,910
1,000,000 Refunding, Freeman Hospital Project, Series A, FSA Insured, 5.50%, 02/15/24 ............... 977,630
1,000,000 Refunding, SSM Health Care, Series AA, MBIA Insured, 6.25%, 06/01/16 ...................... 1,075,300
50,000 Refunding, St. Louis University, Series A, AMBAC Insured, 7.875%, 06/01/12 ................ 52,946
1,200,000 Refunding & Improvement, St. Luke's Hospital of Kansas City Project, MBIA Insured, Pre-Refunded,
7.00%, 11/15/13 .......................................................................... 1,384,140
Missouri State Housing Development Commission, GNMA Secured,
2,240,000 Series B, 6.40%, 12/01/24 ................................................................. 2,290,803
165,000 SFMR, Series A, 7.90%, 02/01/21 ........................................................... 172,768
485,000 SFMR, Series A, 7.625%, 02/01/22 .......................................................... 509,667
2,000,000 SFMR, Series B, 6.10%, 09/01/14 ........................................................... 2,031,340
410,000 SFMR, Series B, 7.625%, 06/01/21 .......................................................... 428,848
1,820,000 SFMR, Series B, 7.75%, 06/01/22 ........................................................... 1,905,576
1,640,000 SFMR, Series C, 6.90%, 07/01/18 ........................................................... 1,710,733
135,000 Missouri State Housing Development Commission, MFHR, FHA Insured, 8.50%, 12/01/29 ............. 142,598
5,000,000 Missouri State Western College Revenue, Refunding, Student Housing, Pre-Refunded, 8.00%,
10/01/16 ..................................................................................... 5,972,900
$ 1,000,000 Moberly Combined Waterworks and Sewerage System, Refunding & Improvement Bonds,
FGIC Insured, Pre-Refunded, 7.50%, 08/01/15 .................................................. $ 1,150,250
50,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc., Pre-Refunded,
8.75%, 03/01/16 .............................................................................. 55,909
1,000,000 Northeast Missouri State University Recreational Facility Revenue, Campus Recreational Center
Project, AMBAC Insured, 5.80%, 06/01/15 ...................................................... 1,017,780
300,000 North Kansas City School District Facilities Authority, BIG Insured, 7.40%, 03/01/06 .......... 316,548
5,200,000 Northwest R-I Educational Facilities Authority, Leasehold Revenue, Jefferson County, FSA Insured,
5.70%, 03/01/15 .............................................................................. 5,247,216
5,000,000 Phelps County Hospital Revenue, Refunding, Phelps County Regional Medical Center,
Connie Lee Insured, 6.00%, 05/15/13 .......................................................... 5,057,600
250,000 Platte County Reorganized School District No. R-5, Pre-Refunded, 7.25%, 03/01/06 .............. 266,865
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Pre-Refunded,
40,000 Refunding, Series 1985-A, FSA Insured, 9.00%, 07/01/09 .................................... 52,858
500,000 Series 1988-A, 7.90%, 07/01/07 ............................................................ 556,055
375,000 Series 1988-A, 7.875%, 07/01/17 ........................................................... 416,835
75,000 Puerto Rico Commonwealth Highway Authority Revenue, Series P, Pre-Refunded, 8.125%, 07/01/13 .. 83,691
25,000 Puerto Rico Commonwealth IDC, General Purpose Revenues, 8.00%, 01/01/03 ....................... 25,126
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
200,000 7.90%, 07/01/07 ........................................................................... 216,986
975,000 7.75%, 07/01/08 ........................................................................... 1,054,628
Puerto Rico Commonwealth Public Improvement GO, Pre-Refunded,
25,000 Series 1986, 7.90%, 07/01/11 .............................................................. 26,139
120,000 Series A, 7.75%, 07/01/13 ................................................................. 133,056
Puerto Rico Electric Power Authority Revenue,
15,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15 ........................................ 16,237
25,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ........................................ 27,828
1,110,000 Refunding, Series N, 7.125%, 07/01/14 ..................................................... 1,207,136
280,000 Series O, 7.125%, 07/01/14 ................................................................ 304,503
520,000 Series O, Pre-Refunded, 7.125%, 07/01/14 .................................................. 579,462
380,000 Puerto Rico HFC, MFMR, Portfolio A, Series 1, 7.50%, 04/01/22 ................................. 401,189
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
160,000 Series A, 7.80%, 10/15/21 ................................................................. 167,730
1,325,000 Series C, 6.85%, 10/15/23 ................................................................. 1,392,072
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
350,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12 .......................................... 387,408
300,000 Upjohn Co. Project, 7.50%, 12/01/23 ....................................................... 328,509
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 2,370,150
130,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 141,848
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
175,000 7.875%, 07/01/16 .......................................................................... 188,494
1,750,000 7.25%, 07/01/17 ........................................................................... 1,913,048
1,000,000 Raymore GO, CGIC Insured, 6.00%, 03/01/14 ..................................................... 1,035,710
500,000 St. Charles County Community College, Pre-Refunded, 7.25%, 03/01/06 ........................... 559,430
St. Charles Public Facility Authority, Leasehold Revenue, AMBAC Insured,
3,000,000 Refunding, 5.80%, 02/01/10 ................................................................ 3,081,660
1,500,000 Series 1990, Pre-Refunded, 7.20%, 03/01/10 ................................................ 1,666,590
2,000,000 St. Louis Airport Revenue, Lambert-St. Louis International Airport, Refunding & Improvement,
FGIC Insured, 6.125%, 07/01/15 ............................................................... 2,086,440
St. Louis County Housing Authority, MFHR, Kensington Square Apartments Project, Refunding,
1,000,000 6.55%, 03/01/14 ........................................................................... 1,042,140
2,750,000 6.65%, 03/01/20 ........................................................................... 2,865,308
St. Louis County IDA, Health Facilities Revenue,
$ 1,930,000 Mother of Perpetual Help, 6.40%, 08/01/35 ................................................. $ 2,022,042
295,000 Normandy Osteopathic Hospitals Project, Refunding & Improvement, First Mortgage, 9.125%,
08/01/13 ................................................................................. 310,989
30,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19 ............................. 31,653
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 ............................................................. 5,858,253
4,765,000 Refunding, 5.50%, 08/15/13 ................................................................ 4,594,032
5,565,000 Refunding, 5.75%, 08/15/21 ................................................................ 5,419,754
1,000,000 St. Louis IDA, Sewer and Solid Waste Disposal Facilities Revenue, Anheuser-Busch Project, 5.875%,
11/01/26 ..................................................................................... 1,000,320
250,000 St. Louis Land Clearance RDA, Leasehold Revenue, Capital Improvement, Pre-Refunded, 7.60%,
08/15/08 ..................................................................................... 271,967
10,000,000 St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding, Series A, 6.00%, 07/15/13 .... 9,861,300
470,000 St. Louis Parking Facilities Revenue, 6.625%, 12/15/21 ........................................ 495,991
375,000 St. Louis Public School District Building Corp., Leasehold Revenue, Capital Improvement,
Series 1989-A, FGIC Insured, 7.40%, 04/01/09 ................................................. 383,490
St. Louis Regional Convention and Sports Complex Authority, Series C,
3,700,000 7.75%, 08/15/01 ........................................................................... 3,922,000
11,900,000 7.90%, 08/15/21 ........................................................................... 13,331,807
15,000,000 Sikeston Electric Revenue, Refunding, MBIA Insured, Pre-Refunded, 6.25%, 06/01/22 ............. 16,814,550
250,000 Southwest University Housing System Revenue, FGIC Insured, Pre-Refunded, 7.00%, 10/01/10 ...... 267,797
5,000,000 Springfield Waterworks Revenue, Series A, 5.60%, 05/01/23 ..................................... 5,063,850
300,000 Sullivan County Public Water Supply District No. 1, Waterworks Revenue, Refunding, 7.70%, 12/15/13 321,095
500,000 Washington County GO, Industrial Bonds, Pauwels Transformers Project, Series A, 7.60%, 12/01/09 530,340
2,000,000 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Series A, 8.625%, 09/15/20 .. 2,172,120
1,600,000 West Plains Improvement Authority, Leasehold Revenue, Civic Center, Inc. Project, FGIC Insured,
6.85%, 04/01/06 .............................................................................. 1,735,087
--------------
Total Long Term Investments (Cost $230,216,672) ........................................ 245,649,427
--------------
cShort Term Investments 1.0%
200,000 Kansas City IDAR, Research Health Services System, MBIA Insured, Daily VRDN and Put, 2.95%,
04/15/15 ..................................................................................... 200,000
1,800,000 Missouri State Health and Educational Facilities Authority, Health Facilities Revenue, Sisters of the
Mercy Health Facility, Series C, Weekly VRDN and Put, 3.20%, 06/01/19 ........................ 1,800,000
500,000 Missouri State Health and Educational Facilities Authority Revenue, Christian Health Services, Series A,
Weekly VRDN and Put, 3.00%, 11/01/19 ......................................................... 500,000
--------------
Total Short Term Investments (Cost $2,500,000) ......................................... 2,500,000
--------------
Total Investments (Cost $232,716,672) 99.7% ....................................... 248,149,427
Other Assets and Liabilities, Net .3% ............................................. 697,289
--------------
Net Assets 100.0% ................................................................. $248,846,716
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $232,717,358 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 15,666,676
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (234,607)
--------------
Net unrealized appreciation ................................................................. $ 15,432,069
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors Guaranty Insurance Co.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFC - Housing Finance Corp.
IDA - Industrial Development Authority/Agency
IDAR - Industrial Development Authority/Agency Revenue
IDC - Industrial Development Corp.
MAC - Municipal Assistance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
SFMR - Single-Family Mortgage Revenue
bSee Note 1 (g) regarding securities purchased on a when-issued basis.
cVariable 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).
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin North Carolina Tax-Free Income Fund (Note 1)
Long Term Investments 97.0%
<C> <C> <C>
$ 1,075,000 Appalachian State University Revenue, Appalachian State Teachers College Utility System,
MBIA Insured, 6.10%, 05/15/13 ................................................................ $ 1,130,707
2,000,000 Buncombe County Metropolitan Sewage District System Revenue, Series B, 6.75%, 07/01/16 ........ 2,281,180
100,000 Charlotte Airport Revenue, 8.50%, 07/01/17 .................................................... 106,847
2,250,000 Charlotte COP, Convention Facility Project, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/11 ...... 2,591,100
Charlotte-Mecklenburg Hospital Authority, Health Care System Revenue, Refunding,
6,100,000 Series 1992, 6.25%, 01/01/20 ............................................................... 6,289,344
150,000 Series G, Pre-Refunded, 7.875%, 10/01/15 ................................................... 162,546
350,000 Series I, Pre-Refunded, 7.80%, 10/01/18 .................................................... 389,879
Charlotte Special Facilities Revenue, Piedmont Aviation, Inc. Project, Douglas International Airport,
260,000 8.375%, 07/01/17 ........................................................................... 263,125
1,255,000 9.00%, 07/01/17 ............................................................................ 1,319,720
1,000,000 Charlotte Water and Sewer, 5.90%, 02/01/18 .................................................... 1,044,890
200,000 Chowan County Hospital Revenue, Refunding, 7.625%, 10/01/10 ................................... 202,616
3,100,000 Coastal Solid Waste Disposal System Authority Revenue, Refunding, Regional Solid Waste
Management, 6.50%, 06/01/08 .................................................................. 3,326,114
1,250,000 Concord Utilities System Revenue, MBIA Insured, 5.75%, 12/01/17 ............................... 1,267,000
1,000,000 County of Cleveland GO, AMBAC Insured, Pre-Refunded, 7.10%, 06/01/06 .......................... 1,128,210
1,400,000 Craven County Regional Medical Facility, MBIA Insured, Pre-Refunded, 7.20%, 10/01/19 .......... 1,596,154
Cumberland County COP, Civic Center Project, Series A, AMBAC Insured,
3,500,000 6.40%, 12/01/19 ............................................................................ 3,761,345
3,765,000 6.40%, 12/01/24 ............................................................................ 4,030,320
Cumberland County Hospital Facility System Revenue,
110,000 BIG Insured, Pre-Refunded, 7.875%, 10/01/14 ................................................ 122,734
2,000,000 MBIA Insured, 6.00%, 10/01/21 .............................................................. 2,060,860
1,000,000 Dare County Utility System Revenue, MBIA Insured, 5.75%, 06/01/14 ............................. 1,035,110
Davie County GO, North Carolina Water, Unlimited Tax,
350,000 7.10%, 04/01/10 ............................................................................ 387,818
250,000 7.10%, 04/01/11 ............................................................................ 276,423
2,000,000 Duplin County COP, Social Service Administrative Building, Solid Waste Project, FGIC Insured, 6.75%,
09/01/12 ..................................................................................... 2,168,540
1,650,000 Durham COP, Series 1991, 6.875%, 04/01/09 ..................................................... 1,833,117
Durham County COP, Hospital and Office Facilities Project,
3,000,000 6.00%, 05/01/14 ............................................................................ 3,098,760
3,200,000 6.00%, 05/01/17 ............................................................................ 3,292,832
3,000,000 Durham County COP, Jail Facilities and Computer Equipment Project, 6.625%, 05/01/14 ........... 3,222,810
Fayetteville Public Works Commission Revenue,
1,650,000 FGIC Insured, Pre-Refunded, 7.00%, 03/01/11 ................................................ 1,846,004
2,000,000 Series A, FSA Insured, 6.00%, 03/01/16 ..................................................... 2,063,920
750,000 Gaston County Industrial Facilities and PCFA Revenue, 7.70%, 10/01/12 ......................... 833,265
2,200,000 Gastonia Combined Utilities System Revenue, MBIA Insured, 6.10%, 05/01/19 ..................... 2,303,202
Greensboro COP,
1,610,000 Coliseum Arena Expansion Project, 6.75%, 12/01/09 .......................................... 1,801,429
350,000 Greensboro Center City Corp., Pre-Refunded, 7.90%, 07/01/09 ................................ 387,993
1,320,000 Greensboro HDC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.70%, 01/01/24 .......... 1,369,196
1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08 ...................................... 1,028,830
400,000 Halifax County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp., 8.15%,
11/01/19 ..................................................................................... 439,648
Haywood County Industrial Facilities and PCFA, Environmental Improvement Revenue, Champion
International Project,
2,000,000 6.25%, 09/01/25 ............................................................................ 2,001,600
2,400,000 Series A, 5.75%, 12/01/25 .................................................................. 2,250,792
$ 200,000 Haywood County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp., 8.10%,
11/01/09 ..................................................................................... $ 218,940
1,500,000 Highpoint Special Obligation Sales Tax Revenue, Solid Waste Management Project, 7.15%, 07/01/01 1,582,200
3,155,000 Kinston Housing Authority Mortgage Revenue, Refunding, Kinston Towers Project, 6.75%, 12/01/18 3,224,631
500,000 Lincoln County GO, Pre-Refunded, 6.90%, 06/01/08 .............................................. 560,260
Martin County Industrial Facilities and PCFA Revenue,
3,000,000 Refunding, 6.375%, 01/01/10 ................................................................ 3,200,670
3,000,000 Solid Waste, Weyerhaeuser Co. Project, 6.00%, 11/01/25 ..................................... 2,987,340
1,000,000 Mooresville Grade School District, COP, AMBAC Insured, 6.35%, 10/01/14 ........................ 1,057,420
1,000,000 New Hanover County Industrial Facilities and PCFA Revenue, Refunding, 6.70%, 07/01/19 ......... 1,066,110
North Carolina Eastern Municipal Power Agency System Revenue,
775,000 Refunding, Series 1987-A, 7.25%, 01/01/21 .................................................. 803,163
400,000 Refunding, Series 1988-A, Pre-Refunded, 8.00%, 01/01/21 .................................... 437,116
750,000 Refunding, Series 1989-A, Pre-Refunded, 7.75%, 01/01/12 .................................... 838,778
9,000,000 Refunding, Series 1991-A, 6.50%, 01/01/17 .................................................. 9,248,400
3,000,000 Refunding, Series 1991-A, 6.50%, 01/01/18 .................................................. 3,203,640
6,000,000 Series 1993-A, 6.40%, 01/01/21 ............................................................. 6,120,720
North Carolina Educational Facilities Finance Agency Revenue, Highpoint College Project,
190,000 7.10%, 12/01/07 ............................................................................ 208,162
205,000 7.10%, 12/01/08 ............................................................................ 224,227
220,000 7.10%, 12/01/09 ............................................................................ 240,159
2,925,000 North Carolina HFA, MFR, Refunding, Series B, 6.90%, 07/01/24 ................................. 3,095,147
North Carolina HFA, Refunding,
3,000,000 MF, Series A, AMBAC Insured, 5.90%, 07/01/20 ............................................... 3,026,820
4,855,000 Series F, 6.70%, 01/01/27 .................................................................. 5,094,109
3,000,000 SF, Series DD, 6.20%, 09/01/27 ............................................................. 3,026,100
North Carolina HFA, SFMR,
35,000 Series C, 8.00%, 03/01/17 .................................................................. 35,962
105,000 Series H, 8.05%, 03/01/19 .................................................................. 108,725
200,000 Series J, 7.40%, 03/01/22 .................................................................. 208,380
490,000 Series M, 7.85%, 09/01/28 .................................................................. 513,736
North Carolina HFA, SFR,
3,400,000 Refunding, Series S, 6.95%, 03/01/17 ....................................................... 3,602,572
955,000 Series AA, 6.25%, 03/01/17 ................................................................. 977,853
2,135,000 Series X, 6.65%, 09/01/19 .................................................................. 2,221,852
North Carolina Medical Care Commission, Health Care Facilities Revenue,
700,000 Gaston Health Care Support Project, Pre-Refunded, 7.25%, 02/15/19 .......................... 775,033
1,250,000 Stanley Memorial Hospital, 7.80%, 10/01/19 ................................................. 1,347,400
North Carolina Medical Care Commission, Hospital Revenue,
3,500,000 Halifax Memorial Hospital Project, 6.75%, 08/15/24 ......................................... 3,597,125
160,000 Memorial Mission Hospital Project, MBIA Insured, Pre-Refunded, 7.80%, 10/01/18 ............. 178,230
1,850,000 Presbyterian Hospital Project, Pre-Refunded, 7.375%, 10/01/20 .............................. 2,122,542
4,700,000 Refunding, Annie Pen Memorial Hospital Project, 7.50%, 08/15/21 ............................ 4,955,022
100,000 Refunding, Carolina Medicorp Project, Series A, Pre-Refunded, 7.875%, 05/01/15 ............. 106,826
4,830,000 Refunding, North Carolina Baptist Hospitals Project, Series A, 6.00%, 06/01/22 ............. 4,869,992
1,900,000 Refunding, Presbyterian Health Services Project, 5.50%, 10/01/20 ........................... 1,828,142
250,000 Refunding, St. Joseph's Hospital Project, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/14 ..... 275,150
3,000,000 Roanoke-Chowan Hospital Project, 7.75%, 10/01/19 ........................................... 3,181,110
195,000 Scotland Memorial Hospital, MBIA Insured, Pre-Refunded, 8.625%, 10/01/11 ................... 220,605
1,000,000 Wayne Memorial Hospital Project, AMBAC Insured, 6.00%, 10/01/21 ............................ 1,018,800
3,240,000 Wilson Memorial Hospital Project, AMBAC Insured, 6.50%, 11/01/20 ........................... 3,409,031
10,500,000 North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, Refunding, Series 1992,
6.25%, 01/01/17 .............................................................................. 10,640,805
North Carolina State Education Assistance Authority Revenue, Guaranteed, Student Loan,
Subordinated Lien, Series A,
$ 3,310,000 6.05%, 07/01/10 ............................................................................ $ 3,339,360
1,500,000 6.30%, 07/01/15 ............................................................................ 1,507,050
400,000 Northampton County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp., 8.05%,
11/01/04 ..................................................................................... 438,480
1,000,000 Onslow County Combined Enterprise System Revenue, MBIA Insured, 6.00%, 06/01/15 ............... 1,045,820
Orange County GO, Pre-Refunded,
350,000 Series 1989, 7.20%, 05/01/08 ............................................................... 388,493
430,000 Series 1990, 6.90%, 06/01/09 ............................................................... 487,702
1,195,000 Pender County COP, Pre-Refunded, 7.70%, 06/01/11 .............................................. 1,399,704
2,165,000 Person County COP, Person County Law Enforcement Center Project, Series 1991, MBIA Insured,
7.125%, 06/01/11 .............................................................................. 2,397,348
Pitt County COP, FGIC Insured,
2,750,000 6.90%, 04/01/08 ............................................................................ 2,993,705
750,000 6.00%, 04/01/12 ............................................................................ 778,590
Polk County School GO, FGIC Insured,
700,000 6.70%, 05/01/08 ............................................................................ 779,170
700,000 6.70%, 05/01/09 ............................................................................ 779,170
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A, Pre-Refunded,
1,000,000 7.875%, 07/01/17 ........................................................................... 1,111,560
250,000 7.00%, 07/01/19 ............................................................................ 273,065
Puerto Rico Commonwealth GO,
8,050,000 6.45%, 07/01/17 ............................................................................ 8,620,101
500,000 Public Improvement, Series 1987, Pre-Refunded, 7.25%, 07/01/12 ............................. 534,550
200,000 Series 1986, Pre-Refunded, 7.90%, 07/01/11 ................................................. 209,110
500,000 Series 1990, Pre-Refunded, 7.25%, 07/01/10 ................................................. 570,155
Puerto Rico Commonwealth Highway Authority Revenue,
100,000 Refunding, Series N, Pre-Refunded, 8.00%, 07/01/03 ......................................... 111,313
170,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ................................................... 189,700
1,250,000 Series R, 7.15%, 07/01/00 .................................................................. 1,367,900
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
3,000,000 Refunding, Series X, 5.50%, 07/01/19 ....................................................... 2,863,320
2,000,000 Series W, 5.50%, 07/01/17 .................................................................. 1,912,800
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
250,000 7.75%, 07/01/08 ............................................................................ 270,418
250,000 7.50%, 07/01/09 ............................................................................ 269,063
Puerto Rico Electric Power Authority Revenue,
5,000,000 6.125%, 07/01/21 ........................................................................... 5,116,300
250,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 .................................... 278,283
160,000 Refunding, Series N, 7.125%, 07/01/14 ...................................................... 174,002
340,000 Refunding, Series N, Pre-Refunded, 7.125%, 07/01/14 ........................................ 378,879
850,000 Series 0, 7.125%, 07/01/14 ................................................................. 924,383
1,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 .................................................... 1,150,840
1,000,000 Series T, 6.375%, 07/01/24 ................................................................. 1,040,930
410,000 Puerto Rico HFC, MFMR, Portfolio A, Series I, 7.50%, 04/01/22 ................................. 432,862
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
215,000 Series A, 7.80%, 10/15/21 .................................................................. 225,387
2,310,000 Series C, 6.85%, 10/15/23 .................................................................. 2,426,932
300,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project,
7.50%, 12/01/23 .............................................................................. 328,509
125,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 136,393
Puerto Rico Telephone Authority Revenue, Series L, Refunding,
$ 1,885,000 6.00%, 01/01/12 ............................................................................ $ 1,927,262
1,490,000 6.125%, 01/01/22 ........................................................................... 1,520,888
1,450,000 Raeford HDC, First Lien Revenue, Refunding, Yadkin Trail, Series A, 6.00%, 07/15/22 ........... 1,457,975
Robeson County GO, Refunding,
110,000 7.20%, 06/01/10 ............................................................................ 119,534
115,000 7.20%, 06/01/11 ............................................................................ 124,822
120,000 7.20%, 06/01/12 ............................................................................ 128,641
145,000 Pre-Refunded, 7.80%, 06/01/11 .............................................................. 159,988
1,750,000 Robeson County Industrial Facilities and PCFA Revenue, Refunding, Campbell Soup Co. Project,
6.40%, 12/01/06 .............................................................................. 1,940,750
1,850,000 Rutherford County COP, Public Facilities Project, FGIC Insured, 6.25%, 06/01/23 ............... 1,933,731
1,000,000 Scotland County COP, Jail/Courthouse Project, CGIC Insured, 6.75%, 03/01/11 ................... 1,080,520
1,000,000 Shelby Producing Facilities System Revenue, Capital Improvement, Pre-Refunded, 6.625%, 06/01/17 1,129,530
Southern Pines GO, Pre-Refunded,
150,000 Refunding, 7.40%, 06/01/08 ................................................................. 164,060
200,000 Series 1990, 6.90%, 03/01/08 ............................................................... 222,637
400,000 Series 1990, 6.90%, 03/01/09 ............................................................... 445,275
1,000,000 Stokes County COP, MBIA Insured, 7.00%, 03/01/06 .............................................. 1,109,060
50,000 University of North Carolina at Chapel Hill, Utility System Revenue, Pre-Refunded, 7.30%, 08/01/11 52,328
University of North Carolina at Charlotte Revenue,
100,000 Refunding, Series K, Pre-Refunded, 7.375%, 01/01/03 ........................................ 108,188
2,680,000 Student Activity Center, MBIA Insured, 5.50%, 06/01/16 ..................................... 2,666,787
3,500,000 Student Activity Center, MBIA Insured, 5.50%, 06/01/21 ..................................... 3,457,300
250,000 University of North Carolina at Wilmington, Student Union System Revenue, AMBAC Insured, 6.90%,
01/01/07 ..................................................................................... 273,017
250,000 Wake County Hospital Revenue, MBIA Insured, 7.40%, 10/01/16 ................................... 268,510
10,000,000 Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co. Project, 6.90%,
04/01/09 ..................................................................................... 10,751,700
400,000 Wilmington City GO, Sanitary Sewer, 6.90%, 03/01/05 ........................................... 436,627
425,000 Winston-Salem SFMR, 8.00%, 09/01/07 ........................................................... 452,263
2,250,000 Winston-Salem Water and Sewer System Revenue, Series B, 5.70%, 06/01/17 ....................... 2,302,290
--------------
Total Long Term Investments (Cost $228,857,383) ......................................... 241,860,015
--------------
cShort Term Investments 1.4%
200,000 North Carolina Educational Facilities Finance Agency Revenue, Bowman Grey School Medical Project,
Weekly VRDN and Put, 3.25%, 09/01/20 ......................................................... 200,000
North Carolina Medical Care Commission Hospital Revenue,
100,000 ACES Pooled Equipment Financing Project, MBIA Insured, Weekly VRDN and Put, 3.10%, 12/01/25 100,000
100,000 ACES Pooled Financing Project, Series A, Daily VRDN and Put, 3.45%, 10/01/20 ............... 100,000
800,000 ACES Pooled Financing Project, Series A-2, MBIA Insured, Weekly VRDN and Put, 3.45%, 07/01/26 800,000
400,000 ACES Pooled Financing Project, Weekly VRDN and Put, 3.20%, 04/01/12 ........................ 400,000
300,000 North Carolina Baptist Hospitals Project, Series B, Weekly VRDN and Put, 3.25%, 06/01/22 ... 300,000
300,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.80%, 12/01/15 ........................................................................... 300,000
500,000 Refunding, Duke University Hospital Project, Series A, Weekly VRDN and Put, 3.20%, 06/01/23 500,000
Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co.,
$ 400,000 Series A, Weekly VRDN and Put, 3.30%, 05/01/15 ............................................. $ 400,000
500,000 Series B, Weekly VRDN and Put, 3.60%, 09/01/15 ............................................. 500,000
--------------
Total Short Term Investments (Cost $3,600,000) .......................................... 3,600,000
--------------
Total Investments (Cost $232,457,383) 98.4% ........................................ 245,460,015
Other Assets and Liabilities, Net 1.6% ............................................. 4,001,759
--------------
Net Assets 100.0% .................................................................. $249,461,774
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $232,459,203 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 13,255,758
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (254,946)
--------------
Net unrealized appreciation ................................................................. $ 13,000,812
==============
</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.
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 Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
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
cVariable 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).
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Texas Tax-Free Income Fund (Note 1)
Long Term Investments 99.7%
<C> <C> <C>
$ 2,250,000 Alliance Airport Authority, Inc., Texas Special Facilities Revenue, American Airlines, Inc. Project, 7.00%,
12/01/11 ....................................................................................... $ 2,424,240
Austin Combined Utility System Revenue,
2,000,000 Refunding, AMBAC Insured, 7.00%, 05/15/16 .................................................... 2,197,260
800,000 Series A, AMBAC Insured, 6.75%, 11/15/07 ..................................................... 884,416
50,000 Series A, Pre-Refunded, 8.00%, 11/15/16 ...................................................... 58,273
1,745,000 Series C, Pre-Refunded, 7.30%, 05/15/17 ...................................................... 2,002,021
3,000,000 Bexar County Health Facilities Development Corp. Revenue, Refunding, Incarnate World Health Services,
FSA Insured, 6.00%, 11/15/15 ................................................................... 3,091,260
100,000 Bexar County HFC Revenue, GNMA Secured, 8.10%, 03/01/24 ......................................... 105,038
3,210,000 Bexar Metropolitan Water District, Waterworks System Revenue, Refunding, MBIA Insured, 6.35%,
05/01/25 ....................................................................................... 3,399,230
Brazos Higher Education Authority Revenue, Student Loan, Inc.,
1,000,000 Refunding, Series A-2, 6.80%, 12/01/04 ....................................................... 1,064,860
1,300,000 Series B-2, 8.25%, 06/01/23 .................................................................. 1,318,109
Brazos River Authority, PCR, Collateralized, Series A,
70,000 Houston Light and Power Co. Project, 7.875%, 11/01/18 ........................................ 72,876
150,000 Texas Utilities Electric Co. Project, 7.875%, 03/01/17 ....................................... 156,447
500,000 Texas Utilities Electric Co. Project, 7.875%, 03/01/21 ....................................... 557,430
100,000 Brazos River Authority Revenue, Refunding, Collateralized, Houston Light and Power Co. Project,
Series A, 7.625%, 05/01/19 ..................................................................... 110,181
Brownsville Utilities System Priority Revenue, Pre-Refunded,
5,000,000 AMBAC Insured, 6.875%, 09/01/10 .............................................................. 5,624,950
50,000 Series A, 8.00%, 09/01/14 .................................................................... 52,139
2,265,000 Caldwell County GO, Refunding, AMBAC Insured, Pre-Refunded, 7.00%, 08/15/15 ..................... 2,477,729
80,000 Cameron County HFC, Collateralized Mortgage Obligation, Refunding, Series B, FGIC Insured, 7.85%,
03/01/24 ....................................................................................... 84,792
Cimarron MUD, Waterworks and Sewer System, Asset Guaranteed, Refunding, Combined Tax and
Revenue,
2,775,000 7.50%, 03/01/15 .............................................................................. 3,011,569
1,225,000 Pre-Refunded, 7.50%, 03/01/15 ................................................................ 1,367,272
4,000,000 Clinton ISD, Refunding, 7.00%, 03/01/15 ......................................................... 4,227,480
50,000 Coastal Water Authority, Water Conveyance System Revenue, Pre-Refunded, 8.20%, 12/15/07 ......... 53,832
1,750,000 Comal County Health Facilities Development Corp. Revenue, Refunding, McKenna Memorial Hospital,
FHA Insured, 7.375%, 01/15/21 .................................................................. 1,889,300
1,500,000 Coppell ISD, Refunding, 6.50%, 08/15/26 ......................................................... 1,576,635
1,400,000 Corpus Christi HFC, SFMR, Refunding, Series A, MBIA Insured, 7.70%, 07/01/11 .................... 1,500,324
Dallas Civic Center Convention Complex Revenue, Senior Lien, AMBAC Insured,
2,000,000 7.00%, 01/01/10 .............................................................................. 2,156,020
1,000,000 Refunding, 6.75%, 01/01/12 ................................................................... 1,049,120
Dallas-Ft. Worth International Airport Facilities Improvement Corp. Revenue,
1,000,000 American Airlines, Inc., 8.00%, 11/01/24 ..................................................... 1,091,840
2,000,000 Delta Airlines, Inc., 7.625%, 11/01/21 ....................................................... 2,142,480
2,000,000 Refunding, American Airlines, Inc., 6.00%, 11/01/14 .......................................... 1,962,420
1,015,000 Dallas-Ft. Worth Regional Airport Revenue, American Special Facilities, 7.25%, 11/01/12 ......... 1,016,827
155,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 ................................................. 163,074
500,000 Dallas Housing Corp. Capital Projects Revenue, Refunding, Section 8, Assisted Projects, 7.70%,
08/01/05 ....................................................................................... 525,380
1,250,000 Denison Hospital Authority Revenue, Texoma Medical Center, Inc. Project, 7.00%, 08/15/14 ........ 1,289,138
2,000,000 Ector County Hospital District Revenue, Medical Center Hospital, 7.30%, 04/15/12 ................ 2,144,180
El Paso County HFC, SFMR, Refunding,
60,000 Series 1988, GNMA Secured, 8.20%, 09/01/20 ................................................... 63,140
675,000 Series A, 8.75%, 10/01/11 .................................................................... 736,202
$ 1,220,000 Ft. Worth HFC, HMR, Refunding, Series A, 8.50%, 10/01/11 ........................................ $ 1,332,228
25,000 Ft. Worth HFC, SFMR, GNMA Secured, 8.25%, 12/01/11 .............................................. 25,635
100,000 Gonzales County Hospital District GO, Refunding, MBIA Insured, 7.65%, 02/15/07 .................. 107,820
1,200,000 Gulf Coast Waste Disposal Authority, PCR, Union Carbide Chemical and Plastic Co., 7.45%, 08/01/04 1,225,380
1,000,000 Gulf Coast Waste Disposal Authority Revenue, Champion International Corp., Series A, 6.875%,
12/01/28 ....................................................................................... 1,038,300
5,000,000 Harris County Health Facilities Development Corp., Health Care System Revenue, Sisters of Charity,
7.10%, 07/01/21 ................................................................................ 5,405,450
Harris County Health Facilities Development Corp., Hospital Revenue,
225,000 Memorial Hospital System, AMBAC Insured, 7.00%, 06/01/12 ..................................... 240,368
45,000 The Herman Trust, Pre-Refunded, 9.00%, 10/01/17 .............................................. 49,458
750,000 Harris County Health Facilities Development Corp. Revenue, Herman Hospital Project, FSA Insured,
7.00%, 10/01/14 ................................................................................ 823,898
500,000 Harris County Health Facilities Development Corp., Special Facilities Revenue, Texas Medical Center
Project, MBIA Insured, 7.375%, 05/15/20 ........................................................ 556,735
80,000 Harris County MUD No. 208, Waterworks and Sewer System, Unlimited Tax, Pre-Refunded, 8.00%,
11/01/13 ....................................................................................... 87,979
70,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, Series 1988, MBIA Insured,
Pre-Refunded, 7.75%, 12/15/07 .................................................................. 78,281
Harris County, Toll Road, Pre-Refunded,
1,750,000 Multimode Senior Lien, Series A, 7.30%, 08/15/07 ............................................. 1,862,000
2,250,000 Multimode Senior Lien, Series A, 7.40%, 08/15/17 ............................................. 2,396,070
830,000 Multimode Senior Lien, Series C, 8.125%, 08/15/17 ............................................ 919,781
250,000 Senior Lien Revenue, Refunding, 8.70%, 08/15/17 .............................................. 274,903
250,000 Hidalgo County Health Services Corp. Revenue, Refunding, Mission Hospital, Series B, BIG Insured,
7.35%, 08/01/25 ................................................................................ 273,468
2,000,000 Houston Airport System Revenue, Sub Lien, Series B, FGIC Insured, 6.625%, 07/01/22 .............. 2,148,680
2,500,000 bHouston Hotel Occupancy Tax Revenue, Refunding, Senior Lien, FSA Insured, 5.50%, 07/01/15 ...... 2,456,025
Houston Water and Sewer System Revenue,
50,000 Exchange, Prior Lien, Pre-Refunded, 8.125%, 12/01/17 ......................................... 54,627
100,000 Exchange, Prior Lien, Series A, MBIA Insured, Pre-Refunded, 7.125%, 12/01/16 ................. 104,714
2,330,000 Exchange, Prior Lien, Series A, Pre-Refunded, 7.125%, 12/01/16 ............................... 2,439,836
5,000,000 Junior Lien, Refunding, Series A, MBIA Insured, 6.20%, 12/01/20 .............................. 5,245,250
285,000 Irving Hospital Authority Revenue, Irving Health Care System, Series 1990, FGIC Insured, Pre-Refunded,
7.25%, 07/01/15 ................................................................................ 311,858
125,000 Keller Waterworks and Sewer System Revenue, Refunding, AMBAC Insured, Pre-Refunded, 7.70%,
01/01/10 ....................................................................................... 137,216
200,000 Laredo Airport, Certificates of Obligation, Limited Tax, AMBAC Insured, 7.00%, 08/01/09 ......... 213,594
400,000 Laredo International Toll Bridge System Revenue, 7.40%, 10/01/06 ................................ 458,016
2,000,000 Leon County PCR, Refunding, Nucor Corp. Project, Series A, 7.375%, 08/01/09 ..................... 2,263,240
Lower Colorado River Authority Revenue, Refunding,
75,000 Priority, MBIA Insured, Pre-Refunded, 7.625%, 01/01/16 ....................................... 81,469
205,000 Series B, AMBAC Insured, 7.00%, 01/01/11 ..................................................... 225,309
1,000,000 Lower Neches Valley Authority IDC, Marine Terminal Revenue, Refunding, Mobil Oil Refining Corp.
Project, 6.85%, 05/01/12 ....................................................................... 1,048,570
10,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, BIG Insured, 8.875%,
12/01/12 ....................................................................................... 10,197
Matagorda County Navigation District No. 1, PCR, Central Power and Light Co. Project,
1,200,000 Collateralized, 7.50%, 12/15/14 .............................................................. 1,339,356
1,500,000 Refunding, MBIA Insured, 6.10%, 07/01/28 ..................................................... 1,531,320
Matagorda County Navigation District No. 1 Revenue, Collateralized, Houston Light and Power Co.,
Refunding,
$ 100,000 Series B, 7.70%, 02/01/19 .................................................................... $ 106,984
1,500,000 Series C, FGIC Insured, 7.125%, 07/01/19 ..................................................... 1,649,415
50,000 Metropolitan Health Facilities Development Corp. Revenue, Refunding & Improvement, Wilson N. Jones
Memorial Hospital Project, Pre-Refunded, 7.75%, 01/01/05 ....................................... 52,676
1,000,000 Midland County Hospital District Revenue, Midland Memorial Hospital, 7.50%, 06/01/16 ............ 1,051,410
Montgomery County Library, Refunding, FGIC Insured,
775,000 6.75%, 09/01/10 .............................................................................. 846,672
825,000 6.75%, 09/01/11 .............................................................................. 898,920
285,000 North Harris Co., Junior College District, FGIC Insured, 7.20%, 08/15/10 ........................ 312,551
500,000 North Texas Municipal Water District, Regional Waste Water Revenue, Refunding & Improvement,
MBIA Insured, Pre-Refunded, 7.20%, 06/01/10 .................................................... 556,620
Panhandle-Plains Higher Education Authority, Inc., Student Loan Revenue, Series B,
2,600,000 9.00%, 06/01/21 .............................................................................. 2,646,254
1,000,000 8.75%, 06/01/23 .............................................................................. 1,088,860
1,500,000 Refunding, 9.00%, 06/01/21 ................................................................... 1,526,160
Sabine River Authority, PCR, Collateralized, Texas Utility Electric Co. Project, Refunding,
1,715,000 7.75%, 04/01/16 .............................................................................. 1,752,336
1,200,000 FGIC Insured, 6.55%, 10/01/22 ................................................................ 1,283,448
San Antonio Electric and Gas Revenue, Refunding,
100,000 7.00%, 02/01/09 .............................................................................. 107,568
150,000 Pre-Refunded, 7.00%, 02/01/09 ................................................................ 164,009
20,000 San Antonio Sewer Improvement Revenue, Prior Lien, Pre-Refunded, 7.90%, 05/01/14 ................ 21,263
San Antonio Water Revenue, Prior Lien, Pre-Refunded,
2,750,000 7.125%, 05/01/16 ............................................................................. 3,034,268
300,000 Refunding, Series A, 7.35%, 05/01/07 ......................................................... 325,641
350,000 South Padre Island, Certificate of Obligation, Pre-Refunded, 7.875%, 03/01/10 ................... 395,413
50,000 Texarkana Health Facilities Development Corp., Hospital Revenue, Refunding & Improvement, Wadley
Regional Medical Center Project, 8.50%, 10/01/12 ............................................... 52,595
500,000 Texas City IDC, Marine Terminal Revenue, Refunding, Arco Pipe Line Co. Project, 7.375%, 10/01/20 612,260
Texas HFA, SFMR,
45,000 Series 1986-A, 8.25%, 03/01/16 ............................................................... 46,089
25,000 Series 1987-B, 8.20%, 03/01/16 ............................................................... 25,763
1,410,000 Texas Housing Agency, Residential Development Revenue, Series A, 7.60%, 07/01/16 ................ 1,474,705
1,690,000 Texas State Department of Housing and Community Affairs, HMR, Refunding, Series A, GNMA Secured,
6.95%, 07/01/23 ................................................................................ 1,775,953
1,000,000 Texas State GO, Veterans Housing Assistance Fund I, Refunding, Series A, 6.15%, 12/01/25 ........ 1,009,040
1,705,000 Texas State Higher Education Coordinating Board, College Student Loan Revenue, Senior Lien, 7.70%,
10/01/25 ....................................................................................... 1,761,964
Texas State National Research Laboratory Commission, GO, Superconducting Super Collider Project,
Pre-Refunded,
1,000,000 7.125%, 04/01/11 ............................................................................. 1,123,270
400,000 7.125%, 04/01/20 ............................................................................. 449,308
Texas State Turnpike Authority Revenue, Dallas North Tollway,
225,000 Series 1989, Pre-Refunded, 7.125%, 01/01/15 .................................................. 237,886
2,270,000 Series 1990, AMBAC Insured, 7.125%, 01/01/15 ................................................. 2,497,953
50,000 Texas State Turnpike Authority Revenue, Mountain Creek Lake Bridge, 7.00%, 01/01/07 ............. 51,033
950,000 Texas Water Resources Finance Authority Revenue, 7.625%, 08/15/08 ............................... 1,038,321
85,000 Travis County HFC, SFMR, GNMA Secured, 8.20%, 04/01/22 .......................................... 88,311
550,000 Trinity River Authority, Regional Waste Water System Improvement Revenue, AMBAC Insured,
Pre-Refunded, 7.10%, 08/01/16 .................................................................. 612,342
250,000 Trinity River Authority, Tex Big Bear Creek Interceptor, System Control, MBIA Insured, 7.40%, 02/01/09 269,562
University of Texas, Financing System Revenue, Refunding,
$ 1,000,000 Series A, 7.00%, 08/15/07 .................................................................... $ 1,132,590
2,000,000 Series B, 6.75%, 08/15/13 .................................................................... 2,191,500
500,000 Waco Health Facilities Development Corp., Hospital Revenue, Hillcrest Baptist Medical Center Project,
MBIA Insured, 7.125%, 09/01/14 ................................................................. 559,260
1,300,000 Weatherford Utility System Revenue, MBIA Insured, 7.00%, 09/01/11 ............................... 1,414,997
160,000 Webb County GO, Limited Tax, CGIC Insured, Pre-Refunded, 7.25%, 02/15/09 ........................ 174,301
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 ...................................................... 1,121,610
50,000 Wichita County, Wichita Falls General Hospital Revenue, Refunding, 7.50%, 09/01/09 .............. 52,596
1,000,000 Wylie GO, ISD, Taylor County, Refunding, 7.00%, 08/15/24 ........................................ 1,170,750
200,000 Ysleta GO, ISD, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.10%, 08/15/05 ..................... 219,420
--------------
Total Long Term Investments (Cost $120,086,404) ........................................... 129,398,362
--------------
cShort Term Investments .2%
300,000 Harris County, Health Facilities Development Corp. Revenue, ACES, Greater Houston Pooled Health,
Series A, Weekly VRDN and Put, 3.25%, 11/01/25 (Cost $300,000) ................................. 300,000
--------------
Total Investments (Cost $120,386,404) 99.9% .......................................... 129,698,362
Other Assets and Liabilities, Net .1% ................................................ 82,745
--------------
Net Assets 100.0% .................................................................... $129,781,107
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $120,386,404 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................... $ 9,311,958
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................. --
--------------
Net unrealized appreciation ................................................................... $ 9,311,958
==============
</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.
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
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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).
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Virginia Tax-Free Income Fund (Note 1)
Long Term Investments 98.1%
<C> <C> <C>
$ 5,000,000 Albermarle County IDAR, Refunding, Martha Jefferson Hospital, 5.875%, 10/01/13 ................. $ 5,052,550
1,125,000 Albermarle County IDAR, University of Virigina Health Services Foundation, 6.50%, 10/01/22 ..... 1,165,241
1,690,000 Alexandria IDAR, Alexandria/Arlington Waste Resource Recovery, 7.40%, 01/01/08 ................. 1,716,482
1,375,000 Appomattox River Water Authority Revenue, Refunding, Pre-Refunded, 7.50%, 10/01/13 ............. 1,434,400
2,085,000 Arlington County GO, 6.00%, 08/01/13 ........................................................... 2,210,726
2,000,000 Arlington County IDA, Hospital Facility Revenue, Arlington Hospital, Series A, Pre-Refunded, 7.125%,
09/01/21 ...................................................................................... 2,305,280
100,000 Ashland GO, Refunding, Pre-Refunded, 7.75%, 08/01/12 ........................................... 110,698
Augusta County IDAR, Augusta Hospital Corp. Project,
1,000,000 AMBAC Insured, 6.625%, 09/01/12 ............................................................. 1,080,370
2,000,000 Pre-Refunded, 7.00%, 09/01/21 ............................................................... 2,287,880
1,230,000 Blacksburg Polytechnic Institute, Sanitation Authority Sewer System Revenue, 6.25%, 11/01/12 ... 1,299,680
950,000 Campbell County Utilities Services Authority, Water and Sewer Revenue, MBIA Insured, Pre-Refunded,
7.25%, 10/01/19 ............................................................................... 1,064,893
2,000,000 Charlottesville IDAR, Martha Jefferson Hospital, Pre-Refunded, 7.375%, 10/01/20 ................ 2,294,640
5,190,000 Chesapeake Bay Bridge and Tunnel Commission District Revenue, Refunding, General Resolution,
MBIA Insured, Pre-Refunded, 6.375%, 07/01/22 .................................................. 5,792,974
Chesapeake Hospital Authority Facilities Revenue, Chesapeake General Hospital,
2,500,000 8.20%, 07/01/05 ............................................................................. 2,834,025
450,000 BIG Insured, Pre-Refunded, 7.625%, 07/01/18 ................................................. 496,121
240,000 Chesapeake IDA, Nursing Home Revenue, Sentara Life Care Corp. Project, 8.00%, 11/01/17 ......... 262,954
3,940,000 Chesapeake IDA, Public Facilities Lease Revenue, Chesapeake Jail Project, MBIA Insured, 6.00%,
06/01/12 ...................................................................................... 4,120,531
50,000 Chesapeake Water and Sewer System Revenue, Pre-Refunded, 7.75%, 07/01/17 ....................... 53,640
50,000 Chesterfield County COP, Pre-Refunded, 7.90%, 12/15/01 ......................................... 52,743
5,000,000 Covington-Alleghany County IDA, PCR, Refunding, Westvaco Corp. Project, 6.65%, 09/01/18 ........ 5,438,200
2,000,000 Danville COP, Social Services, 7.625%, 04/01/13 ................................................ 2,221,780
Danville GO, Series 1991,
655,000 6.75%, 02/01/10 ............................................................................. 710,682
705,000 6.75%, 02/01/11 ............................................................................. 763,332
5,000,000 Danville IDA, Hospital Revenue, Refunding, Danville Regional Medical Center, FGIC Insured, 6.50%,
10/01/24 ...................................................................................... 5,333,900
500,000 Danville IDA, Solid Waste Disposal Revenue, International Paper Co., 6.50%, 03/01/19 ........... 516,245
1,000,000 Fairfax County EDA, Parking Revenue, Huntington Metrorail, 7.00%, 09/01/10 ..................... 1,101,060
1,500,000 Fairfax County EDA, Resource Recovery Revenue, Ogden Martin System of Fairfax, Inc. Project,
Series 1988-A, 7.75%, 02/01/11 ................................................................ 1,644,000
150,000 Fairfax County IDAR, Refunding, Fairfax Hospital Association, Series A, Pre-Refunded, 7.875%, 10/01/17 158,313
4,700,000 Fairfax County Redevelopment and Housing Authority, MFR, Cedar Ridge Apartments, GNMA Secured,
6.30%, 12/20/27 ............................................................................... 4,772,944
1,000,000 Fairfax County Sewer Revenue, Series A, AMBAC Insured, Pre-Refunded, 7.00%, 11/15/16 ........... 1,115,610
2,500,000 Fairfax County Water Authority Revenue, Series 1989, Pre-Refunded, 7.25%, 01/01/27 ............. 2,809,100
2,040,000 Frederick County IDA Lease Revenue, Government Complex Facilities Project, MBIA Insured, 6.50%,
12/01/09 ...................................................................................... 2,223,070
250,000 Frederick Winchester Sewer Service Authority Revenue, Refunding, AMBAC Insured, Pre-Refunded,
7.20%, 10/01/08 ............................................................................... 279,823
165,000 Fredericksburg IDA, Crossover Revenue, Refunding, Mary Washington Hospital, AMBAC Insured,
Pre-Refunded, 7.80%, 07/01/14 ................................................................. 182,548
35,000 Front Royal and Warren County IDAR, Refunding, Mortgage, Heritage Hall No. 13, FHA Insured, 8.25%,
07/15/05 ...................................................................................... 35,725
Guam Airport Authority Revenue, Refunding, Series A,
830,000 6.375%, 10/01/10 ............................................................................ 837,337
1,000,000 6.50%, 10/01/23 ............................................................................. 1,003,460
$ 3,000,000 Halifax County IDA, Exempt Facilities Revenue, Old Dominion Electric Cooperative Project, 6.50%,
12/01/12 ...................................................................................... $ 3,160,920
Hampton Museum Revenue, Pre-Refunded,
1,200,000 Series 1989, 7.50%, 01/01/14 ................................................................ 1,332,396
1,000,000 Series 1990, 7.30%, 01/01/14 ................................................................ 1,123,500
955,000 Hampton Redevelopment and Housing Authority, MFHR, Magruder Pines Apartment Project, 7.125%,
05/01/08 ...................................................................................... 957,206
1,100,000 Hampton Redevelopment and Housing Authority, Senior Living Association Revenue, Refunding,
Series 1996-A, GNMA Secured, 6.00%, 01/20/26 .................................................. 1,100,880
1,500,000 Hampton Roads Medical College General Revenue, Refunding, Series A, 6.875%, 11/15/16 ........... 1,616,940
3,500,000 Hampton Roads Sanitation District, Primary Pledge Sewer Revenue, Pre-Refunded, 7.20%,
07/01/09 ...................................................................................... 3,906,280
2,000,000 Hanover County IDA, Hospital Revenue, Bon Secours Health Systems Projects, MBIA Insured, 5.50%,
08/15/25 ...................................................................................... 1,929,340
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 ...................................................... 305,588
Henrico County IDAR, Bon Secours,
250,000 Maryview Nursing Center, Series B, Pre-Refunded, 7.625%, 08/15/18 ........................... 276,363
835,000 St. Mary's Hospital, Series C, 7.50%, 09/01/07 .............................................. 918,842
300,000 Henry County Public Service Authority, Water and Sewer Revenue, FGIC Insured, Pre-Refunded, 7.75%,
11/15/18 ....................................................................................... 311,787
1,250,000 Leesburg Utilities System Revenue, MBIA Insured, 6.30%, 07/01/17 ............................... 1,321,063
650,000 Loudoun County Sanitation Authority, Water and Sewer System Revenue, AMBAC Insured,
Pre-Refunded, 7.50%, 01/01/10 ................................................................. 722,638
190,000 Lynchburg IDA, Hospital Facilities Revenue, Refunding, First Mortgage, Central Health, Inc., 8.125%,
01/01/16 ...................................................................................... 205,143
1,155,000 Lynchburg IDAR, Refunding, Randolph Macon Women's College, Pre-Refunded, 7.125%, 09/01/17 ...... 1,266,411
1,000,000 Lynchburg Redevelopment and Housing Authority Revenue, Refunding, Waldon Pond III, Series A,
GNMA Secured, 6.20%, 07/20/27 ................................................................. 1,006,870
50,000 Manassas GO, Series 1988-A, Pre-Refunded, 7.20%, 03/01/06 ...................................... 52,749
500,000 Manassas IDA, Hospital Revenue, Prince William Hospital, Pre-Refunded, 8.125%, 04/01/19 ........ 566,340
1,180,000 Martinsville IDA, Hospital Facility Revenue, Memorial Hospital of Martinsville and Henry,
7.00%, 01/01/11 ............................................................................... 1,242,741
4,500,000 Mecklenburg County IDAR, Exempt Facility, Series A, 7.35%, 05/01/08 ............................ 4,809,060
1,000,000 Metropolitan Washington D.C. Airports, General Airport Authority Revenue, Series A, 7.60%, 10/01/14 1,101,980
150,000 Nelson County Service Authority, Water and Sewer Revenue, FGIC Insured, Pre-Refunded, 7.875%,
07/01/18 ...................................................................................... 153,774
2,075,000 Norfolk GO, MBIA Insured, 5.75%, 06/01/14 ...................................................... 2,110,109
Norfolk IDAR,
50,000 Children's Hospital of the Kings' Daughters, Inc., Series A, 8.375%, 06/01/12 ............... 53,206
3,000,000 Children's Hospital of the Kings' Group, Inc., AMBAC Insured, Pre-Refunded, 7.00%, 06/01/11 . 3,424,080
20,000 Medical Center Hospital Project, Series A, 7.00%, 11/01/07 .................................. 20,865
30,000 Medical Center Hospital Project, Series A, Pre-Refunded, 7.00%, 11/01/07 .................... 31,598
1,000,000 Norfolk Water Revenue, AMBAC Insured, 5.375%, 11/01/23 ......................................... 961,670
360,000 Northern Virginia Transportation District Commission, Commuter Rail Revenue, Railway Express Project,
CGIC Insured, 7.00%, 07/01/05 ................................................................. 397,307
1,000,000 Peninsula Airport Commission Revenue, Airport Improvement, 7.25%, 07/15/11 ..................... 1,104,490
5,480,000 Peninsula Ports Authority, Coal Terminal Revenue, Refunding, Coal Terminal Association Project,
7.375%, 06/01/20 .............................................................................. 5,912,646
50,000 Peninsula Ports Authority Hospital Revenue, Refunding, Whittaker Memorial Hospital Project,
FHA Insured Mortgage, 8.70%, 08/01/23 ......................................................... 53,382
6,000,000 Peninsula Ports Authority Revenue, Refunding, Riverside Health System Project, Series A, 6.625%,
07/01/18 ...................................................................................... 6,358,980
50,000 Portsmouth Public Utility, GO, Refunding, Pre-Refunded, 7.50%, 11/01/12 ........................ 54,239
$ 2,200,000 Prince William County IDA, Commuter Parking Facilities Project, Pre-Refunded, 7.25%, 03/01/11 .. $ 2,477,002
5,500,000 Prince William County Service Authority, Water and Sewer Systems Revenue, FGIC Insured, 6.00%,
07/01/29 ...................................................................................... 5,574,305
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A,
1,000,000 7.90%, 07/01/07 ............................................................................. 1,112,110
2,700,000 Pre-Refunded, 7.875%, 07/01/17 .............................................................. 3,001,212
1,500,000 Pre-Refunded, 7.00%, 07/01/19 ............................................................... 1,638,390
Puerto Rico Commonwealth Electric Power Authority Revenue, Water Resources, Pre-Refunded,
55,000 Refunding, Series L, 8.40%, 07/01/15 ........................................................ 59,536
600,000 Refunding, Series M, 8.00%, 07/01/08 ........................................................ 667,878
1,500,000 Series P, 7.00%, 07/01/21 ................................................................... 1,726,260
Puerto Rico Commonwealth GO,
10,000 Public Improvement, Refunding, 7.125%, 07/01/02 ............................................. 10,580
5,000 Public Improvement, Refunding, Pre-Refunded, 7.125%, 07/01/02 ............................... 5,338
75,000 Public Improvement, Series 1988, Pre-Refunded, 7.75%, 07/01/13 .............................. 83,160
25,000 Series 1986, Pre-Refunded, 7.90%, 07/01/11 .................................................. 26,139
1,000,000 Series 1990, Pre-Refunded, 7.30%, 07/01/20 .................................................. 1,144,410
Puerto Rico Commonwealth Highway Authority Revenue,
2,000,000 Refunding, Series R, 7.20%, 07/01/01 ........................................................ 2,241,940
225,000 Series P, Pre-Refunded, 8.125%, 07/01/13 .................................................... 251,073
1,000,000 Series Q, Pre-Refunded, 8.00%, 07/01/18 ..................................................... 1,169,730
40,000 Puerto Rico Commonwealth IDC, General Purpose Revenues, 8.00%, 01/01/03 ........................ 40,201
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
750,000 7.75%, 07/01/08 ............................................................................. 811,253
350,000 Pre-Refunded, 7.90%, 07/01/07 ............................................................... 379,726
Puerto Rico HFC Revenue,
20,000 FHA Mortgage Insured, Section 8 Assisted, 6th Portfolio, Pre-Refunded, 7.75%, 12/01/26 ...... 24,489
2,460,000 MFM, Series A-1, 7.50%, 04/01/22 ............................................................ 2,597,170
315,000 Puerto Rico HFC, SFMR, Portfolio 1, Series B, GNMA Secured, 7.65%, 10/15/22 .................... 333,591
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
300,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12 ............................................ 332,064
250,000 Upjohn Co. Project, 7.50%, 12/01/23 ......................................................... 273,758
185,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 ........................... 201,861
Puerto Rico PBA, Guaranteed, Public Education and Health Facilities, Pre-Refunded,
175,000 Series H, 7.875%, 07/01/16 .................................................................. 188,494
1,925,000 Series J, 7.25%, 07/01/17 ................................................................... 2,104,352
5,000,000 Puerto Rico Telephone Authority Revenue, Series L, 6.125%, 01/01/22 ............................ 5,103,650
Richmond Metropolitan Authority, Expressway Revenue,
2,000,000 AMBAC Insured, 7.00%, 10/15/13 .............................................................. 2,181,640
2,500,000 Refunding, Series A, FGIC Insured, 6.375%, 07/15/16 ......................................... 2,643,100
3,890,000 Refunding, Series A, FGIC Insured, 5.75%, 07/15/22 .......................................... 3,908,166
5,000,000 Series B, FGIC Insured, 6.25%, 07/15/22 ..................................................... 5,210,800
2,000,000 Richmond Public Improvement GO, Series A, Pre-Refunded, 6.25%, 01/15/21 ........................ 2,197,200
175,000 Richmond Public Utilities Revenue, Series A, Pre-Refunded, 8.00%, 01/15/18 ..................... 191,503
1,650,000 Roanoke IDA, Hospital Revenue, Refunding, Roanoke Memorial Hospitals Project, Series A,
MBIA Insured, 5.00%, 07/01/24 ................................................................. 1,492,755
3,000,000 Roanoke IDAR, Roanoke Memorial Hospital, Pre-Refunded, 7.50%, 07/01/20 ......................... 3,437,460
4,250,000 South Boston IDAR, Halifax-Community Hospital, Inc. Project, 7.375%, 09/01/11 .................. 4,531,903
Southeastern Public Service Authority Revenue, Senior Regional Solid Waste System, Series B,
Pre-Refunded,
40,000 9.00%, 07/01/05 ............................................................................. 41,538
10,000 9.25%, 07/01/15 ............................................................................. 10,393
1,000,000 Refunding, BIG Insured, 7.00%, 07/01/13 ..................................................... 1,109,920
$ 945,000 Staunton IDA, Facilities Revenue, Refunding, Mary Baldwin College, Series B, 8.00%, 11/01/17 ... $ 1,034,898
200,000 Suffolk GO, Series 1988, Pre-Refunded, 7.40%, 08/01/05 ......................................... 214,262
345,000 Suffolk IDAR, Louise Obici Memorial Hospital, 7.875%, 01/01/05 ................................. 368,660
1,000,000 University of Virginia, Hospital Revenue, Refunding, Series D, Pre-Refunded, 7.15%, 06/01/17 ... 1,089,550
3,000,000 Upper Occoquan Sewer Authority, Regional Sewer Revenue, Series A, MBIA Insured, 5.15%, 07/01/20 2,894,940
50,000 Virginia Beach Development Authority, General Hospital Facility Revenue, Series A, Pre-Refunded,
8.75%, 12/01/17 ............................................................................... 55,148
Virginia College Building Authority, Educational Facilities Revenue,
750,000 Hampton University Project, Series A, Pre-Refunded, 7.75%, 04/01/14 ......................... 842,633
1,750,000 Marymount University Project, 7.00%, 07/01/22 ............................................... 1,874,390
2,345,000 Refunding, Washington and Lee University Project, 5.75%, 01/01/19 ........................... 2,365,777
175,000 Virginia Education Loan Authority, Guaranteed, Student Loan Program Revenue, Series B,
Pre-Refunded, 8.00%, 03/01/04 ................................................................. 191,489
900,000 Virginia Polytechnic Institute Revenue, Dormitory and Dining Hall, BIG Insured, 7.00%, 06/01/09 973,800
400,000 Virginia Port Authority Revenue, Commonwealth Port Fund, 8.20%, 07/01/08 ....................... 441,052
Virginia State HDA, Commonwealth Mortgage,
1,000,000 Series A, 7.10%, 01/01/17 ................................................................... 1,064,550
5,500,000 Series A, 7.15%, 01/01/33 ................................................................... 5,819,330
5,000 Series A-1, 8.10%, 01/01/17 ................................................................. 5,191
5,000,000 Series B-1, 7.20%, 07/01/17 ................................................................. 5,400,900
585,000 Series B-2, 7.625%, 07/01/17 ................................................................ 608,937
110,000 Series B-3, 7.625%, 01/01/17 ................................................................ 114,761
250,000 Series B-3, 7.375%, 07/01/17 ................................................................ 265,102
2,000,000 Series B-3, 6.80%, 01/01/27 ................................................................. 2,054,560
5,000,000 Series B-4, 6.85%, 07/01/17 ................................................................. 5,180,850
1,000,000 Series B-4, 6.55%, 01/01/27 ................................................................. 1,039,170
5,000,000 Series D-1, 6.40%, 07/01/17 ................................................................. 5,150,000
800,000 Series D-1, 7.50%, 07/01/17 ................................................................. 834,343
1,500,000 Series D-2, 7.35%, 07/01/17 ................................................................. 1,564,320
1,000,000 Series D-3, 7.375%, 07/01/17 ................................................................ 1,051,090
2,000,000 Series H-2, 6.55%, 01/01/27 ................................................................. 2,024,120
9,000,000 Virginia State HDA, MF, Series F, 7.10%, 05/01/13 .............................................. 9,585,810
5,000,000 Virginia State PBA, Building Revenue, 5.20%, 08/01/16 .......................................... 4,787,550
2,000,000 Virginia State Resources Authority, Sewer System Revenue, Refunding, Harrisonburg Rockingham
Region, Series A, 6.00%, 05/01/22 ............................................................. 2,029,980
Virginia State Resources Authority, Water and Sewer System Revenue,
1,000,000 Lot #7, Rapidan Service Authority, 7.125%, 10/01/16 ......................................... 1,072,270
400,000 Pooled Loan Program, Series A, 7.35%, 11/01/16 .............................................. 432,987
100,000 Pooled Loan Program, Series A, 7.45%, 11/01/16 .............................................. 108,451
100,000 Pooled Loan Program, Series A, 7.85%, 11/01/17 .............................................. 112,744
190,000 Pooled Loan Program, Series A, Pre-Refunded, 7.35%, 11/01/16 ................................ 211,731
Virginia State Resources Authority, Water System Revenue,
1,000,000 Refunding, Series A, 6.125%, 04/01/19 ....................................................... 1,028,720
85,000 Series 1988, Pre-Refunded, 7.875%, 10/01/18 ................................................. 94,727
Virginia State Transportation Board, Transportation Contract Revenue,
9,000,000 Refunding, U.S. Route 28 Project, 6.50%, 04/01/18 ........................................... 9,537,750
475,000 U.S. Route 28 Project, Pre-Refunded, 7.80%, 03/01/16 ........................................ 520,837
2,500,000 U.S. Route 58 Corridor Development Program, 6.00%, 05/15/19 ................................. 2,550,174
3,295,000 Washington County IDA, College Facilities Revenue, Emory and Henry College Project, 6.375%,
04/01/23 ...................................................................................... 3,438,793
3,000,000 Washington County IDA, Hospital Facilities Revenue, First Mortgage, Johnston Memorial Hosptial, 7.00%,
07/01/22 ...................................................................................... 3,219,810
$ 5,450,000 West Point IDA, Solid Waste Disposal Revenue, Refunding, Chesapeake Corp. Project, Series B, 6.25%,
03/01/19 ...................................................................................... $ 5,604,780
2,000,000 Winchester IDA, Educational Facilities Revenue, Refunding, First Mortgage, Shenandoah University
Project, Asset Guaranteed, 6.80%, 10/01/24 .................................................... 2,218,260
--------------
Total Long Term Investments (Cost $250,581,328) .......................................... 268,269,587
--------------
cShort Term Investments .3%
100,000 Campbell County IDAR, Exempt Facilities, Hadson Power, Series 12-A, Daily VRDN and Put, 3.50%,
04/01/15 ...................................................................................... 100,000
100,000 Loudon County IDA, Residential Care Facility Revenue, Falcons Landing Project, Series B, Daily VRDN
and Put, 3.40%, 11/01/24 ...................................................................... 100,000
Lynchburg IDA, Hospital Facilities, First Mortgage Revenue, VHA, Mid Atlantic, AMBAC Insured, Weekly
VRDN and Put,
200,000 Capital Series B, 3.25%, 12/01/25 ........................................................... 200,000
200,000 Capital Series F, 3.25%, 12/01/25 ........................................................... 200,000
Peninsula Ports Authority, Coal Terminal Revenue, DATES, Dominion Term Project, Refunding,
Daily VRDN and Put,
100,000 Series C, 3.45%, 07/01/16 ................................................................... 100,000
100,000 Series D, 3.45%, 07/01/16 ................................................................... 100,000
--------------
Total Short Term Investments (Cost $800,000) ............................................. 800,000
--------------
Total Investments (Cost $251,381,328) 98.4% ......................................... 269,069,587
Other Assets and Liabilities, Net 1.6% .............................................. 4,376,505
--------------
Net Assets 100.0% ................................................................... $273,446,092
==============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $251,381,328 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 17,813,902
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (125,643)
--------------
Net unrealized appreciation .................................................................. $ 17,688,259
==============
</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
IDAR - Industrial Development Authority Revenue
IDC - Industrial Development Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFM - Multi-Family Mortgage
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single-Family Mortgage Revenue
VHA - Volunteer Hospital of America
cVariable 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).
FRANKLIN TAX-FREE TRUST
Financial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
February 29, 1996
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................................. $173,561,500 $1,255,621,202 $119,609,492 $36,763,183 $100,823,587
========== =========== ========== ========= ==========
At value........................................... 184,424,469 1,345,547,676 127,292,860 38,229,483 108,117,502
Cash................................................ 87,029 563,692 266,143 74,687 59,149
Receivables:
Interest........................................... 3,149,895 24,035,472 1,796,395 583,343 1,760,669
Investment securities sold......................... 76,500 8,310,428 -- -- 8,052
Capital shares sold................................ 699,712 1,784,428 2,880,105 182,489 178,742
---------- ----------- ---------- --------- ----------
Total assets................................... 188,437,605 1,380,241,696 132,235,503 39,070,002 110,124,114
---------- ----------- ---------- --------- ----------
Liabilities:
Payables:
Investment securities purchased (Note 1)........... -- 15,857,833 -- -- 870,915
Distributions payable to shareholders.............. 242,228 1,826,585 184,869 49,168 142,944
Capital shares repurchased......................... 416,837 540,467 236,762 2,064 123,838
Management fees.................................... 88,702 531,232 65,297 15,478 55,825
Distribution fees.................................. 26,100 184,305 15,983 4,633 16,207
Shareholder servicing costs........................ 4,244 25,034 3,530 902 2,470
Accrued expenses and other liabilities.............. 16,680 91,913 13,782 6,633 12,751
---------- ----------- ---------- --------- ----------
Total liabilities.............................. 794,791 19,057,369 520,223 78,878 1,224,950
---------- ----------- ---------- --------- ----------
Net assets, at value................................. $187,642,814 $1,361,184,327 $131,715,280 $38,991,124 $108,899,164
========== =========== ========== ========= ==========
Net assets consist of:
Undistributed net investment income................. $ 375,254 $ 3,602,270 $ 40,555 $ 24,543 $ 305,059
Net unrealized appreciation on investments.......... 10,862,969 89,926,474 7,683,368 1,466,300 7,293,915
Net realized loss................................... (148,756) (2,417,567) (833,869) (878,967) (2,937,864)
Class I capital shares.............................. 174,900,335 1,262,456,103 123,491,020 38,379,248 102,794,632
Class II capital shares............................. 1,653,012 7,617,047 1,334,206 -- 1,443,422
---------- ----------- ---------- --------- ----------
Net assets, at value................................. $187,642,814 $1,361,184,327 $131,715,280 $38,991,124 $108,899,164
========== =========== ========== ========= ==========
Class I shares:
Net assets, at value................................ $185,980,693 $1,353,540,770 $130,380,487 $38,991,124 $107,461,451
========== =========== ========== ========= ==========
Shares outstanding.................................. 15,856,631 115,813,580 10,977,803 3,532,880 9,492,783
========== =========== ========== ========= ==========
Net asset value per share*.......................... $11.73 $11.69 $11.88 $11.04 $11.32
========== =========== ========== ========= ==========
Maximum offering price per share (100/95.75 of net
asset value per share).............................. $12.25 $12.21 $12.41 $11.53 $11.82
========== =========== ========== ========= ==========
Class II shares:
Net assets, at value................................ $ 1,662,121 $ 7,643,557 $ 1,334,793 -- $ 1,437,713
========== =========== ========== ========= ==========
Shares outstanding.................................. 141,273 650,212 111,999 -- 126,471
========== =========== ========== ========= ==========
Net asset value per share*.......................... $11.77 $11.76 $11.92 -- $11.37
========== =========== ========== ========= ==========
Maximum offering price per share (100/99 of net asset
value per share).................................... $11.89 $11.88 $12.04 -- $11.48
========== =========== ========== ========= ==========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
<TABLE>
<CAPTION>
Statements of Assets and Liabilities (cont.)
February 29, 1996
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.................................. $162,180,457 $232,716,672 $232,457,383 $120,386,404 $251,381,328
========== ========== ========== ========== ==========
At value............................................ 172,551,983 248,149,427 245,460,015 129,698,362 269,069,587
Cash................................................. 237,109 360,584 106,903 140,666 79,942
Receivables:
Interest............................................ 3,122,046 3,842,182 4,080,333 2,384,337 4,553,276
Investment securities sold.......................... -- 5,000 120,000 2,828,546 --
Capital shares sold................................. 434,899 521,183 435,954 21,747 304,599
---------- ---------- ---------- ---------- ----------
Total assets.................................... 176,346,037 252,878,376 250,203,205 135,073,658 274,007,404
---------- ---------- ---------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased (Note 1)............ -- 3,528,634 -- 4,924,933 --
Distributions payable to shareholders............... 220,808 309,671 315,054 172,960 347,491
Capital shares repurchased.......................... 7,136 19,747 250,956 91,882 28,333
Management fees..................................... 83,745 114,027 114,329 64,547 123,378
Distribution fees................................... 21,909 29,998 33,192 20,892 34,272
Shareholder servicing costs......................... 5,014 6,680 5,856 2,999 6,892
Accrued expenses and other liabilities............... 16,187 22,903 22,044 14,338 20,946
---------- ---------- ---------- ---------- ----------
Total liabilities............................... 354,799 4,031,660 741,431 5,292,551 561,312
---------- ---------- ---------- ---------- ----------
Net assets, at value.................................. $175,991,238 $248,846,716 $249,461,774 $129,781,107 $273,446,092
========== ========== ========== ========== ==========
Net assets consist of:
Undistributed net investment income.................. $ 271,585 $ 405,867 $-- $ 247,882 $ 591,271
Accumulated distributions in excess of net investment
income (Note 1)...................................... -- -- (30,217) -- --
Net unrealized appreciation on investments........... 10,371,526 15,432,755 13,002,632 9,311,958 17,688,259
Undistributed net gain (loss)........................ (1,280,145) (8,494) (2,929,904) 10,887 (514,236)
Class I capital shares............................... 165,722,845 231,706,329 236,995,806 120,131,544 253,644,036
Class II capital shares.............................. 905,427 1,310,259 2,423,457 78,836 2,036,762
---------- ---------- ---------- ---------- ----------
Net assets, at value.................................. $175,991,238 $248,846,716 $249,461,774 $129,781,107 $273,446,092
========== ========== ========== ========== ==========
Class I shares:
Net assets, at value................................. $175,077,810 $247,521,730 $247,031,376 $129,702,494 $271,396,130
========== ========== ========== ========== ==========
Shares outstanding................................... 15,386,759 20,731,900 21,030,672 11,196,751 23,164,535
========== ========== ========== ========== ==========
Net asset value per share*........................... $11.38 $11.94 $11.75 $11.58 $11.72
========== ========== ========== ========== ==========
Maximum offering price per share (100/95.75 of net
asset value per share)............................... $11.89 $12.47 $12.27 $12.09 $12.24
========== ========== ========== ========== ==========
Class II shares:
Net assets, at value................................. $ 913,428 $ 1,324,986 $ 2,430,398 $ 78,613 $ 2,049,962
========== ========== ========== ========== ==========
Shares outstanding................................... 79,853 110,725 205,964 6,731 174,185
========== ========== ========== ========== ==========
Net asset value per share*........................... $11.44 $11.97 $11.80 $11.68 $11.77
========== ========== ========== ========== ==========
Maximum offering price per share (100/99 of net asset
value per share)..................................... $11.56 $12.09 $11.92 $11.80 $11.89
========== ========== ========== ========== ==========
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Operations
for the year ended February 29, 1996
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)............................................ $11,494,745 $ 85,848,573 $7,829,961 $2,127,826 $7,053,971
--------- ---------- --------- --------- ---------
Expenses:
Management fees (Note 5)..................................... 1,025,448 6,180,348 744,453 223,931 655,033
Distribution fees - Class I (Note 5)......................... 136,983 960,596 96,521 27,693 79,754
Distribution fees - Class II (Note 5)........................ 3,343 17,447 2,143 -- 1,773
Shareholder servicing costs (Note 5)......................... 48,467 279,912 37,904 9,746 27,333
Reports to shareholders...................................... 31,398 240,739 22,579 6,303 17,297
Pricing service fees......................................... 21,372 51,964 21,633 14,873 21,330
Custodian fees............................................... 15,046 110,556 10,335 2,973 8,887
Professional fees............................................ 5,734 36,800 4,200 1,968 3,718
Registration and filing fees................................. 3,430 10,172 2,555 2,425 3,270
Trustees' fees and expenses.................................. 2,716 19,948 1,867 492 1,609
Other........................................................ 4,732 27,072 3,640 1,849 3,783
Expenses waived by Manager (Note 5).......................... -- -- -- (174,736) --
--------- ---------- --------- --------- ---------
Total expenses.......................................... 1,298,669 7,935,554 947,830 117,517 823,787
--------- ---------- --------- --------- ---------
Net investment income................................... 10,196,076 77,913,019 6,882,131 2,010,309 6,230,184
--------- ---------- --------- --------- ---------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)..................................... 1,639,699 5,260,309 792,584 (93,203) 315,845
Net unrealized appreciation.................................. 4,747,672 33,040,146 2,701,329 1,657,762 2,327,110
--------- ---------- --------- --------- ---------
Net realized and unrealized gain on investments............... 6,387,371 38,300,455 3,493,913 1,564,559 2,642,955
--------- ---------- --------- --------- ---------
Net increase in net assets resulting from operations.......... $16,583,447 $116,213,474 $10,376,044 $3,574,868 $8,873,139
========= ========== ========= ========= =========
</TABLE>
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Operations (cont.)
for the year ended February 29, 1996
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)........................................... $10,386,920 $14,944,470 $14,453,217 $ 8,621,835 $16,773,657
--------- --------- --------- --------- ---------
Expenses:
Management fees (Note 5).................................... 954,307 1,318,581 1,292,366 776,321 1,441,960
Distribution fees - Class I (Note 5)........................ 131,476 176,767 182,238 98,291 196,658
Distribution fees - Class II (Note 5)....................... 1,950 3,092 4,566 139 4,830
Shareholder servicing costs (Note 5)........................ 54,799 72,204 62,646 33,974 75,369
Reports to shareholders..................................... 31,229 44,981 39,477 21,374 46,595
Pricing service fees........................................ 19,367 24,350 27,510 26,001 25,748
Custodian fees.............................................. 13,715 20,037 19,483 10,910 22,081
Professional fees........................................... 5,341 7,422 7,185 4,382 9,037
Registration and filing fees................................ 3,050 4,890 3,308 12,610 3,140
Trustees' fees and expenses................................. 2,492 3,601 3,507 1,986 4,007
Other....................................................... 4,554 5,896 5,397 3,177 6,827
--------- --------- --------- --------- ---------
Total expenses......................................... 1,222,280 1,681,821 1,647,683 989,165 1,836,252
--------- --------- --------- --------- ---------
Net investment income.................................. 9,164,640 13,262,649 12,805,534 7,632,670 14,937,405
--------- --------- --------- --------- ---------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss).................................... (339,820) 2,429,032 55,992 1,250,561 2,856,048
Net unrealized appreciation................................. 6,976,565 7,364,664 7,436,156 2,598,262 5,708,436
--------- --------- --------- --------- ---------
Net realized and unrealized gain on investments.............. 6,636,745 9,793,696 7,492,148 3,848,823 8,564,484
--------- --------- --------- --------- ---------
Net increase in net assets resulting from operations......... $15,801,385 $23,056,345 $20,297,682 $11,481,493 $23,501,889
========= ========= ========= ========= =========
</TABLE>
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
for the years ended February 29, 1996 and February 28, 1995
Franklin Alabama Franklin Florida Franklin Georgia
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
--------------------- ----------------------- ---------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ----------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income................ $ 10,196,076 $ 9,963,892 $ 77,913,019 $ 78,641,179 $ 6,882,131 $ 6,693,192
Net realized gain (loss) from security
transactions......................... 1,639,699 (1,785,827) 5,260,309 (6,760,745) 792,584 (1,426,675)
Net unrealized appreciation
(depreciation) on investments........ 4,747,672 (6,044,705) 33,040,146 (45,647,422) 2,701,329 (3,279,116)
---------- ---------- ----------- ----------- ---------- ----------
Net increase in net assets
resulting from operations............ 16,583,447 2,133,360 116,213,474 26,233,012 10,376,044 1,987,401
Distributions to shareholders from
undistributed net investment income:
Class I (Note 7).................... (10,122,459) (9,804,407) (77,720,760) (76,589,571) (6,924,143) (6,715,463)
Class II (Note 7)................... (24,970) -- (136,954) -- (16,079) --
Increase (decrease) in net assets from
capital share transactions (Note 2).. 11,155,927 (692,543) 57,810,132 (46,207,701) 11,508,122 617,009
---------- ---------- ----------- ----------- ---------- ----------
Net increase (decrease) in net
assets............................... 17,591,945 (8,363,590) 96,165,892 (96,564,260) 14,943,944 (4,111,053)
Net assets:
Beginning of year.................... 170,050,869 178,414,459 1,265,018,435 1,361,582,695 116,771,336 120,882,389
---------- ---------- ----------- ----------- ---------- ----------
End of year.......................... $187,642,814 $170,050,869 $1,361,184,327 $1,265,018,435 $131,715,280 $116,771,336
========== ========== =========== =========== ========== ==========
Undistributed net investment income
included in net assets:
Beginning of year................... $ 326,607 $ 167,122 $ 3,546,965 $ 1,495,357 $ 98,646 $ 120,917
========== ========== =========== =========== ========== ==========
End of year......................... $ 375,254 $ 326,607 $ 3,602,270 $ 3,546,965 $ 40,555 $ 98,646
========== ========== =========== =========== ========== ==========
</TABLE>
FRANKLIN TAX-FREE TRUST
<TABLE>
<CAPTION>
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the years ended February 29, 1996 and February 28, 1995
Franklin Kentucky Franklin Louisiana Franklin Maryland
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------- --------------------- ---------------------
1996 1995 1996 1995 1996 1995
--------- --------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income...................... $ 2,010,309 $ 1,795,371 $ 6,230,184 $ 6,456,910 $ 9,164,640 $ 8,856,066
Net realized gain (loss) from security
transactions............................... (93,203) (759,461) 315,845 (3,100,285) (339,820) (302,688)
Net unrealized appreciation (depreciation)
on investments............................. 1,657,762 (805,246) 2,327,110 (2,523,882) 6,976,565 (6,128,504)
--------- --------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations............................ 3,574,868 230,664 8,873,139 832,743 15,801,385 2,424,874
Distributions to shareholders from undistributed
net investment income:
Class I (Note 7)........................... (2,006,847) (1,815,911) (6,126,121) (6,308,597) (9,178,594) (8,652,494)
Class II (Note 7).......................... -- -- (13,421) -- (14,480) --
Increase (decrease) in net assets from capital
share transactions (Note 2)................ 4,591,799 6,359,314 1,185,776 (5,515,489) 16,238,350 2,689,253
--------- --------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets. 6,159,820 4,774,067 3,919,373 (10,991,343) 22,846,661 (3,538,367)
Net assets:
Beginning of year.......................... 32,831,304 28,057,237 104,979,791 115,971,134 153,144,577 156,682,944
--------- --------- ---------- ---------- ---------- ----------
End of year................................ $38,991,124 $32,831,304 $108,899,164 $104,979,791 $175,991,238 $153,144,577
========= ========= ========== ========== ========== ==========
Undistributed net investment income included
in net assets:
Beginning of year......................... $ 21,081 $ 41,621 $ 214,417 $ 66,104 $ 300,019 $ 96,447
========= ========= ========== ========== ========== ==========
End of year............................... $ 24,543 $ 21,081 $ 305,059 $ 214,417 $ 271,585 $ 300,019
========= ========= ========== ========== ========== ==========
</TABLE>
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (cont.)
for the years ended February 29, 1996 and February 28, 1995
Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
--------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income................................................ $ 13,262,649 $ 12,903,117 $ 12,805,534 $ 12,172,662
Net realized gain (loss) from security transactions.................. 2,429,032 (1,832,356) 55,992 (2,746,697)
Net unrealized appreciation (depreciation) on investments............ 7,364,664 (8,063,083) 7,436,156 (7,384,751)
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations............ 23,056,345 3,007,678 20,297,682 2,041,214
Distributions to shareholders:
From undistributed net investment income:
Class I (Note 7).................................................... (13,013,408) (12,863,835) (12,897,164) (12,187,559)
Class II (Note 7)................................................... (22,756) -- (33,638) --
In excess of net investment income Class I (Note 1).................. -- -- (30,868) --
Increase in net assets from capital share transactions (Note 2)....... 11,385,029 9,149,155 25,862,266 10,870,334
---------- ---------- ---------- ----------
Net increase (decrease) in net assets........................... 21,405,210 (707,002) 33,198,278 723,989
Net assets:
Beginning of year.................................................... 227,441,506 228,148,508 216,263,496 215,539,507
---------- ---------- ---------- ----------
End of year.......................................................... $248,846,716 $227,441,506 $249,461,774 $216,263,496
========== ========== ========== ==========
Undistributed net investment income (accumulated distributions in excess
of net investment income) included in net assets:
Beginning of year................................................... $ 179,382 $ 140,100 $ 125,919 $ 140,816
========== ========== ========== ==========
End of year......................................................... $ 405,867 $ 179,382 $ (30,217) $ 125,919
========== ========== ========== ==========
</TABLE>
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets (cont.)
for the years ended February 29, 1996 and February 28, 1995
Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund
--------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income................................................ $ 7,632,670 $ 8,273,562 $ 14,937,405 $ 14,841,432
Net realized gain (loss) from security transactions.................. 1,250,561 (1,211,703) 2,856,048 (3,093,260)
Net unrealized appreciation (depreciation) on investments............ 2,598,262 (5,076,016) 5,708,436 (7,958,005)
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations............ 11,481,493 1,985,843 23,501,889 3,790,167
Distributions to shareholders from undistributed net investment income:
Class I (Note 7)..................................................... (7,659,213) (8,088,325) (14,797,398) (14,680,932)
Class II (Note 7).................................................... (1,044) -- (36,166) --
Increase (decrease) in net assets from capital share transactions (Note 2)(4,724,511) (11,897,120) 8,813,058 5,942,403
---------- ---------- ---------- ----------
Net increase (decrease) in net assets........................... (903,275) (17,999,602) 17,481,383 (4,948,362)
Net assets:
Beginning of year.................................................... 130,684,382 148,683,984 255,964,709 260,913,071
---------- ---------- ---------- ----------
End of year.......................................................... $129,781,107 $130,684,382 $273,446,092 $255,964,709
========== ========== ========== ==========
Undistributed net investment income included in net assets:
Beginning of year.................................................... $ 275,469 $ 90,232 $ 487,430 $ 326,930
========== ========== ========== ==========
End of year.......................................................... $ 247,882 $ 275,469 $ 591,271 $ 487,430
========== ========== ========== ==========
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Free Trust (the Trust) is an open-end management investment company
(mutual fund), registered under the Investment Company Act of 1940 as amended.
The Trust currently consists of twenty-seven separate funds. 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. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security 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 of the
bonds or notes). Such a right to resell is commonly known as a "put".
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. Bond 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. Monthly dividends are reinvested
in additional shares of the Funds, or paid in cash as requested by the
shareholders.
The distributions in excess of net investment income for the Franklin North
Carolina Tax-Free Income Fund did not 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.
g. 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.
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.
2. TRUST SHARES
At February 29, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Funds' shares for the years
ended February 29, 1996 and February 28, 1995 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
-------- ---------- --------- ----------- -------- ----------
1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................................... 1,873,792 $21,726,836 12,062,025 $139,835,471 1,843,140 $21,750,827
Shares issued in reinvestment of distributions . 342,773 3,965,753 1,715,131 19,860,564 285,166 3,357,019
Shares redeemed ................................ (1,275,498) (14,773,310)(10,059,734) (116,556,022)(1,266,896) (14,936,186)
Changes from exercise of exchange privilege:
Shares sold ................................... 128,014 1,479,298 6,240,273 72,512,782 320,824 3,764,954
Shares redeemed ............................... (250,427) (2,895,662) (5,637,304) (65,459,710) (319,523) (3,762,698)
-------- ---------- --------- ----------- -------- ----------
Net increase .................................... 818,654 $ 9,502,915 4,320,391 $ 50,193,085 862,711 $10,173,916
======== ========== ========= =========== ======== ==========
1995
Shares sold .................................... 1,621,119 $18,242,951 8,411,182 $ 94,636,747 1,231,961 $14,088,149
Shares issued in reinvestment of distributions . 321,962 3,596,571 1,678,619 18,812,041 271,984 3,100,210
Shares redeemed ................................ (1,856,828) (20,777,303)(14,722,572) (164,615,468)(1,410,178) (15,991,452)
Changes from exercise of exchange privilege:
Shares sold ................................... 277,491 3,096,607 7,643,987 84,296,915 609,634 6,889,684
Shares redeemed ............................... (440,080) (4,851,369) (7,161,104) (79,337,936) (658,706) (7,469,582)
-------- ---------- --------- ----------- -------- ----------
Net increase (decrease) ......................... (76,336) $ (692,543) (4,149,888) $ (46,207,701) 44,695 $ 617,009
======== ========== ========= =========== ======== ==========
Class II shares:
1996*
Shares sold .................................... 140,587 $ 1,644,981 672,177 $ 7,872,574 115,112 $ 1,371,417
Shares issued in reinvestment of distributions . 686 8,031 6,504 76,439 1,080 12,860
Shares redeemed ................................ -- -- (29,793) (346,568) (4,193) (50,071)
Changes from exercise of exchange privilege:
Shares sold ................................... -- -- 14,789 174,426 -- --
Shares redeemed ............................... -- -- (13,465) (159,824) -- --
-------- ---------- --------- ----------- -------- ----------
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.
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
------- --------- -------- ---------- -------- ----------
1996
Shares sold ......................................... 481,007 $5,258,901 831,792 $ 9,343,401 2,212,211 $24,928,322
Shares issued in reinvestment of distributions ...... 87,040 945,363 221,661 2,484,257 405,922 4,557,510
Shares redeemed ..................................... (234,766) (2,558,981) (921,824) (10,338,354)(1,372,004) (15,419,405)
Changes from exercise of exchange privilege:
Shares sold ........................................ 119,997 1,319,425 69,687 784,860 476,483 5,332,922
Shares redeemed .................................... (34,041) (372,909) (226,177) (2,531,810) (362,338) (4,066,426)
------- --------- -------- ---------- -------- ----------
Net increase (decrease) .............................. 419,237 $4,591,799 (24,861) $ (257,646) 1,360,274 $15,332,923
======= ========= ======== ========== ======== ==========
1995
Shares sold ......................................... 671,028 $7,024,240 854,957 $ 9,422,663 2,014,838 $21,713,304
Shares issued in reinvestment of distributions ...... 83,222 857,832 219,711 2,397,694 375,143 4,013,270
Shares redeemed ..................................... (202,303) (2,068,311) (1,403,612) (15,248,084)(2,108,990) (22,501,921)
Changes from exercise of exchange privilege:
Shares sold ........................................ 126,907 1,299,879 154,135 1,665,053 607,151 6,459,413
Shares redeemed .................................... (74,987) (754,326) (342,794) (3,752,815) (658,216) (6,994,813)
------- --------- -------- ---------- -------- ----------
Net increase (decrease) .............................. 603,867 $6,359,314 (517,603)$ (5,515,489) 229,926 $ 2,689,253
======= ========= ======== ========== ======== ==========
Class II shares:
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) (4,382) (49,557)
Changes from exercise of exchange privilege
Shares redeemed .................................... -- -- -- -- (150) (1,722)
------- --------- -------- ---------- -------- ----------
Net increase.......................................... -- -- 126,471 $ 1,443,422 79,853 $ 905,427
======= ========= ======== ========== ======== ==========
*For the period May 1, 1995 to February 29, 1996.
Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------
Class I shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
1996
<S> <C> <C> <C> <C>
Shares sold ................................................................ 2,298,733 $26,992,078 3,120,525 $36,390,061
Shares issued in reinvestment of distributions ............................. 492,617 5,775,215 534,072 6,211,974
Shares redeemed ............................................................ (1,886,235) (22,123,853)(1,719,782) (20,011,467)
Changes from exercise of exchange privilege:
Shares sold ............................................................... 231,617 2,710,790 523,507 6,087,775
Shares redeemed ........................................................... (279,549) (3,279,460) (450,663) (5,239,534)
-------- ---------- -------- ----------
Net increase................................................................. 857,183 $10,074,770 2,007,659 $23,438,809
======== ========== ======== ==========
1995
Shares sold ................................................................ 2,751,161 $31,262,645 2,715,182 $30,691,925
Shares issued in reinvestment of distributions ............................. 483,780 5,454,450 509,168 5,703,591
Shares redeemed ............................................................ (2,353,075) (26,324,898)(2,201,068) (24,612,803)
Changes from exercise of exchange privilege:
Shares sold ............................................................... 459,895 5,203,959 778,419 8,699,625
Shares redeemed ........................................................... (575,966) (6,447,001) (859,389) (9,612,004)
-------- ---------- -------- ----------
Net increase................................................................. 765,795 $ 9,149,155 942,312 $10,870,334
======== ========== ======== ==========
Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------
Class II shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
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.
Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund
------------------ ------------------
Class I shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
1996
Shares sold ................................................................ 706,155 $ 8,125,974 2,253,092 $26,140,783
Shares issued in reinvestment of distributions ............................. 259,186 2,975,696 570,171 6,603,993
Shares redeemed ............................................................ (1,242,501) (14,255,099)(2,100,683) (24,303,082)
Changes from exercise of exchange privilege:
Shares sold ............................................................... 202,414 2,323,072 444,618 5,138,881
Shares redeemed ........................................................... (345,767) (3,972,990) (586,834) (6,804,279)
-------- ---------- -------- ----------
Net increase (decrease) ..................................................... (420,513) $ (4,803,347) 580,364 $ 6,776,296
======== ========== ======== ==========
1995
Shares sold ................................................................ 667,569 $ 7,515,729 2,483,253 $27,919,274
Shares issued in reinvestment of distributions ............................. 256,909 2,876,711 576,775 6,439,101
Shares redeemed ............................................................ (1,759,301) (19,709,523)(2,505,456) (27,915,451)
Changes from exercise of exchange privilege:
Shares sold ............................................................... 220,974 2,467,493 581,315 6,485,601
Shares redeemed ........................................................... (453,684) (5,047,530) (632,522) (6,986,122)
-------- ---------- -------- ----------
Net increase (decrease) ..................................................... (1,067,533) $(11,897,120) 503,365 $ 5,942,403
======== ========== ======== ==========
Class II shares:
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 ............................................................ (1,691) (19,852) (1,081) (12,876)
Changes from exercise of exchange privilege
Shares redeemed ........................................................... (1,284) (15,109) (151) (1,753)
-------- ---------- -------- ----------
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 accumulated net 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 ....................................................... -- -- -- 93,203 --
--------- -------- -------- -------- --------
$148,006 $2,417,567 $833,869 $878,967 $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
--------- -------- --------- --------
<S> <C> <C> <C> <C>
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>
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at February 29,
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 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 year ended February 29,1996 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 ............................................ $33,780,531 $210,037,664 $18,841,767 $15,357,946 $6,536,406
========== ========== ========= ========= =========
Sales ................................................ $21,707,006 $150,877,849 $13,237,487 $11,090,609 $5,429,287
========== ========== ========= ========= =========
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 ............................................ $26,216,793 $55,430,912 $79,877,136 $23,520,432 $41,574,523
========== ========== ========== ========== =========
Sales ................................................ $12,934,150 $42,876,731 $57,126,596 $25,069,809 $33,064,106
========== ========== ========== ========== =========
</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 aggregate annual 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 year ended February 29,
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 in the amount of $174,736, in an effort to minimize the Fund's
expenses.
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 year ended February 29, 1996 aggregated $702,354, of which $591,035 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 will 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 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 $2,126,260 for the year ended February 29, 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' Class I and Class II shares. Commissions received by Distributors,
the amounts paid to other dealers and any applicable contingent deferred sales
charges for the year ended February 29, 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 ................................. $683,020 $4,418,055 $638,334 $187,687 $325,044
Paid to other dealers ...................................... $670,397 $4,277,732 $630,275 $181,950 $315,930
Contingent deferred sales charges .......................... -- $ 20,301 -- -- --
Class II
Total commissions received ................................. $ 16,765 $ 79,203 $ 13,812 -- $ 14,856
Paid to other dealers ...................................... $ 32,495 $ 156,824 $ 27,276 -- $ 22,668
Contingent deferred sales charges .......................... -- $ 2,800 -- -- --
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 ................................ $927,505 $887,537 $1,258,509 $257,110 $942,729
Paid to other dealers ..................................... $885,718 $859,169 $1,218,240 $247,940 $886,460
Contingent deferred sales charges ......................... -- $ 11,670 -- -- --
Class II
Total commissions received ................................ $ 9,652 $ 13,230 $ 24,525 $ 1,145 $ 20,803
Paid to other dealers ..................................... $ 19,050 $ 24,696 $ 48,041 $ 1,910 $ 35,883
Contingent deferred sales charges ......................... $ 480 -- -- -- --
</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
Although each of the Funds, except the Franklin Maryland Tax-Free Income Fund,
has a diversified investment portfolio, all of their investments are in the
securities of issuers within their respective states and U.S. territories and
possessions. Such concentration may subject the Funds more significantly to
economic changes occurring within those states and U.S. territories and
possessions.
7. FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for a share of beneficial interest outstanding throughout each period, by Fund, are as follows:
Per Share Operating Performance Ratios/Supplemental Data
Net Distri- Ratio of Net
Period Net Asset Net Realized & butions Net Asset Ratio of Investment
Ended Value at Invest- Unrealized Total From From Net Total Value Net Assets at Expenses Income Portfolio
February Beginning ment Gain (Loss) Investment Investment Distri- at End Total End of Period to Average to Average Turnover
29 of Period Income on SecuritiesOperations Income butions of Period Return1 (in 000's) Net Assets Net Assets Rate
Franklin Alabama Tax-Free Income Fund
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $10.75 $.66 $.346 $1.006 $(.756) $(.756) $11.00 9.51% $ 96,254 .71% 6.21% 1.21%
1993 11.00 .68 .714 1.394 (.684) (.684) 11.71 12.84 144,480 .68 6.04 11.27
1994 11.71 .66 .094 .754 (.664) (.664) 11.80 6.35 178,414 .64 5.62 14.87
1995 11.80 .66 (.500) .160 (.650) (.650) 11.31 1.54 170,051 .72 5.88 19.85
1996 11.31 .66 .416 1.076 (.656) (.656) 11.73 9.74 185,981 .72 5.69 12.39
Class II Shares:
1996+ 11.36 .49 .405 .895 (.485) (.485) 11.77 8.01 1,662 1.29* 5.09* 12.39
Franklin Florida Tax-Free Income Fund
Class I Shares:
1992 10.75 .71 .348 1.058 (.768) (.768) 11.04 10.02 886,110 .54 6.60 16.69
1993 11.04 .71 .647 1.357 (.717) (.717) 11.68 12.45 1,164,827 .54 6.30 11.72
1994 11.68 .70 .086 .786 (.696) (.696) 11.77 6.63 1,361,583 .52 5.90 11.77
1995 11.77 .69 (.436) .254 (.674) (.674) 11.35 2.36 1,265,018 .59 6.15 14.34
1996 11.35 .69 .338 1.028 (.688) (.688) 11.69 9.28 1,353,541 .60 5.93 11.78
Class II Shares:
1996+ 11.37 .52 .382 .902 (.512) (.512) 11.76 8.05 7,644 1.18* 5.33* 11.78
Franklin Georgia Tax-Free Income Fund
Class I Shares:
1992 10.94 .65 .349 .999 (.759) (.759) 11.18 9.32 68,546 .72 6.11 6.18
1993 11.18 .68 .658 1.338 (.668) (.668) 11.85 12.09 91,017 .71 5.91 17.10
1994 11.85 .66 .154 .814 (.664) (.664) 12.00 6.77 120,882 .69 5.48 16.75
1995 12.00 .66 (.458) .202 (.662) (.662) 11.54 1.87 116,771 .76 5.76 36.17
1996 11.54 .66 .343 1.003 (.663) (.663) 11.88 8.90 130,380 .77 5.58 10.98
Class II Shares:
1996+ 11.57 .50 .343 .843 (.493) (.493) 11.92 7.40 1,335 1.34* 5.04* 10.98
Franklin Kentucky Tax-Free Income Fund
Class I Shares:
1992++ 10.00 .15 .164 .314 (.014) (.014) 10.30 8.37* 3,032 --3 3.52* 53.90
1993 10.30 .57 .832 1.402 (.652) (.652) 11.05 13.81 11,678 --3 6.11 18.41
1994 11.05 .63 .164 .794 (.664) (.664) 11.18 7.07 28,057 --3 5.73 13.22
1995 11.18 .61 (.625) (.015) (.625) (.625) 10.54 0.11 32,831 .293 5.94 32.92
1996 10.54 .62 .495 1.115 (.615) (.615) 11.04 10.73 38,991 .333 5.65 31.89
Franklin Louisiana Tax-Free Income Fund
Class I Shares:
1992 10.68 .67 .326 .996 (.776) (.776) 10.90 9.49 72,923 .70 6.33 10.51
1993 10.90 .69 .668 1.358 (.688) (.688) 11.57 12.61 95,368 .70 6.18 23.37
1994 11.57 .67 (.005) .665 (.675) (.675) 11.56 5.63 115,971 .68 5.70 17.63
1995 11.56 .66 (.549) .111 (.641) (.641) 11.03 1.14 104,980 .75 5.98 32.28
1996 11.03 .66 .281 .941 (.651) (.651) 11.32 8.75 107,461 .78 5.89 5.23
Class II Shares:
1996+ 11.01 .49 .351 .841 (.481) (.481) 11.37 7.76 1,438 1.35* 5.27* 5.23
Franklin Maryland Tax-Free Income Fund
Class I Shares:
1992 10.37 .64 .300 .940 (.710) (.710) 10.60 9.21 71,538 .71 6.15 16.65
1993 10.60 .65 .672 1.322 (.652) (.652) 11.27 12.64 115,873 .71 6.00 14.73
1994 11.27 .64 .092 .732 (.642) (.642) 11.36 6.40 156,683 .66 5.58 18.38
1995 11.36 .63 (.453) .177 (.617) (.617) 10.92 1.78 153,145 .73 5.86 20.30
1996 10.92 .62 .467 1.087 (.627) (.627) 11.38 10.18 175,078 .74 5.56 8.11
Class II Shares:
1996+ 10.93 .47 .506 .976 (.466) (.466) 11.44 9.06 913 1.31* 4.95* 8.11
Franklin Missouri Tax-Free Income Fund
Class I Shares:
1992 10.74 .65 .409 1.059 (.729) (.729) 11.07 10.04 110,940 .71 6.21 16.40
1993 11.07 .68 .676 1.356 (.676) (.676) 11.75 12.40 164,122 .67 6.03 10.28
1994 11.75 .66 .206 .866 (.676) (.676) 11.94 7.29 228,149 .64 5.55 11.02
1995 11.94 .65 (.501) .149 (.649) (.649) 11.44 1.44 227,442 .70 5.75 19.84
1996 11.44 .65 .494 1.144 (.644) (.644) 11.94 10.23 247,522 .71 5.58 18.27
Class II Shares:
1996+ 11.47 .48 .497 .977 (.477) (.477) 11.97 8.66 1,325 1.27* 4.94* 18.27
Per Share Operating Performance Ratios/Supplemental Data
Net Distri- Ratio of Net
Period Net Asset Net Realized & butions Net Asset Ratio of Investment
Ended Value at Invest- Unrealized Total From From Net Total Value Net Assets at Expenses Income Portfolio
February Beginning ment Gain (Loss) Investment Investment Distri- at End Total End of Period to Average to Average Turnover
29 of Period Income on SecuritiesOperations Income butions of Period Return1 (in 000's) Net Assets Net Assets Rate
Franklin North Carolina Tax-Free Income Fund
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $10.86 $.64 $.352 $ .992 $(.732) $(.732) $11.12 9.28% $ 106,960 .71% 6.03% 3.16%
1993 11.12 .67 .754 1.424 (.664) (.664) 11.88 12.97 156,517 .67 5.86 8.48
1994 11.88 .65 .054 .704 (.664) (.664) 11.92 5.81 215,540 .63 5.44 3.86
1995 11.92 .65 (.550) .100 (.650) (.650) 11.37 1.06 216,263 .70 5.75 25.05
1996 11.37 .64 .391 1.031 (.651)** (.651) 11.75 9.28 247,031 .71 5.52 25.19
Class II Shares:
1996+ 11.41 .49 .384 .874 (.484) (.484) 11.80 7.77 2,430 1.28* 4.90* 25.19
Franklin Texas Tax-Free Income Fund
Class I Shares:
1992 10.77 .67 .370 1.040 (.780) (.780) 11.03 9.84 123,722 .70 6.14 6.44
1993 11.03 .69 .661 1.351 (.691) (.691) 11.69 12.41 139,389 .66 6.15 12.33
1994 11.69 .69 .032 .722 (.692) (.692) 11.72 6.09 148,684 .65 5.85 20.18
1995 11.72 .68 (.487) .193 (.663) (.663) 11.25 1.80 130,684 .73 6.05 6.36
1996 11.25 .67 .335 1.005 (.675) (.675) 11.58 9.152 129,702 .76 5.86 18.38
Class II Shares:
1996+ 11.27 .51 .403 .913 (.503) (.503) 11.68 8.23 79 1.33* 5.23* 18.38
Franklin Virginia Tax-Free Income Fund
Class I Shares:
1992 10.70 .66 .362 1.022 (.742) (.742) 10.98 9.71 152,615 .68 6.17 4.33
1993 10.98 .67 .704 1.374 (.664) (.664) 11.69 12.67 211,171 .65 5.98 5.74
1994 11.69 .67 .136 .806 (.676) (.676) 11.82 6.80 260,913 .62 5.65 6.86
1995 11.82 .66 (.499) .161 (.651) (.651) 11.33 1.56 255,965 .69 5.86 21.73
1996 11.33 .66 .381 1.041 (.651) (.651) 11.72 9.41 271,396 .69 5.66 12.96
Class II Shares:
1996+ 11.35 .49 .412 .902 (.482) (.482) 11.77 8.07 2,050 1.26* 5.06* 12.72
</TABLE>
*Annualized
**Includes distributions in excess of net investment income in the amount of
$0.001.
+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
charges or 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. Effective May 1, 1994, with the implementation of the Rule 12b-1
distribution plans for Class I shares, the sales charges on reinvested dividends
were eliminated.
2The total return may differ from that reported in the Manager's Discussion due
to differences between the NAV quoted on February 29, 1996, and the NAV
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
During this fiscal year, each Fund paid distributions from undistributed net
investment income in the amounts shown in the Statement of Changes in Net
Assets. Each Fund hereby designates the total amount of these distributions as
exempt-interest dividends under Section 852(b)(5) of the Internal Revenue Code.
FRANKLIN TAX-FREE TRUST
Report of Independent Auditors
To the Shareholders and Board of Trustees
of the Franklin Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities of each of
the funds comprising the Franklin Tax-Free Trust, including each Fund's
statement of investments in securities and net assets, as of February 29, 1996,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the funds comprising the Franklin Tax Free-Trust as of February 29, 1996, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated thereon, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 29 , 1996
Franklin Tax-Free Trust #2 Annual Report
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
11/30/94 88.69
12/31/94 92.76
1/31/95 96.16
2/28/95 99.01
3/31/95 99.45
4/30/95 98.50
5/31/95 101.13
6/30/95 98.19
7/31/95 96.02
8/31/95 96.09
9/30/95 96.72
10/31/95 98.26
11/30/95 99.96
12/31/95 98.10
GRAPHIC MATERIAL (2)
This bar chart shows that 37% insured municipal bonds and 63% non-insured
municipal bonds were issued in 1994, compared to 44% insured municipal bonds and
56% non-insured municipal bonds issued in 1995.
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), and 1995 ($156 billion).
GRAPHIC MATERIAL (4)
This chart shows in pie chart format the income and capital appreciation of the
Lehman Brothers 20-Year Municipal Bond Index for the 15-year period ended
12/31/95.
Income: An Important Component of Total Return
Income 88.45%
Capital Appreciation 11.55%
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 2/29/96
AAA 63.1%
AA 3.9%
A 5.7%
BBB 27.3%
GRAPHIC MATERIAL (6)
This bar chart shows the comparison between the fund's distribution rate of
5.39% and the taxable equivalent distribution rate of 9.39%, for the Class I
shares.
GRAPHIC MATERIAL (7)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
Period Ending Fund Index Index
9/1/87 9,573 10,000 10,000
9/30/87 8,936 9,631 10,052
10/31/87 8,955 9,665 10,078
11/30/87 9,373 9,917 10,087
12/31/87 9,535 10,061 10,087
1/31/88 9,996 10,419 10,113
2/29/88 10,116 10,529 10,140
3/31/88 9,910 10,407 10,183
4/30/88 9,953 10,486 10,236
5/31/88 9,997 10,456 10,271
6/30/88 10,188 10,609 10,315
7/31/88 10,202 10,678 10,359
8/31/88 10,276 10,687 10,402
9/30/88 10,478 10,881 10,472
10/31/88 10,722 11,072 10,506
11/30/88 10,628 10,970 10,515
12/31/88 10,774 11,082 10,533
1/31/89 11,003 11,311 10,585
2/28/89 10,914 11,183 10,629
3/31/89 10,898 11,156 10,690
4/30/89 11,099 11,420 10,760
5/31/89 11,344 11,658 10,821
6/30/89 11,505 11,816 10,847
7/31/89 11,584 11,977 10,873
8/31/89 11,492 11,859 10,891
9/30/89 11,433 11,824 10,925
10/31/89 11,544 11,968 10,978
11/30/89 11,711 12,178 11,004
12/31/89 11,835 12,277 11,022
1/31/90 11,752 12,220 11,135
2/28/90 11,888 12,329 11,188
3/31/90 11,870 12,332 11,249
4/30/90 11,774 12,243 11,267
5/31/90 12,025 12,510 11,293
6/30/90 12,154 12,620 11,354
7/31/90 12,352 12,807 11,397
8/31/90 12,025 12,622 11,502
9/30/90 12,053 12,629 11,599
10/31/90 12,220 12,858 11,668
11/30/90 12,480 13,116 11,694
12/31/90 12,461 13,174 11,694
1/31/91 12,690 13,350 11,764
2/28/91 12,789 13,466 11,782
3/31/91 12,854 13,472 11,799
4/30/91 13,014 13,652 11,817
5/31/91 13,104 13,774 11,853
6/30/91 13,097 13,760 11,887
7/31/91 13,285 13,928 11,905
8/31/91 13,412 14,112 11,939
9/30/91 13,615 14,295 11,992
10/31/91 13,695 14,424 12,010
11/30/91 13,737 14,464 12,045
12/31/91 14,006 14,775 12,053
1/31/92 14,054 14,809 12,071
2/29/92 14,026 14,814 12,115
3/31/92 14,049 14,820 12,176
4/30/92 14,174 14,952 12,193
5/31/92 14,365 15,128 12,211
6/30/92 14,570 15,382 12,254
7/31/92 15,037 15,844 12,280
8/31/92 14,864 15,688 12,315
9/30/92 14,901 15,790 12,349
10/31/92 14,647 15,636 12,392
11/30/92 14,990 15,915 12,410
12/31/92 15,214 16,078 12,401
1/31/93 15,397 16,264 12,462
2/28/93 15,878 16,853 12,505
3/31/93 15,804 16,674 12,549
4/30/93 15,921 16,843 12,584
5/31/93 15,998 16,937 12,602
6/30/93 16,226 17,220 12,620
7/31/93 16,234 17,242 12,620
8/31/93 16,535 17,601 12,655
9/30/93 16,750 17,802 12,681
10/31/93 16,811 17,836 12,733
11/30/93 16,760 17,679 12,742
12/31/93 17,077 18,052 12,742
1/31/94 17,240 18,257 12,777
2/28/94 16,917 17,785 12,820
3/31/94 16,333 17,061 12,864
4/30/94 16,396 17,206 12,882
5/31/94 16,504 17,355 12,891
6/30/94 16,450 17,250 12,935
7/31/94 16,720 17,565 12,970
8/31/94 16,784 17,627 13,021
9/30/94 16,598 17,368 13,057
10/31/94 16,307 17,058 13,066
11/30/94 15,972 16,750 13,083
12/31/94 16,322 17,118 13,083
1/31/95 16,765 17,608 13,135
2/28/95 17,180 18,120 13,188
3/31/95 17,338 18,328 13,231
4/30/95 17,420 18,350 13,275
5/31/95 17,825 18,936 13,301
6/30/95 17,738 18,771 13,328
7/31/95 17,837 18,949 13,328
8/31/95 18,000 19,190 13,363
9/30/95 18,116 19,311 13,389
10/31/95 18,342 19,591 13,433
11/30/95 18,634 19,916 13,424
12/31/95 18,817 20,107 13,415
1/31/96 18,905 20,260 13,494
2/29/96 18,849 20,122 13,519
Total Return 88.49% 101.22% 35.19%
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between the fund's distribution rate of
4.95% and the taxable equivalent distribution rate of 8.62%, for the Class II
shares.
GRAPHIC MATERIAL (9)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/53 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,904 10,000 10,000
5/31/95 10,127 10,319 10,020
6/30/95 10,082 10,229 10,040
7/31/95 10,141 10,326 10,040
8/31/95 10,220 10,458 10,066
9/30/95 10,289 10,523 10,086
10/30/95 10,412 10,676 10,120
11/30/95 10,572 10,853 10,112
12/31/95 10,679 10,957 10,105
1/31/96 10,723 11,041 10,165
2/29/96 10,587 10,966 10,184
Total Return 5.87% 9.66% 1.84%
GRAPHIC MATERIAL (10)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 2/29/96
AAA 52.2%
AA 6.8%
A 9.6%
BBB 28.9%
Below Investment Grade 2.5%
GRAPHIC MATERIAL (11)
This bar chart shows the comparison between the fund's distribution rate of
5.60% and the taxable equivalent distribution rate of 9.27%, for the Class I
shares.
GRAPHIC MATERIAL (12)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
Period Ending Fund Index Index
9/1/87 9,572 10,000 10,000
9/30/87 9,040 9,631 10,052
10/31/87 9,040 9,665 10,078
11/30/87 9,420 9,917 10,087
12/31/87 9,612 10,061 10,087
1/31/88 10,074 10,419 10,113
2/29/88 10,267 10,529 10,140
3/31/88 10,075 10,407 10,183
4/30/88 10,115 10,486 10,236
5/31/88 10,145 10,456 10,271
6/30/88 10,334 10,609 10,315
7/31/88 10,375 10,678 10,359
8/31/88 10,443 10,687 10,402
9/30/88 10,652 10,881 10,472
10/31/88 10,903 11,072 10,506
11/30/88 10,797 10,970 10,515
12/31/88 10,939 11,082 10,533
1/31/89 11,163 11,311 10,585
2/28/89 11,047 11,183 10,629
3/31/89 11,045 11,156 10,690
4/30/89 11,275 11,420 10,760
5/31/89 11,526 11,658 10,821
6/30/89 11,663 11,816 10,847
7/31/89 11,757 11,977 10,873
8/31/89 11,647 11,859 10,891
9/30/89 11,569 11,824 10,925
10/31/89 11,720 11,968 10,978
11/30/89 11,904 12,178 11,004
12/31/89 12,013 12,277 11,022
1/31/90 11,910 12,220 11,135
2/28/90 12,076 12,329 11,188
3/31/90 12,062 12,332 11,249
4/30/90 11,958 12,243 11,267
5/31/90 12,241 12,510 11,293
6/30/90 12,353 12,620 11,354
7/31/90 12,560 12,807 11,397
8/31/90 12,208 12,622 11,502
9/30/90 12,288 12,629 11,599
10/31/90 12,471 12,858 11,668
11/30/90 12,749 13,116 11,694
12/31/90 12,743 13,174 11,694
1/31/91 12,954 13,350 11,764
2/28/91 13,044 13,466 11,782
3/31/91 13,099 13,472 11,799
4/30/91 13,276 13,652 11,817
5/31/91 13,368 13,774 11,853
6/30/91 13,363 13,760 11,887
7/31/91 13,581 13,928 11,905
8/31/91 13,725 14,112 11,939
9/30/91 13,920 14,295 11,992
10/31/91 14,002 14,424 12,010
11/30/91 14,060 14,464 12,045
12/31/91 14,343 14,775 12,053
1/31/92 14,357 14,809 12,071
2/29/92 14,371 14,814 12,115
3/31/92 14,412 14,820 12,176
4/30/92 14,544 14,952 12,193
5/31/92 14,729 15,128 12,211
6/30/92 14,903 15,382 12,254
7/31/92 15,437 15,844 12,280
8/31/92 15,278 15,688 12,315
9/30/92 15,280 15,790 12,349
10/31/92 15,037 15,636 12,392
11/30/92 15,351 15,915 12,410
12/31/92 15,582 16,078 12,401
1/31/93 15,787 16,264 12,462
2/28/93 16,214 16,853 12,505
3/31/93 16,157 16,674 12,549
4/30/93 16,295 16,843 12,584
5/31/93 16,420 16,937 12,602
6/30/93 16,658 17,220 12,620
7/31/93 16,685 17,242 12,620
8/31/93 16,939 17,601 12,655
9/30/93 17,122 17,802 12,681
10/31/93 17,248 17,836 12,733
11/30/93 17,173 17,679 12,742
12/31/93 17,457 18,052 12,742
1/31/94 17,639 18,257 12,777
2/28/94 17,324 17,785 12,820
3/31/94 16,785 17,061 12,864
4/30/94 16,866 17,206 12,882
5/31/94 16,963 17,355 12,891
6/30/94 16,941 17,250 12,935
7/31/94 17,191 17,565 12,970
8/31/94 17,230 17,627 13,021
9/30/94 17,072 17,368 13,057
10/31/94 16,867 17,058 13,066
11/30/94 16,556 16,750 13,083
12/31/94 16,875 17,118 13,083
1/31/95 17,319 17,608 13,135
2/28/95 17,735 18,120 13,188
3/31/95 17,871 18,328 13,231
4/30/95 17,944 18,350 13,275
5/31/95 18,366 18,936 13,301
6/30/95 18,329 18,771 13,328
7/31/95 18,436 18,949 13,328
8/31/95 18,592 19,190 13,363
9/30/95 18,700 19,311 13,389
10/31/95 18,922 19,591 13,433
11/30/95 19,177 19,916 13,424
12/31/95 19,353 20,107 13,415
1/31/96 19,447 20,260 13,494
2/29/96 19,375 20,122 13,519
Total Return 93.75% 101.22% 35.19%
GRAPHIC MATERIAL (13)
This bar chart shows the comparison between the fund's distribution rate of
5.15% and the taxable equivalent distribution rate of 8.53%, for the Class II
shares.
GRAPHIC MATERIAL (14)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,904 10,000 10,000
5/31/95 10,164 10,319 10,020
6/30/95 10,147 10,229 10,040
7/31/95 10,192 10,326 10,040
8/31/95 10,281 10,458 10,066
9/30/95 10,344 10,523 10,086
10/30/95 10,452 10,676 10,120
11/30/95 10,596 10,853 10,112
12/31/95 10,687 10,957 10,105
1/31/96 10,733 11,041 10,165
2/29/96 10,589 10,966 10,184
Total Return 5.89% 9.66% 1.84%
GRAPHIC MATERIAL (15)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
Quality Breakdown on 2/29/96
AAA 65.9%
AA 16.0%
A 7.7%
BBB 6.3%
Below Investment Grade 4.1%
GRAPHIC MATERIAL (16)
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 (17)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
Period Ending Fund Index Index
9/1/87 9,573 10,000 10,000
9/30/87 8,928 9,631 10,052
10/31/87 8,975 9,665 10,078
11/30/87 9,326 9,917 10,087
12/31/87 9,507 10,061 10,087
1/31/88 9,982 10,419 10,113
2/29/88 10,126 10,529 10,140
3/31/88 9,925 10,407 10,183
4/30/88 9,944 10,486 10,236
5/31/88 9,973 10,456 10,271
6/30/88 10,140 10,609 10,315
7/31/88 10,179 10,678 10,359
8/31/88 10,259 10,687 10,402
9/30/88 10,498 10,881 10,472
10/31/88 10,738 11,072 10,506
11/30/88 10,644 10,970 10,515
12/31/88 10,786 11,082 10,533
1/31/89 10,989 11,311 10,585
2/28/89 10,897 11,183 10,629
3/31/89 10,867 11,156 10,690
4/30/89 11,126 11,420 10,760
5/31/89 11,386 11,658 10,821
6/30/89 11,544 11,816 10,847
7/31/89 11,642 11,977 10,873
8/31/89 11,571 11,859 10,891
9/30/89 11,510 11,824 10,925
10/31/89 11,642 11,968 10,978
11/30/89 11,818 12,178 11,004
12/31/89 11,940 12,277 11,022
1/31/90 11,856 12,220 11,135
2/28/90 12,013 12,329 11,188
3/31/90 12,005 12,332 11,249
4/30/90 11,933 12,243 11,267
5/31/90 12,195 12,510 11,293
6/30/90 12,302 12,620 11,354
7/31/90 12,511 12,807 11,397
8/31/90 12,187 12,622 11,502
9/30/90 12,170 12,629 11,599
10/31/90 12,337 12,858 11,668
11/30/90 12,632 13,116 11,694
12/31/90 12,614 13,174 11,694
1/31/91 12,855 13,350 11,764
2/28/91 12,955 13,466 11,782
3/31/91 12,996 13,472 11,799
4/30/91 13,169 13,652 11,817
5/31/91 13,259 13,774 11,853
6/30/91 13,254 13,760 11,887
7/31/91 13,442 13,928 11,905
8/31/91 13,583 14,112 11,939
9/30/91 13,773 14,295 11,992
10/31/91 13,841 14,424 12,010
11/30/91 13,897 14,464 12,045
12/31/91 14,158 14,775 12,053
1/31/92 14,205 14,809 12,071
2/29/92 14,177 14,814 12,115
3/31/92 14,200 14,820 12,176
4/30/92 14,338 14,952 12,193
5/31/92 14,527 15,128 12,211
6/30/92 14,718 15,382 12,254
7/31/92 15,207 15,844 12,280
8/31/92 15,034 15,688 12,315
9/30/92 15,082 15,790 12,349
10/31/92 14,812 15,636 12,392
11/30/92 15,149 15,915 12,410
12/31/92 15,381 16,078 12,401
1/31/93 15,508 16,264 12,462
2/28/93 15,944 16,853 12,505
3/31/93 15,869 16,674 12,549
4/30/93 16,052 16,843 12,584
5/31/93 16,154 16,937 12,602
6/30/93 16,434 17,220 12,620
7/31/93 16,441 17,242 12,620
8/31/93 16,723 17,601 12,655
9/30/93 16,938 17,802 12,681
10/31/93 17,000 17,836 12,733
11/30/93 16,937 17,679 12,742
12/31/93 17,211 18,052 12,742
1/31/94 17,415 18,257 12,777
2/28/94 17,054 17,785 12,820
3/31/94 16,477 17,061 12,864
4/30/94 16,541 17,206 12,882
5/31/94 16,649 17,355 12,891
6/30/94 16,583 17,250 12,935
7/31/94 16,866 17,565 12,970
8/31/94 16,932 17,627 13,021
9/30/94 16,763 17,368 13,057
10/31/94 16,505 17,058 13,066
11/30/94 16,189 16,750 13,083
12/31/94 16,567 17,118 13,083
1/31/95 17,008 17,608 13,135
2/28/95 17,375 18,120 13,188
3/31/95 17,533 18,328 13,231
4/30/95 17,586 18,350 13,275
5/31/95 17,989 18,936 13,301
6/30/95 17,920 18,771 13,328
7/31/95 18,004 18,949 13,328
8/31/95 18,182 19,190 13,363
9/30/95 18,252 19,311 13,389
10/31/95 18,477 19,591 13,433
11/30/95 18,720 19,916 13,424
12/31/95 18,901 20,107 13,415
1/31/96 18,972 20,260 13,494
2/29/96 18,916 20,122 13,519
Total Return 89.16% 101.22% 35.19%
GRAPHIC MATERIAL (18)
This bar chart shows the comparison between the fund's distribution rate of
4.88% and the taxable equivalent distribution rate of 8.59%, for the Class II
shares.
GRAPHIC MATERIAL (19)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,897 10,000 10,000
5/31/95 10,116 10,319 10,020
6/30/95 10,089 10,229 10,040
7/31/95 10,140 10,326 10,040
8/31/95 10,226 10,458 10,066
9/30/95 10,268 10,523 10,086
10/30/95 10,381 10,676 10,120
11/30/95 10,520 10,853 10,112
12/31/95 10,616 10,957 10,105
1/31/96 10,651 11,041 10,165
2/29/96 10,515 10,966 10,184
Total Return 5.15% 9.66% 1.84%
GRAPHIC MATERIAL (20)
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 2/29/96
AAA 54.7%
AA 14.8%
A 18.7%
BBB 8.9%
Below Investment Grade 2.9%
GRAPHIC MATERIAL (21)
This bar chart shows the comparison between the fund's distribution rate of
5.31% and the taxable equivalent distribution rate of 9.35%.
GRAPHIC MATERIAL (22)
The following line graph hypothetically compares the performance of the fund
with the Consumer Price Index (CPI) and the Lehman Brothers Municipal Bond
Index, based on a $10,000 investment from 10/12/91 to 2/29/96.
Period Ending Fund Index Index
10/12/91 9,579 10,000 10,000
10/31/91 9,588 10,055 10,009
11/30/91 9,598 10,083 10,038
12/31/91 9,789 10,300 10,045
1/31/92 9,856 10,324 10,060
2/29/92 9,866 10,327 10,097
3/31/92 9,890 10,331 10,148
4/30/92 9,972 10,423 10,162
5/31/92 10,122 10,546 10,176
6/30/92 10,263 10,723 10,213
7/31/92 10,679 11,045 10,235
8/31/92 10,497 10,937 10,263
9/30/92 10,522 11,008 10,292
10/31/92 10,348 10,900 10,328
11/30/92 10,643 11,095 10,342
12/31/92 10,798 11,208 10,335
1/31/93 10,925 11,338 10,386
2/28/93 11,265 11,749 10,422
3/31/93 11,188 11,624 10,459
4/30/93 11,306 11,741 10,488
5/31/93 11,393 11,807 10,503
6/30/93 11,626 12,004 10,517
7/31/93 11,663 12,020 10,517
8/31/93 11,898 12,270 10,547
9/30/93 12,071 12,410 10,569
10/31/93 12,150 12,433 10,612
11/30/93 12,018 12,324 10,620
12/31/93 12,300 12,584 10,620
1/31/94 12,435 12,727 10,648
2/28/94 12,085 12,398 10,685
3/31/94 11,396 11,893 10,721
4/30/94 11,488 11,994 10,736
5/31/94 11,614 12,099 10,743
6/30/94 11,505 12,025 10,780
7/31/94 11,771 12,245 10,809
8/31/94 11,806 12,288 10,852
9/30/94 11,528 12,107 10,882
10/31/94 11,192 11,892 10,889
11/30/94 10,913 11,676 10,903
12/31/94 11,254 11,933 10,903
1/31/95 11,700 12,275 10,947
2/28/95 12,112 12,632 10,991
3/31/95 12,240 12,777 11,027
4/30/95 12,252 12,792 11,063
5/31/95 12,694 13,200 11,086
6/30/95 12,508 13,086 11,108
7/31/95 12,580 13,210 11,108
8/31/95 12,747 13,378 11,137
9/30/95 12,854 13,462 11,159
10/31/95 13,081 13,657 11,196
11/30/95 13,333 13,884 11,188
12/31/95 13,491 14,017 11,180
1/31/96 13,553 14,124 11,246
2/29/96 13,408 14,028 11,267
Total Return 34.08% 40.28% 12.67%
GRAPHIC MATERIAL (23)
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 2/29/96
AAA 51.8%
AA 2.9%
A 17.8%
BBB 15.8%
Below Investment Grade 11.7%
GRAPHIC MATERIAL (24)
This bar chart shows the comparison between the fund's distribution rate of
5.48% and the taxable equivalent distribution rate of 9.65%, for the Class I
shares.
GRAPHIC MATERIAL (25)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
Period Ending Fund Index Index
9/1/87 9,573 10,000 10,000
9/30/87 8,955 9,631 10,052
10/31/87 8,993 9,665 10,078
11/30/87 9,307 9,917 10,087
12/31/87 9,480 10,061 10,087
1/31/88 9,962 10,419 10,113
2/29/88 10,069 10,529 10,140
3/31/88 9,868 10,407 10,183
4/30/88 9,909 10,486 10,236
5/31/88 9,961 10,456 10,271
6/30/88 10,130 10,609 10,315
7/31/88 10,152 10,678 10,359
8/31/88 10,218 10,687 10,402
9/30/88 10,405 10,881 10,472
10/31/88 10,624 11,072 10,506
11/30/88 10,549 10,970 10,515
12/31/88 10,698 11,082 10,533
1/31/89 10,911 11,311 10,585
2/28/89 10,834 11,183 10,629
3/31/89 10,830 11,156 10,690
4/30/89 11,047 11,420 10,760
5/31/89 11,317 11,658 10,821
6/30/89 11,473 11,816 10,847
7/31/89 11,586 11,977 10,873
8/31/89 11,507 11,859 10,891
9/30/89 11,448 11,824 10,925
10/31/89 11,553 11,968 10,978
11/30/89 11,735 12,178 11,004
12/31/89 11,841 12,277 11,022
1/31/90 11,748 12,220 11,135
2/28/90 11,889 12,329 11,188
3/31/90 11,895 12,332 11,249
4/30/90 11,811 12,243 11,267
5/31/90 12,092 12,510 11,293
6/30/90 12,213 12,620 11,354
7/31/90 12,417 12,807 11,397
8/31/90 12,133 12,622 11,502
9/30/90 12,105 12,629 11,599
10/31/90 12,277 12,858 11,668
11/30/90 12,580 13,116 11,694
12/31/90 12,611 13,174 11,694
1/31/91 12,834 13,350 11,764
2/28/91 12,938 13,466 11,782
3/31/91 12,982 13,472 11,799
4/30/91 13,148 13,652 11,817
5/31/91 13,254 13,774 11,853
6/30/91 13,249 13,760 11,887
7/31/91 13,456 13,928 11,905
8/31/91 13,588 14,112 11,939
9/30/91 13,785 14,295 11,992
10/31/91 13,843 14,424 12,010
11/30/91 13,915 14,464 12,045
12/31/91 14,153 14,775 12,053
1/31/92 14,189 14,809 12,071
2/29/92 14,187 14,814 12,115
3/31/92 14,223 14,820 12,176
4/30/92 14,338 14,952 12,193
5/31/92 14,520 15,128 12,211
6/30/92 14,703 15,382 12,254
7/31/92 15,245 15,844 12,280
8/31/92 15,056 15,688 12,315
9/30/92 15,080 15,790 12,349
10/31/92 14,847 15,636 12,392
11/30/92 15,157 15,915 12,410
12/31/92 15,400 16,078 12,401
1/31/93 15,575 16,264 12,462
2/28/93 16,028 16,853 12,505
3/31/93 15,942 16,674 12,549
4/30/93 16,050 16,843 12,584
5/31/93 16,117 16,937 12,602
6/30/93 16,424 17,220 12,620
7/31/93 16,447 17,242 12,620
8/31/93 16,697 17,601 12,655
9/30/93 16,863 17,802 12,681
10/31/93 16,885 17,836 12,733
11/30/93 16,851 17,679 12,742
12/31/93 17,116 18,052 12,742
1/31/94 17,251 18,257 12,777
2/28/94 16,963 17,785 12,820
3/31/94 16,350 17,061 12,864
4/30/94 16,369 17,206 12,882
5/31/94 16,507 17,355 12,891
6/30/94 16,436 17,250 12,935
7/31/94 16,710 17,565 12,970
8/31/94 16,760 17,627 13,021
9/30/94 16,613 17,368 13,057
10/31/94 16,359 17,058 13,066
11/30/94 15,983 16,750 13,083
12/31/94 16,296 17,118 13,083
1/31/95 16,765 17,608 13,135
2/28/95 17,159 18,120 13,188
3/31/95 17,243 18,328 13,231
4/30/95 17,295 18,350 13,275
5/31/95 17,710 18,936 13,301
6/30/95 17,590 18,771 13,328
7/31/95 17,707 18,949 13,328
8/31/95 17,874 19,190 13,363
9/30/95 18,009 19,311 13,389
10/31/95 18,240 19,591 13,433
11/30/95 18,506 19,916 13,424
12/31/95 18,676 20,107 13,415
1/31/96 18,748 20,260 13,494
2/29/96 18,655 20,122 13,519
Total Return 86.55% 101.22% 35.19%
GRAPHIC MATERIAL (26)
This bar chart shows the comparison between the fund's distribution rate of
5.02% and the taxable equivalent distribution rate of 8.84%, for the Class II
shares.
GRAPHIC MATERIAL (27)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,901 10,000 10,000
5/31/95 10,131 10,319 10,020
6/30/95 10,066 10,229 10,040
7/31/95 10,146 10,326 10,040
8/31/95 10,236 10,458 10,066
9/30/95 10,298 10,523 10,086
10/30/95 10,434 10,676 10,120
11/30/95 10,580 10,853 10,112
12/31/95 10,680 10,957 10,105
1/31/96 10,715 11,041 10,165
2/29/96 10,558 10,966 10,184
Total Return 5.58% 9.66% 1.84%
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 2/29/96
AAA 46.6%
AA 17.8%
A 26.9%
BBB 8.7%
GRAPHIC MATERIAL (29)
This bar chart shows the comparison between the fund's distribution rate of
5.25% and the taxable equivalent distribution rate of 9.62%, for the Class I
shares.
GRAPHIC MATERIAL (30)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 10/3/88 to 2/29/96.
Period Ending Fund Index Index
10/3/88 9,579 10,000 10,000
10/31/88 9,588 10,176 10,033
11/30/88 9,521 10,082 10,041
12/31/88 9,617 10,185 10,058
1/31/89 9,761 10,396 10,108
2/28/89 9,699 10,278 10,150
3/31/89 9,686 10,253 10,209
4/30/89 9,905 10,496 10,275
5/31/89 10,106 10,714 10,334
6/30/89 10,239 10,860 10,358
7/31/89 10,334 11,008 10,383
8/31/89 10,261 10,900 10,400
9/30/89 10,217 10,867 10,433
10/31/89 10,303 11,000 10,483
11/30/89 10,460 11,192 10,508
12/31/89 10,557 11,284 10,525
1/31/90 10,482 11,231 10,634
2/28/90 10,601 11,331 10,684
3/31/90 10,555 11,334 10,742
4/30/90 10,483 11,253 10,760
5/31/90 10,722 11,498 10,784
6/30/90 10,848 11,599 10,843
7/31/90 11,006 11,771 10,884
8/31/90 10,741 11,600 10,984
9/30/90 10,730 11,607 11,076
10/31/90 10,892 11,817 11,143
11/30/90 11,140 12,055 11,167
12/31/90 11,129 12,108 11,167
1/31/91 11,347 12,270 11,234
2/28/91 11,435 12,377 11,251
3/31/91 11,479 12,382 11,268
4/30/91 11,624 12,548 11,285
5/31/91 11,691 12,659 11,319
6/30/91 11,702 12,647 11,351
7/31/91 11,838 12,801 11,368
8/31/91 11,952 12,970 11,401
9/30/91 12,123 13,138 11,452
10/31/91 12,192 13,257 11,469
11/30/91 12,227 13,294 11,502
12/31/91 12,471 13,580 11,510
1/31/92 12,512 13,611 11,527
2/29/92 12,506 13,615 11,569
3/31/92 12,524 13,620 11,628
4/30/92 12,636 13,742 11,644
5/31/92 12,809 13,904 11,660
6/30/92 12,971 14,137 11,702
7/31/92 13,375 14,561 11,727
8/31/92 13,236 14,419 11,760
9/30/92 13,266 14,512 11,793
10/31/92 13,052 14,370 11,834
11/30/92 13,353 14,627 11,851
12/31/92 13,557 14,777 11,842
1/31/93 13,725 14,948 11,900
2/28/93 14,131 15,489 11,942
3/31/93 14,061 15,325 11,984
4/30/93 14,181 15,480 12,017
5/31/93 14,238 15,566 12,034
6/30/93 14,499 15,826 12,051
7/31/93 14,541 15,847 12,051
8/31/93 14,776 16,177 12,085
9/30/93 14,858 16,361 12,110
10/31/93 14,926 16,392 12,160
11/30/93 14,878 16,248 12,168
12/31/93 15,207 16,591 12,168
1/31/94 15,340 16,780 12,201
2/28/94 15,064 16,345 12,243
3/31/94 14,480 15,680 12,284
4/30/94 14,494 15,813 12,301
5/31/94 14,630 15,951 12,310
6/30/94 14,563 15,854 12,352
7/31/94 14,821 16,144 12,385
8/31/94 14,877 16,200 12,435
9/30/94 14,688 15,962 12,468
10/31/94 14,400 15,678 12,477
11/30/94 14,058 15,394 12,493
12/31/94 14,435 15,733 12,493
1/31/95 14,884 16,183 12,543
2/28/95 15,334 16,654 12,593
3/31/95 15,478 16,845 12,635
4/30/95 15,494 16,865 12,677
5/31/95 15,908 17,403 12,702
6/30/95 15,782 17,252 12,727
7/31/95 16,000 17,416 12,727
8/31/95 16,190 17,637 12,761
9/30/95 16,323 17,748 12,786
10/31/95 16,515 18,006 12,828
11/30/95 16,766 18,304 12,819
12/31/95 16,931 18,480 12,810
1/31/96 16,993 18,621 12,886
2/29/96 16,892 18,494 12,910
Total Return 68.92% 84.94% 29.10%
GRAPHIC MATERIAL (31)
This bar chart shows the comparison between the fund's distribution rate of
4.83% and the taxable equivalent distribution rate of 8.85%, for the Class II
shares.
GRAPHIC MATERIAL (32)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,900 10,000 10,000
5/31/95 10,167 10,319 10,020
6/30/95 10,081 10,229 10,040
7/31/95 10,224 10,326 10,040
8/31/95 10,340 10,458 10,066
9/30/95 10,409 10,523 10,086
10/30/95 10,544 10,676 10,120
11/30/95 10,699 10,853 10,112
12/31/95 10,798 10,957 10,105
1/31/96 10,841 11,041 10,165
2/29/96 10,682 10,966 10,184
Total Return 6.82% 9.66% 1.84%
GRAPHIC MATERIAL (33)
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 2/29/96
AAA 55.8%
AA 12.7%
A 12.5%
BBB 14.9%
GRAPHIC MATERIAL (34)
This bar chart shows the comparison between the fund's distribution rate of
5.20% and the taxable equivalent distribution rate of 9.15%, for the Class I
shares.
GRAPHIC MATERIAL (35)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
Period Ending Fund Index Index
9/1/87 9,573 10,000 10,000
9/30/87 8,967 9,631 10,052
10/31/87 8,957 9,665 10,078
11/30/87 9,289 9,917 10,087
12/31/87 9,466 10,061 10,087
1/31/88 9,902 10,419 10,113
2/29/88 9,975 10,529 10,140
3/31/88 9,788 10,407 10,183
4/30/88 9,843 10,486 10,236
5/31/88 9,888 10,456 10,271
6/30/88 10,070 10,609 10,315
7/31/88 10,116 10,678 10,359
8/31/88 10,186 10,687 10,402
9/30/88 10,387 10,881 10,472
10/31/88 10,629 11,072 10,506
11/30/88 10,539 10,970 10,515
12/31/88 10,662 11,082 10,533
1/31/89 10,868 11,311 10,585
2/28/89 10,776 11,183 10,629
3/31/89 10,767 11,156 10,690
4/30/89 10,997 11,420 10,760
5/31/89 11,238 11,658 10,821
6/30/89 11,366 11,816 10,847
7/31/89 11,462 11,977 10,873
8/31/89 11,400 11,859 10,891
9/30/89 11,338 11,824 10,925
10/31/89 11,436 11,968 10,978
11/30/89 11,601 12,178 11,004
12/31/89 11,701 12,277 11,022
1/31/90 11,616 12,220 11,135
2/28/90 11,772 12,329 11,188
3/31/90 11,763 12,332 11,249
4/30/90 11,709 12,243 11,267
5/31/90 11,969 12,510 11,293
6/30/90 12,084 12,620 11,354
7/31/90 12,268 12,807 11,397
8/31/90 12,031 12,622 11,502
9/30/90 11,999 12,629 11,599
10/31/90 12,198 12,858 11,668
11/30/90 12,479 13,116 11,694
12/31/90 12,481 13,174 11,694
1/31/91 12,671 13,350 11,764
2/28/91 12,745 13,466 11,782
3/31/91 12,807 13,472 11,799
4/30/91 12,988 13,652 11,817
5/31/91 13,075 13,774 11,853
6/30/91 13,054 13,760 11,887
7/31/91 13,263 13,928 11,905
8/31/91 13,375 14,112 11,939
9/30/91 13,562 14,295 11,992
10/31/91 13,651 14,424 12,010
11/30/91 13,716 14,464 12,045
12/31/91 13,975 14,775 12,053
1/31/92 14,009 14,809 12,071
2/29/92 14,043 14,814 12,115
3/31/92 14,078 14,820 12,176
4/30/92 14,201 14,952 12,193
5/31/92 14,364 15,128 12,211
6/30/92 14,528 15,382 12,254
7/31/92 15,029 15,844 12,280
8/31/92 14,843 15,688 12,315
9/30/92 14,892 15,790 12,349
10/31/92 14,625 15,636 12,392
11/30/92 14,977 15,915 12,410
12/31/92 15,212 16,078 12,401
1/31/93 15,395 16,264 12,462
2/28/93 15,834 16,853 12,505
3/31/93 15,789 16,674 12,549
4/30/93 15,893 16,843 12,584
5/31/93 15,985 16,937 12,602
6/30/93 16,268 17,220 12,620
7/31/93 16,346 17,242 12,620
8/31/93 16,660 17,601 12,655
9/30/93 16,889 17,802 12,681
10/31/93 16,923 17,836 12,733
11/30/93 16,833 17,679 12,742
12/31/93 17,234 18,052 12,742
1/31/94 17,397 18,257 12,777
2/28/94 17,020 17,785 12,820
3/31/94 16,398 17,061 12,864
4/30/94 16,448 17,206 12,882
5/31/94 16,585 17,355 12,891
6/30/94 16,519 17,250 12,935
7/31/94 16,774 17,565 12,970
8/31/94 16,840 17,627 13,021
9/30/94 16,609 17,368 13,057
10/31/94 16,333 17,058 13,066
11/30/94 16,013 16,750 13,083
12/31/94 16,359 17,118 13,083
1/31/95 16,828 17,608 13,135
2/28/95 17,269 18,120 13,188
3/31/95 17,409 18,328 13,231
4/30/95 17,474 18,350 13,275
5/31/95 17,936 18,936 13,301
6/30/95 17,833 18,771 13,328
7/31/95 17,930 18,949 13,328
8/31/95 18,121 19,190 13,363
9/30/95 18,203 19,311 13,389
10/31/95 18,426 19,591 13,433
11/30/95 18,715 19,916 13,424
12/31/95 18,926 20,107 13,415
1/31/96 19,106 20,260 13,494
2/29/96 19,033 20,122 13,519
Total Return 90.33% 101.22% 35.19%
GRAPHIC MATERIAL (36)
This bar chart shows the comparison between the fund's distribution rate of
4.76% and the taxable equivalent distribution rate of 8.38%, for the Class II
shares.
GRAPHIC MATERIAL (37)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,896 10,000 10,000
5/31/95 10,160 10,319 10,020
6/30/95 10,096 10,229 10,040
7/31/95 10,146 10,326 10,040
8/31/95 10,249 10,458 10,066
9/30/95 10,298 10,523 10,086
10/30/95 10,419 10,676 10,120
11/30/95 10,576 10,853 10,112
12/31/95 10,690 10,957 10,105
1/31/96 10,787 11,041 10,165
2/29/96 10,641 10,966 10,184
Total Return 6.41% 9.66% 1.84%
GRAPHIC MATERIAL (38)
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 2/29/95
AAA 32.0%
AA 21.8%
A 36.8%
BBB 8.8%
Below Investment Grade 0.7%
GRAPHIC MATERIAL (39)
This bar chart shows the comparison between the fund's distribution rate of
5.28% and the taxable equivalent distribution rate of 9.48%, for the Class I
shares.
GRAPHIC MATERIAL (40)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
Period Ending Fund Index Index
9/1/87 9,579 10,000 10,000
9/30/87 8,948 9,631 10,052
10/31/87 9,006 9,665 10,078
11/30/87 9,388 9,917 10,087
12/31/87 9,578 10,061 10,087
1/31/88 10,050 10,419 10,113
2/29/88 10,175 10,529 10,140
3/31/88 9,960 10,407 10,183
4/30/88 9,989 10,486 10,236
5/31/88 10,017 10,456 10,271
6/30/88 10,234 10,609 10,315
7/31/88 10,293 10,678 10,359
8/31/88 10,354 10,687 10,402
9/30/88 10,596 10,881 10,472
10/31/88 10,819 11,072 10,506
11/30/88 10,708 10,970 10,515
12/31/88 10,862 11,082 10,533
1/31/89 11,100 11,311 10,585
2/28/89 11,017 11,183 10,629
3/31/89 11,007 11,156 10,690
4/30/89 11,270 11,420 10,760
5/31/89 11,502 11,658 10,821
6/30/89 11,662 11,816 10,847
7/31/89 11,747 11,977 10,873
8/31/89 11,672 11,859 10,891
9/30/89 11,597 11,824 10,925
10/31/89 11,694 11,968 10,978
11/30/89 11,869 12,178 11,004
12/31/89 11,980 12,277 11,022
1/31/90 11,903 12,220 11,135
2/28/90 12,047 12,329 11,188
3/31/90 12,047 12,332 11,249
4/30/90 11,970 12,243 11,267
5/31/90 12,244 12,510 11,293
6/30/90 12,374 12,620 11,354
7/31/90 12,559 12,807 11,397
8/31/90 12,285 12,622 11,502
9/30/90 12,264 12,629 11,599
10/31/90 12,442 12,858 11,668
11/30/90 12,725 13,116 11,694
12/31/90 12,739 13,174 11,694
1/31/91 12,932 13,350 11,764
2/28/91 13,005 13,466 11,782
3/31/91 13,056 13,472 11,799
4/30/91 13,227 13,652 11,817
5/31/91 13,327 13,774 11,853
6/30/91 13,305 13,760 11,887
7/31/91 13,492 13,928 11,905
8/31/91 13,617 14,112 11,939
9/30/91 13,794 14,295 11,992
10/31/91 13,871 14,424 12,010
11/30/91 13,924 14,464 12,045
12/31/91 14,204 14,775 12,053
1/31/92 14,237 14,809 12,071
2/29/92 14,232 14,814 12,115
3/31/92 14,253 14,820 12,176
4/30/92 14,363 14,952 12,193
5/31/92 14,526 15,128 12,211
6/30/92 14,716 15,382 12,254
7/31/92 15,247 15,844 12,280
8/31/92 15,071 15,688 12,315
9/30/92 15,119 15,790 12,349
10/31/92 14,928 15,636 12,392
11/30/92 15,255 15,915 12,410
12/31/92 15,477 16,078 12,401
1/31/93 15,674 16,264 12,462
2/28/93 16,128 16,853 12,505
3/31/93 16,068 16,674 12,549
4/30/93 16,185 16,843 12,584
5/31/93 16,248 16,937 12,602
6/30/93 16,504 17,220 12,620
7/31/93 16,513 17,242 12,620
8/31/93 16,855 17,601 12,655
9/30/93 17,042 17,802 12,681
10/31/93 17,089 17,836 12,733
11/30/93 16,997 17,679 12,742
12/31/93 17,285 18,052 12,742
1/31/94 17,448 18,257 12,777
2/28/94 17,096 17,785 12,820
3/31/94 16,426 17,061 12,864
4/30/94 16,518 17,206 12,882
5/31/94 16,640 17,355 12,891
6/30/94 16,514 17,250 12,935
7/31/94 16,812 17,565 12,970
8/31/94 16,877 17,627 13,021
9/30/94 16,647 17,368 13,057
10/31/94 16,326 17,058 13,066
11/30/94 15,916 16,750 13,083
12/31/94 16,296 17,118 13,083
1/31/95 16,800 17,608 13,135
2/28/95 17,275 18,120 13,188
3/31/95 17,479 18,328 13,231
4/30/95 17,499 18,350 13,275
5/31/95 17,951 18,936 13,301
6/30/95 17,818 18,771 13,328
7/31/95 17,901 18,949 13,328
8/31/95 18,080 19,190 13,363
9/30/95 18,180 19,311 13,389
10/31/95 18,453 19,591 13,433
11/30/95 18,744 19,916 13,424
12/31/95 18,925 20,107 13,415
1/31/96 19,011 20,260 13,494
2/29/96 18,873 20,122 13,519
Total Return 88.73% 101.22% 35.19%
GRAPHIC MATERIAL (41)
This bar chart shows the comparison between the fund's distribution rate of
4.83% and the taxable equivalent distribution rate of 8.67%, for the Class II
shares.
GRAPHIC MATERIAL (42)
The following line graph hypothetically compares the performance of the fund's
Class II Sharse with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,896 10,000 10,000
5/31/95 10,144 10,319 10,020
6/30/95 10,081 10,229 10,040
7/31/95 10,132 10,326 10,040
8/31/95 10,227 10,458 10,066
9/30/95 10,287 10,523 10,086
10/30/95 10,436 10,676 10,120
11/30/95 10,594 10,853 10,112
12/31/95 10,700 10,957 10,105
1/31/96 10,734 11,041 10,165
2/29/96 10,552 10,966 10,184
Total Return 5.52% 9.66% 1.84%
GRAPHIC MATERIAL (43)
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 2/29/96
AAA 65.6%
AA 11.4%
A 7.3%
BBB 14.0%
Below Investment Grade 1.7%
GRAPHIC MATERIAL (44)
This bar chart shows the comparison between the fund's distribution rate of
5.55% and the taxable equivalent distribution rate of 9.19%, for the Class I
shares.
GRAPHIC MATERIAL (45)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
Period Ending Fund Index Index
9/1/87 9,574 10,000 10,000
9/30/87 8,987 9,631 10,052
10/31/87 9,025 9,665 10,078
11/30/87 9,460 9,917 10,087
12/31/87 9,684 10,061 10,087
1/31/88 10,119 10,419 10,113
2/29/88 10,191 10,529 10,140
3/31/88 9,993 10,407 10,183
4/30/88 10,017 10,486 10,236
5/31/88 10,071 10,456 10,271
6/30/88 10,244 10,609 10,315
7/31/88 10,309 10,678 10,359
8/31/88 10,346 10,687 10,402
9/30/88 10,583 10,881 10,472
10/31/88 10,844 11,072 10,506
11/30/88 10,759 10,970 10,515
12/31/88 10,879 11,082 10,533
1/31/89 11,082 11,311 10,585
2/28/89 11,027 11,183 10,629
3/31/89 11,035 11,156 10,690
4/30/89 11,252 11,420 10,760
5/31/89 11,502 11,658 10,821
6/30/89 11,648 11,816 10,847
7/31/89 11,741 11,977 10,873
8/31/89 11,673 11,859 10,891
9/30/89 11,616 11,824 10,925
10/31/89 11,721 11,968 10,978
11/30/89 11,904 12,178 11,004
12/31/89 12,022 12,277 11,022
1/31/90 11,941 12,220 11,135
2/28/90 12,049 12,329 11,188
3/31/90 12,035 12,332 11,249
4/30/90 11,963 12,243 11,267
5/31/90 12,221 12,510 11,293
6/30/90 12,344 12,620 11,354
7/31/90 12,548 12,807 11,397
8/31/90 12,243 12,622 11,502
9/30/90 12,216 12,629 11,599
10/31/90 12,413 12,858 11,668
11/30/90 12,716 13,116 11,694
12/31/90 12,748 13,174 11,694
1/31/91 12,961 13,350 11,764
2/28/91 13,029 13,466 11,782
3/31/91 13,074 13,472 11,799
4/30/91 13,266 13,652 11,817
5/31/91 13,372 13,774 11,853
6/30/91 13,369 13,760 11,887
7/31/91 13,552 13,928 11,905
8/31/91 13,685 14,112 11,939
9/30/91 13,883 14,295 11,992
10/31/91 13,955 14,424 12,010
11/30/91 14,015 14,464 12,045
12/31/91 14,296 14,775 12,053
1/31/92 14,294 14,809 12,071
2/29/92 14,332 14,814 12,115
3/31/92 14,370 14,820 12,176
4/30/92 14,486 14,952 12,193
5/31/92 14,668 15,128 12,211
6/30/92 14,865 15,382 12,254
7/31/92 15,354 15,844 12,280
8/31/92 15,138 15,688 12,315
9/30/92 15,176 15,790 12,349
10/31/92 14,944 15,636 12,392
11/30/92 15,266 15,915 12,410
12/31/92 15,495 16,078 12,401
1/31/93 15,670 16,264 12,462
2/28/93 16,163 16,853 12,505
3/31/93 16,049 16,674 12,549
4/30/93 16,144 16,843 12,584
5/31/93 16,211 16,937 12,602
6/30/93 16,475 17,220 12,620
7/31/93 16,499 17,242 12,620
8/31/93 16,764 17,601 12,655
9/30/93 16,945 17,802 12,681
10/31/93 16,983 17,836 12,733
11/30/93 17,036 17,679 12,742
12/31/93 17,292 18,052 12,742
1/31/94 17,433 18,257 12,777
2/28/94 17,181 17,785 12,820
3/31/94 16,691 17,061 12,864
4/30/94 16,772 17,206 12,882
5/31/94 16,898 17,355 12,891
6/30/94 16,875 17,250 12,935
7/31/94 17,092 17,565 12,970
8/31/94 17,145 17,627 13,021
9/30/94 17,016 17,368 13,057
10/31/94 16,841 17,058 13,066
11/30/94 16,560 16,750 13,083
12/31/94 16,813 17,118 13,083
1/31/95 17,144 17,608 13,135
2/28/95 17,493 18,120 13,188
3/31/95 17,642 18,328 13,231
4/30/95 17,698 18,350 13,275
5/31/95 18,085 18,936 13,301
6/30/95 18,078 18,771 13,328
7/31/95 18,183 18,949 13,328
8/31/95 18,368 19,190 13,363
9/30/95 18,506 19,311 13,389
10/31/95 18,693 19,591 13,433
11/30/95 18,913 19,916 13,424
12/31/95 19,053 20,107 13,415
1/31/96 19,161 20,260 13,494
2/29/96 19,105 20,122 13,519
Total Return 91.05% 101.22% 35.19%
GRAPHIC MATERIAL (46)
This bar chart shows the comparison between the fund's distribution rate of
5.08% and the taxable equivalent distribution rate of 8.41%, for the Class II
shares.
GRAPHIC MATERIAL (47)
The following line graph hypothetically compares the performance of the fund
with the Consumer Price Index (CPI) and the Lehman Brothers Municipal Bond
Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,903 10,000 10,000
5/31/95 10,121 10,319 10,020
6/30/95 10,111 10,229 10,040
7/31/95 10,165 10,326 10,040
8/31/95 10,290 10,458 10,066
9/30/95 10,361 10,523 10,086
10/30/95 10,460 10,676 10,120
11/30/95 10,613 10,853 10,112
12/31/95 10,695 10,957 10,105
1/31/96 10,750 11,041 10,165
2/29/96 10,605 10,966 10,184
Total Return 6.05% 9.66% 1.84%
GRAPHIC MATERIAL (48)
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 2/29/96
AAA 39.9%
AA 31.0%
A 20.5%
BBB 8.6%
GRAPHIC MATERIAL (49)
This bar chart shows the comparison between the fund's distribution rate of
5.29% and the taxable equivalent distribution rate of 9.30%, for the Class I
shares.
GRAPHIC MATERIAL (50)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
Period Ending Fund Index Index
9/1/87 9,571 10,000 10,000
9/30/87 8,980 9,631 10,052
10/31/87 8,990 9,665 10,078
11/30/87 9,447 9,917 10,087
12/31/87 9,641 10,061 10,087
1/31/88 10,048 10,419 10,113
2/29/88 10,148 10,529 10,140
3/31/88 9,937 10,407 10,183
4/30/88 9,950 10,486 10,236
5/31/88 9,993 10,456 10,271
6/30/88 10,174 10,609 10,315
7/31/88 10,237 10,678 10,359
8/31/88 10,310 10,687 10,402
9/30/88 10,505 10,881 10,472
10/31/88 10,742 11,072 10,506
11/30/88 10,653 10,970 10,515
12/31/88 10,780 11,082 10,533
1/31/89 10,979 11,311 10,585
2/28/89 10,899 11,183 10,629
3/31/89 10,881 11,156 10,690
4/30/89 11,106 11,420 10,760
5/31/89 11,363 11,658 10,821
6/30/89 11,515 11,816 10,847
7/31/89 11,615 11,977 10,873
8/31/89 11,543 11,859 10,891
9/30/89 11,481 11,824 10,925
10/31/89 11,593 11,968 10,978
11/30/89 11,761 12,178 11,004
12/31/89 11,864 12,277 11,022
1/31/90 11,800 12,220 11,135
2/28/90 11,926 12,329 11,188
3/31/90 11,918 12,332 11,249
4/30/90 11,843 12,243 11,267
5/31/90 12,107 12,510 11,293
6/30/90 12,214 12,620 11,354
7/31/90 12,413 12,807 11,397
8/31/90 12,104 12,622 11,502
9/30/90 12,084 12,629 11,599
10/31/90 12,275 12,858 11,668
11/30/90 12,562 13,116 11,694
12/31/90 12,565 13,174 11,694
1/31/91 12,772 13,350 11,764
2/28/91 12,895 13,466 11,782
3/31/91 12,935 13,472 11,799
4/30/91 13,109 13,652 11,817
5/31/91 13,198 13,774 11,853
6/30/91 13,202 13,760 11,887
7/31/91 13,404 13,928 11,905
8/31/91 13,532 14,112 11,939
9/30/91 13,735 14,295 11,992
10/31/91 13,815 14,424 12,010
11/30/91 13,869 14,464 12,045
12/31/91 14,140 14,775 12,053
1/31/92 14,160 14,809 12,071
2/29/92 14,168 14,814 12,115
3/31/92 14,189 14,820 12,176
4/30/92 14,313 14,952 12,193
5/31/92 14,478 15,128 12,211
6/30/92 14,682 15,382 12,254
7/31/92 15,191 15,844 12,280
8/31/92 15,040 15,688 12,315
9/30/92 15,088 15,790 12,349
10/31/92 14,829 15,636 12,392
11/30/92 15,159 15,915 12,410
12/31/92 15,384 16,078 12,401
1/31/93 15,568 16,264 12,462
2/28/93 16,013 16,853 12,505
3/31/93 15,952 16,674 12,549
4/30/93 16,070 16,843 12,584
5/31/93 16,162 16,937 12,602
6/30/93 16,448 17,220 12,620
7/31/93 16,456 17,242 12,620
8/31/93 16,760 17,601 12,655
9/30/93 16,951 17,802 12,681
10/31/93 17,045 17,836 12,733
11/30/93 17,011 17,679 12,742
12/31/93 17,291 18,052 12,742
1/31/94 17,458 18,257 12,777
2/28/94 17,135 17,785 12,820
3/31/94 16,547 17,061 12,864
4/30/94 16,611 17,206 12,882
5/31/94 16,705 17,355 12,891
6/30/94 16,607 17,250 12,935
7/31/94 16,879 17,565 12,970
8/31/94 16,960 17,627 13,021
9/30/94 16,757 17,368 13,057
10/31/94 16,462 17,058 13,066
11/30/94 16,092 16,750 13,083
12/31/94 16,492 17,118 13,083
1/31/95 16,986 17,608 13,135
2/28/95 17,406 18,120 13,188
3/31/95 17,566 18,328 13,231
4/30/95 17,602 18,350 13,275
5/31/95 18,027 18,936 13,301
6/30/95 17,939 18,771 13,328
7/31/95 18,087 18,949 13,328
8/31/95 18,267 19,190 13,363
9/30/95 18,368 19,311 13,389
10/31/95 18,597 19,591 13,433
11/30/95 18,859 19,916 13,424
12/31/95 19,042 20,107 13,415
1/31/96 19,129 20,260 13,494
2/29/96 19,038 20,122 13,519
Total Return 90.38% 101.22% 35.19%
GRAPHIC MATERIAL (51)
This bar chart shows the comparison between the fund's distribution rate of
4.84% and the taxable equivalent distribution rate of 8.51%, for the Class II
shares.
GRAPHIC MATERIAL (52)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
Period Ending Fund Index Index
5/1/95 9,904 10,000 10,000
5/31/95 10,162 10,319 10,020
6/30/95 10,117 10,229 10,040
7/31/95 10,185 10,326 10,040
8/31/95 10,290 10,458 10,066
9/30/95 10,341 10,523 10,086
10/30/95 10,464 10,676 10,120
11/30/95 10,606 10,853 10,112
12/31/95 10,703 10,957 10,105
1/31/96 10,746 11,041 10,165
2/29/96 10,591 10,966 10,184
Total Return 5.91% 9.66% 1.84%
Table of Contents
Message from the Chairman
Special Feature: Portfolio Update
Franklin's Tax-Free Income Funds
Fund Reports
Franklin Arizona Tax-Free
Income Fund
Franklin Colorado Tax-Free
Income Fund
Franklin Connecticut Tax-Free
Income Fund
Franklin Indiana Tax-Free
Income Fund
Franklin New Jersey Tax-Free
Income Fund
Franklin Oregon Tax-Free
Income Fund
Franklin Pennsylvania Tax-Free
Income Fund
Franklin Puerto Rico Tax-Free
Income Fund
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Franklin High Yield Tax-Free
Income Fund
Statement of Investments
Financial Statements
Notes to Financial Statements
Report of Independent Auditors
To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most fund reports, such as annual and semi-annual reports, may be
mailed to a household. Additional copies may be obtained, without charge, by
calling Franklin Templeton Fund Information at 1-800/DIAL BEN (1-800/342-5236).
MESSAGE FROM THE CHAIRMAN
April 15, 1996
Dear Shareholder:
It's a pleasure to bring you the annual report of the Franklin Tax-Free Trust
for the period ended February 29, 1996.
Declining interest rates, low inflation and moderate growth characterized the
year under review. The nation's economic growth slowed significantly, prompting
the Federal Reserve Board to lower the federal funds rate on three occasions
during the reporting period. Bond markets in general anticipated the Fed's
actions; long-term bond yields had been decreasing steadily since the beginning
of 1995. Prices of fixed-income securities appreciated in response to the Fed's
moves in July and December 1995, and February 1996 to lower interest rates.
Hopes for further reductions dimmed as the economy began to show signs of
improvement, causing bond prices to give back some of their 1995 gains.
While striving to provide shareholders with a high level of current income, we
aim to avoid the effects of market volatility. In addition, we seek to reduce a
fund's exposure to credit risk by investing in securities issued by a broad
range of cities and counties throughout the nation, as well as from a variety of
municipal sectors.
We remain conservative in our management of the Trust's funds, emphasizing the
purchase of high-quality, investment-grade bonds.** In addition, we evaluate
each issue individually, favoring highly rated "essential service" bonds. These
securities tend to have a reliable income stream generated from hospitals,
utilities, and transportation projects, to name a few. As a result, they tend to
be less affected by budgetary and political changes than other fixed-income
securities and are believed by many analysts to be very attractive in a
municipal cost-cutting environment. Please keep in mind, however, that the
principal value of each fund's holdings as well as the price of its shares, will
fluctuate with market conditions.
The Federal Reserve's policy appears to target slow to moderate economic growth
and controlled inflation, which bodes well for fixed-income securities. Interest
rates did rise following a stronger-than-expected employment report released in
early March, but we believe there is still no clear evidence pointing to a
breakout of inflation. In terms of the supply of municipal bonds, we think the
technical aspect of the market would indicate that demand will be slightly ahead
of supply in 1996. The fluctuation of interest rates in 1995 -caused by the
Fed's activities - reinforced our philosophy that shareholders should view their
investments with a long-term perspective. While your fund may react to these
changes, we believe that the performance of tax-free income funds, including
those in the Franklin Tax-Free Trust, will be rewarding over the long term.
Tax-free securities continue to be an important component of one's overall
financial plan. You will find a discussion of each fund's performance on the
following pages.
**The Franklin High Yield Tax-Free Income Fund invests in higher yielding,
medium- to lower-quality and non-rated municipal bonds. As discussed in the
fund's prospectus, these securities entail greater risk than higher-rated
municipal securities.
As always, we appreciate your trust and support and look forward to serving your
investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
An Update on Tax Reform
Tax reform is an issue that has weighed heavy on everyone's mind -- including
ours. We have patiently waited for word from Washington and, in January, the
National Commission on Tax Reform and Economic Growth released its
long-anticipated report on tax reform. Although the Commission endorsed the idea
of sweeping tax reform, the report may have actually raised more questions than
it answered: What would be an acceptable tax rate? Would low-income families be
excluded? What would be the tax status of investment income? Would the rich and
poor gain at the expense of the middle class? While several, more detailed tax
reform plans are being discussed, investors should keep in mind that making such
dramatic change is not a simple process. We recognize that media attention on a
few of the high-profile proposals has caused some investor concern over
municipal investments, and we believe it is important to note that the municipal
bond market could be affected by tax reform. However, we feel that dramatic
changes, if any, are probably far down the road. For more information regarding
the effects of tax reform on the municipal market, please see the Portfolio
Update on page 3.
PORTFOLIO UPDATE - FRANKLIN'S TAX-FREE INCOME FUNDS
Tom Kenny, director of Franklin Templeton's Municipal Bond Department, and
portfolio managers Bernie Schroer, Sheila Amoroso and Don Duerson take a look at
the important issues that shaped the municipal bond market last year.
PICTURE OMITTED
Portfolio managers Don Duerson (left) and Sheila Amoroso (right) discuss aspects
of a new bond issue with Tom Kenny, director of Franklin Templeton's Municipal
Bond Department.
Did the municipal market measure up to your expectations in 1995?
Tom Kenny: In our last portfolio update, we told you we were anticipating a
strong municipal market in 1995. We expected that the supply of new municipal
bonds would continue to be low, and that the interest-rate environment would be
more favorable for bond investors, thereby increasing demand. Generally
speaking, we were right. Tax-free income funds fared well in 1995, and
Franklin's funds were no exception. After enduring one of the worst fixed-income
markets of the last 25 years in 1994, last year's rebound only reinforced our
philosophy that investors should keep a long-term perspective (see fig. 1 on
next page). That being said, the municipal market's performance wasn't quite as
robust as we had anticipated.
Why was that?
Tom: While investor demand was strong in the beginning of the year, it started
to decline in April, due in part to a "hangover" effect from the tough 1994
market. Additionally, the stock market performed so well that it pulled a lot of
assets into equities.
Bernie Schroer: There was also the fear of a "flat tax."
The media has focused considerable attention on a proposed "flat tax." What does
tax reform mean for individual municipal bonds and bond funds?
Don Duerson: It really depends upon which tax-reform proposal you are
discussing. There are several proposals out there, such as a flat tax, a
value-added tax, an unlimited savings allowance, and a consumption tax. The
popular appeal of most of these proposals is that they attempt to bring
simplicity to what is now a complex tax code.
Ultimately, however, no one proposal addresses every problem. So while we are
closely following the debate, we think it's too early to make any investment
decisions based purely on speculation.
Sheila Amoroso: The debate, however, has had an impact on the market, keeping
municipal securities' prices lower than they otherwise might have been.
What are the chances that some type of tax reform will be enacted this year?
Don: Because it is so complicated and the effects so far-reaching, tax reform
probably won't be addressed before 1997 -- although the political rhetoric will
certainly be a big part of the upcoming presidential election. Also, keep in
mind what happened to the health care reform proposals a few years ago. After
all the political debate and havoc that was wrought on health care securities,
the issue has quietly faded into the background.
Sheila: Change of this magnitude is not a simple process, as we have seen
recently with the balanced budget proposals. In that case, everyone agrees on
the goal of balancing the budget, but they disagree on how to get there. Tax
reform is much more difficult because the goals are not the same for all the
parties involved.
PICTURE OMITTED
Staying on top of the municipal market. (From left) Andrew Jennings, Sr., Bernie
Schroer, Tom Kenny and Don Duerson.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
How about Orange County? Did that situation continue to affect the market in
1995?
Tom: Generally speaking, the overall municipal market was impacted by Orange
County's bankruptcy for a relatively short time, rebounding very quickly. The
California market, on the other hand, was affected well into 1995, until Orange
County established a recovery plan. While the "Orange County effect" is
essentially behind us, it does point out one of the major benefits of owning a
Franklin tax-free mutual fund as our funds invest in a variety of issues, and
the impact of any one issue, sector or region is usually very limited.
Interestingly, one measurable effect of Orange County's financial difficulties
may be the increased volume of insured bonds in the market. Approximately 44% of
new municipal bonds in 1995 were insured, versus 37% in 1994 (see fig. 2).1 In
California that figure was even higher.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Does this mean the funds are buying more insured securities?
Bernie: Yes. Recently, we have been buying mostly insured bonds for many of the
Franklin tax-free funds, but that is primarily due to the narrow yield spread
between AAA and lesser-quality issues.2
What do you mean by "narrow spread"?
Bernie: In a declining or low interest-rate environment, investors tend to
"reach for yield," trying to obtain the same yield level they had in an earlier,
higher interest-rate environment. To accomplish this, investors have to buy
lesser-quality bonds, which are usually higher yielding. Paradoxically, this
added demand generally drives the prices of these securities higher and results
in lower relative yields. The end result is a much smaller yield difference, or
"narrow spread," between a AAA insured bond and a lesser-grade BBB bond. When
this happens, it makes more sense for us to buy the insured bonds.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Sheila, are you even purchasing insured bonds for the Franklin High Yield
Tax-Free Income Fund?2
Sheila: Yes, recently we have been. Higher risk should mean higher potential
reward, but there just isn't enough of a yield spread in the rated market to
warrant the added risk in lower-quality bonds right now. In addition, we have
been focusing heavily on non-rated issues where yields have remained attractive.
We have one of the largest teams of municipal market analysts of any fund group
in the nation.4 With their hard work, we can determine which bonds meet our
strict internal ratings criteria, and we still get paid the higher yield for
buying a "non-rated" security. We feel this can definitely be an advantage for
our shareholders.
1. Source:The Bond Buyer, 01/08/96.
2. Portfolio holdings are subject to change and may not represent future
portfolio composition.
Do you anticipate a continued low supply of new issues this year?
Tom: Municipal bonds finance the building and repair of infrastructure across
the country. While the need for these projects clearly exists, nationally there
has been a taxpayer revolt. Across the country, many new Republican governors
have been swept into office on a theme of lower taxes, and many states continue
to face budget pressures. As a result, states and municipalities simply can't
afford to issue new securities. So while the need is there, I think the
economics and politics of the matter bode well for continued low supply (see
fig. 3 on previous page).
That could be good news for our shareholders, because if supply continues to
remain low, stronger investor demand could make municipal securities attractive
investments.
What do you see in the months ahead?
Tom: We think the fundamentals look good for municipal bonds. But regardless of
changing market conditions, we will continue to focus on providing our
shareholders with high current income free from regular federal and, depending
on the fund, state personal income taxes.5
Franklin has become the largest tax-free fund manager in the nation by following
a very straightforward, "plain vanilla" investment philosophy, which has proved
successful in both strong and weak markets.6 Over time, income has provided a
much greater percentage of total return than has capital appreciation, based on
the unmanaged Lehman Brothers 20-Year Municipal Bond Index (see fig. 4). We plan
to maintain our approach and continue to make tax-free income our focus.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Looking ahead, I think municipal securities will remain an excellent investment
option for many individuals, and our 870,000 tax-free fund shareholders will
continue to find investing in our funds to be one of the most effective and
convenient ways to participate in the municipal securities market.
4. Source: Research and Ratings Review, 08/31/95.
5. For investors subject to federal or state alternative minimum tax, all or a
portion of this income may be subject to such tax, depending on the fund.
Distributions of capital gains and of ordinary income from accrued market
discount, if any, are generally taxable.
6. Past performance cannot guarantee future results.
FRANKLIN ARIZONA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Arizona
state personal income taxes through a portfolio consisting primarily of Arizona
municipal bonds.*
State Update
Arizona's economy continued to diversify away from cyclical agricultural and
copper industries toward the more stable service, tourism, and manufacturing
sectors. For example, a large number of high-tech companies have relocated to
the state over the last few years, with over 200 firms moving into the Phoenix
area alone in 1995. In fact, Intel Corp's $1.3 billion chip production expansion
is expected to increase the company's Phoenix-area employment by approximately
1300 jobs throughout this year.** Additionally, Phoenix played host to the 1996
Super Bowl, which attracted thousands of out-of-town visitors to boost the local
economy and also acted as great advertising for Phoenix as a place to visit or
relocate.
During the 1970s and 1980s, Arizona financed much of the growth needed through
the 1990s. As a result, the state's borrowing needs remain modest. This, of
course, adds scarcity value to Arizona municipal bonds.
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.
**Source: Standard & Poor's Creditweek Municipal, July 10, 1995.
Portfolio Notes
We worked to decrease the fund's exposure to pre-refunded bonds. We invested the
proceeds in full coupon bonds (bonds with a coupon rate near or above the
current market rate) that offered better call protection. This strategy
significantly decreased our pre-refunded exposure to 20.0% of total long-term
investments on February 29, 1996, down from 32.1% on February 28, 1995.
At the end of the reporting period, one of the largest positions in the
portfolio was the Salt River Project -- a municipal utility rated AA by Standard
& Poor's and Moody's. We feel it is stable due in part to its strong management
team and low competitive rates. During the fiscal year, we also purchased
general obligation bonds issued by the City of Phoenix, which are aa1-rated by
Moody's and AA+-rated by Standard & Poor's and -- in our opinion -- are stable
credits.
Franklin Arizona Tax-Free Income
Fund Portfolio Breakdown on February 29, 1996
Based on total long-term investments
Sector % of total
long-term
investments
Utilities 32.9%
Pre-Refunded 20.0%
Education 10.0%
Hospitals 9.4%
Other Revenue 7.8%
Housing 5.7%
Transportation 5.5%
General Obligations 4.1%
Certificates of Participation 2.8%
Industria l0.8%
Miscellaneous 0.6%
Sales Tax 0.4%
For a complete list of portfolio holdings, please see page 73 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 11.)
We are pleased to report that the Franklin Arizona Tax-Free Income Fund's Class
I share price, as measured by net asset value, increased to $11.34 on February
29, 1996, from $11.11 on February 28, 1995.
Franklin Arizona Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Amount
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
September 5.4 cents
October 5.4 cents
November 5.4 cents
December 5.4 cents
January 5.4 cents
February 5.4 cents
Total 64.8 cents
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
In addition to the dividend income, your fund's Class I shares paid out a
long-term capital gain of 12.09 cents ($0.1209) per share in December 1995.
Distributions will vary depending on income earned by the fund and the profit
realized from the sales of securities in the portfolio. Past distributions are
not predictive of future results.
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.47%, based on an annualization of the current monthly dividend of
5.4 cents ($0.054) per share and the maximum offering price of $11.84 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Arizona state personal income tax bracket of
42.98%, you would have to earn 9.74% from a taxable investment of similar
quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1988, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Arizona Tax-Free Income Fund's Class
II share price, as measured by net asset value, increased to $11.38 on February
29, 1996, from $11.15 on May 1, 1995, the date the fund began offering these
shares.
In addition to the dividend income, your fund's Class II shares paid out a
long-term capital gain of 12.09 cents ($0.1209) per share in December 1995.
Distributions will vary depending an income earned by the fund and any profits
realized from the sale of securities in the fund's portfolio. Past distributions
are not predictive of future results.
Franklin Arizona Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend Amount
Month per Share
May 3.4 cents
June 4.8 cents
July 4.8 cents
August 4.8 cents
September 4.8 cents
October 4.8 cents
November 4.8 cents
December 4.8 cents
January 4.8 cents
February 4.8 cents
Total 46.6 cents
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 5.01%, based on an annualization of the current monthly dividend of
4.8 cents ($0.048) per share and the offering price of $11.49 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Arizona state personal income tax bracket of 42.98%, you would have
to earn 8.92% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since June 1995, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. Although the
fund has slightly underperformed the unmanaged Lehman Brothers Municipal Bond
Index, such unmanaged market indices have inherent performance differentials in
comparison with any fund. For example, they do not pay management fees to cover
salaries of security analysts or portfolio managers, or pay commissions or
market spreads to buy and sell bonds. Unlike unmanaged market indices, mutual
funds are never 100% invested because of the need to have cash on hand to redeem
shares. The fund's performance figures also include the initial sales charge,
all fund expenses and account fees. If operating expenses such as the fund's had
been applied to this index, its (the index's) performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Arizona Tax-Free Income Fund
Periods ended February 29, 1996
Class II
Since Inception Since Inception
1-Year 5-Year (9/1/87) (5/1/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 9.24% 46.40% 94.42% --
Class II Shares -- -- -- 7.60%
Average Annual Total Return2
Class I Shares 4.62% 6.99% 7.58% --
Aggregate Total Return2
Class II Shares -- -- -- 5.56%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I Shares 5.47% Class I Shares 9.74%
Class II Shares 5.01% Class II Shares 8.92%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I Shares 4.32% Class I Shares 7.58%
Class II Shares 3.88% Class II Shares 6.80%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% Contingent
Deferred Sales Charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge for Class I shares. Aggregate total return includes the 1.0%
initial sales charge and represents the change in value of an investment since
the inception date. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of investment. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See Note
below.
3. Class I shares distribution rate is based on an annualization of the current
5.4 cent per share monthly dividend and the maximum offering price of $11.84 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.8 cent per share monthly dividend and the
offering price of $11.49 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Arizona state personal income tax rate of 42.98%, 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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 cannot guarantee future results.
The Franklin Arizona Tax-Free Income Fund paid per share distributions derived
from long-term capital gains of 12.09 cents ($0.1209) in December 1995. 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
Fund 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 Notes
Colorado's economy was one of the healthiest in the U.S. during the reporting
period. Employment and personal income levels continued to grow at faster rates
than the rest of the nation, due primarily to the state's diverse economy, high
education levels, cost advantages, and quality of life.** The Denver area has
registered positive job growth since 1988 -- the only large metropolitan area in
the country to do so.
GRAPHIC MATERIAL 10 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: Standard & Poor's Creditweek Municipal, 6/26/95.
Portfolio Notes
In 1995, Colorado municipal bond issuance increased 13.4% to $2.666 billion;
however, we anticipate lower 1996 issuance. This should make the state's
municipal bonds attractive investments as demand will exceed supply, increasing
the value of these securities.
During 1995, the education sector represented over 35% of the new municipal bond
issues in Colorado. We participated in the Cherry Creek School District and the
Auraria Higher Education Center issues over the reporting period. As a result,
our exposure to the education sector increased to 15.1% of total long-term
investments on February 29, 1996, from 11.9% on February 28, 1995. Additionally,
40% of the bonds that came to market in the state had bond insurance. Insured
bonds are attractive due to the narrow yield spreads to lower-rated municipal
issues.
Franklin Colorado Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Pre-Refunded 15.3%
Hospitals 15.0%
Education 14.9%
Housing 14.0%
Transportation 13.3%
Health Care 6.6%
Sales Tax 5.3%
Certificates of Participation 4.5%
Utilities 4.3%
General Obligations 2.7%
Industrial 2.1%
Other Revenue 1.1%
Tax Allocation 0.9%
For a complete list of portfolio holdings, please see page 81 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 18.)
We are pleased to report that the Franklin Colorado Tax-Free Income Fund's Class
I share price, as measured by net asset value, increased to $11.84 on February
29, 1996, from $11.38 on February 28, 1995.
Franklin Colorado Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Amount
Month per Share
March 5.5 cents
April 5.5 cents
May 5.5 cents
Jun 5.5 cents
July 5.5 cents
August 5.5 cents
September 5.5 cents
October 5.5 cents
November 5.5 cents
December 5.5 cents
January 5.5 cents
February 5.5 cents
Total 66.0 cents
GRAPHIC MATERIAL 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.34%, based on an annualization of the current monthly dividend of
5.5 cents ($0.055) per share and the maximum offering price of $12.37 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Colorado state personal income tax bracket of
42.6%, you would have to earn 9.30% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1988, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
The Franklin Colorado Tax-Free Income Fund's Class II share price, as measured
by net asset value, increased to $11.87 on February 29, 1996, from $11.40 on May
1, 1995, the date the fund began offering these shares.
Franklin Colorado Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend Income
Month per Share
May 3.5 cents
June 4.9 cents
July 4.9 cents
August 4.9 cents
September 4.9 cents
October 4.9 cents
November 4.9 cents
December 4.9 cents
January 4.9 cents
February 4.9 cents
Total 47.6 cents
GRAPHIC MATERIAL 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.90%, based on an annualization of the current monthly dividend of
4.9 cents ($0.049) per share and the offering price of $11.99 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Colorado state personal income tax bracket of 42.6%, you would have
to earn 8.54% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since June 1995, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. Although the
fund has slightly underperformed the unmanaged Lehman Brothers Municipal Bond
Index, such unmanaged market indices have inherent performance differentials in
comparison with any fund. For example, they do not pay management fees to cover
salaries of security analysts or portfolio managers, or pay commissions or
market spreads to buy and sell bonds. Unlike unmanaged market indices, mutual
funds are never 100% invested because of the need to have cash on hand to redeem
shares. The fund's performance figures also include the initial sales charge,
all fund expenses and account fees. If operating expenses such as the fund's had
been applied to this index, its (the index's) performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Colorado Tax-Free Income Fund
Periods ended February 29, 1996
Since Inception
Since Inception Class II
1-Year 5-Year (9/1/87) (5/1/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 10.12% 49.78% 99.40% --
Class II Shares -- -- -- 8.57%
Average Annual Total Return2
Class I Shares 5.40% 7.49% 7.90% --
Aggregate Total Return2
Class II Shares -- -- -- 6.45%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I Shares 5.34% Class I Shares 9.30%
Class II Shares 4.90% Class II Shares 8.54%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I Shares 4.55% Class I Shares 7.93%
Class II Shares 4.12% Class II Shares 7.18%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% Contingent
Deferred Sales Charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge for Class I shares. Aggregate total return includes the 1.0%
initial sales charge and represents the change in value of an investment since
the inception date. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of investment. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See Note
below.
3. Class I shares distribution rate is based on an annualization of the current
5.5 cent per share monthly dividend and the maximum offering price of $12.37 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.9 cent per share monthly dividend and the
offering price of $11.99 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Colorado 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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 cannot guarantee future results.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Connecticut
state personal income taxes through a portfolio consisting primarily of
Connecticut municipal bonds.
State Notes
During the past few years, Connecticut experienced one of the longest recessions
in the nation, and impact was felt in almost every economic sector, with job
losses of more than 164,000.**
However, 1995 told a story of rebound and recovery. Throughout the year,
Connecticut attracted approximately thirty new businesses and almost 5,000 new
jobs, due largely to proposed tax relief for urban businesses and the
implementation of research and development tax credits to stimulate growth in
the high-tech industries.+
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a small portion
of these dividends may be subject to such tax. Distributions of capital gains
and of ordinary income from accrued market discount, if any, are generally
taxable.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
the fund's prospectus.
**Source: Standard & Poor's Creditweek Municipal, 10/16/95.
+Source: Connecticut State of the State Address, 2/07/96.
Portfolio Notes
Over the past year, we focused on improving the fund's credit quality. To this
end, we shortened the average maturity somewhat, to just over 20 years on
February 29, 1996, from 21.3 years on February 28, 1995, and improved its
quality ratings, concentrating on the two highest categories, AA and AAA. On
February 29, 1996, AA- and AAA-rated bonds comprised over 63% of the portfolio's
total long-term investments, up from 53.2% a year earlier. Helping this
improvement was the mid-February 1996 Moody's upgrade of Bridgeport bonds --
bonds in which the fund has investments -- to Baa from Ba1.
Franklin Connecticut Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Housing 24.6%
General Obligations 16.6%
Utilities 14.2%
Pre-Refunded 14.1%
Hospitals 13.7%
Education 9.1%
Health Care 4.2%
Transportation 2.1%
Industrial 1.4%
For a complete list of portfolio holdings, please see page 85 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 25.)
We are pleased to report that the Franklin Connecticut Tax-Free Income Fund's
Class I share price, as measured by net asset value, increased to $10.96 on
February 29, 1996, from $10.64 on February 28, 1995.
Due to increased income earned by the fund, we were able to raise the monthly
dividend to 5.2 cents ($0.052) from 5.1 cents ($0.051) per share, effective with
theNovember 1995 distribution. Dividends will vary based on the earnings of the
fund's portfolio, and past distributions are not predictive of future results.
Franklin Connecticut Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Income
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
September 5.1 cents
October 5.1 cents
November 5.2 cents
December 5.2 cents
January 5.2 cents
February 5.2 cents
Total 61.6 cents
GRAPHIC MATERIAL 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.45%, based on an annualization of the current monthly dividend of
5.2 cents ($0.052) per share and the maximum offering price of $11.45 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Connecticut state personal income tax bracket
of 42.3%, you would have to earn 9.45% from a taxable investment of similar
quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1988, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Connecticut Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $10.97 on
February 29, 1996, from $10.65 on May 1, 1995, the date the fund began offering
the Class II shares.
Due to increased income earned by the fund, we were able to raise the monthly
dividend to 4.6 cents ($0.046) from 4.5 cents ($0.045) per share in November
1995, and again to 4.67 cents ($0.0467) per share effective with the February
1996 distribution. Dividends will vary based on the earnings of the fund's
portfolio, and past distributions are not predictive of future results.
Franklin Connecticut Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend Income
Month per Share
May 3.4 cents
June 4.5 cents
July 4.5 cents
August 4.5 cents
September 4.5 cents
October 4.5 cents
November 4.6 cents
December 4.6 cents
January 4.6 cents
February 4.67 cents
Total 44.37 cents
GRAPHIC MATERIAL 18 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 5.06%, based on an annualization of the current monthly dividend of
4.67 cents ($0.0467) per share and the offering price of $11.08 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Connecticut state personal income tax bracket of 42.3%, you would
have to earn 8.77% from a taxable investment of similar quality to match your
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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since June 1995, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. Although the
fund has slightly underperformed the unmanaged Lehman Brothers Municipal Bond
Index, such unmanaged market indices have inherent performance differentials in
comparison with any fund. For example, they do not pay management fees to cover
salaries of security analysts or portfolio managers, or pay commissions or
market spreads to buy and sell bonds. Unlike unmanaged market indices, mutual
funds are never 100% invested because of the need to have cash on hand to redeem
shares. The fund's performance figures also include the initial sales charge,
all fund expenses and account fees. If operating expenses such as the fund's had
been applied to this index, its (the index's) performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 19 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Connecticut Tax-Free Income Fund
Periods ended February 29, 1996
Since Inception
Since Inception Class II
1-Year 5-Year (10/3/88) (5/1/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 9.04% 42.38% 69.05% --
Class II Shares -- -- -- 7.45%
Average Annual Total Return2
Class I Shares 4.43% 6.39% 6.72% --
Aggregate Total Return2
Class II Shares -- -- -- 5.37%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I Shares 5.45% Class I Shares 9.45%
Class II Shares 5.06% Class II Shares 8.77%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I Shares 4.52% Class I Shares 7.83%
Class II Shares 4.10% Class II Shares 7.11%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% Contingent
Deferred Sales Charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See Note below.
2. Average annua total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge for Class I shares. Aggregate total return includes the 1.0%
initial sales charge and represents the change in value of an investment since
the inception date. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of investment. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See Note
below.
3. Class I shares distribution rate is based on an annualization of the current
5.2 cent per share monthly dividend and the maximum offering price of $11.45 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.67 cent per share monthly dividend and the
offering price of $11.08 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Connecticut state 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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 cannot guarantee future results.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
FRANKLIN INDIANA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Indiana
state personal income taxes through a portfolio consisting primarily of Indiana
municipal bonds.
State Notes
Indiana has become a strong, low-cost location for bank office and professional
service operations. Additionally, the state continues to emerge as a
transportation and distribution center due largely to the ongoing construction
of the United Airlines Maintenance Operations Center facility and airport
improvements in the Indianapolis area.**
GRAPHIC MATERIAL 20 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: Standard & Poor's Creditweek Municipal, 1/29/96.
Portfolio Notes
We took advantage of attractive investment opportunities in higher quality
municipal securities. In the declining interest-rate environment, the yields
available on high-quality, AAA-rated municipal securities were attractive
relative to lower-quality issues, as investor demand for higher yields pushed up
prices (and thus lowered yields) on lower-quality bonds. Overall, the result has
been a much smaller yield difference, or "narrow spread," between high-quality
AAA-rated insured bonds and lesser-grade bonds.
Franklin Indiana Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Hospitals 26.5%
Pre-Refunded 19.3%
Education 14.7%
Other Revenue 13.4%
Industrial 7.8%
Utilities 7.0%
Certificates of Participation 5.6%
Housing 3.3%
Transportation 2.3%
Tax Assessment Bonds 0.1%
For a complete list of portfolio holdings, please see page 88 of this report.
Performance Summary
We are pleased to report that the Franklin Indiana Tax-Free Income Fund's share
price, as measured by net asset of value, increased to $11.76 on February 29,
1996, from $11.40 on February 28, 1995.
Franklin Indiana Tax-Free Income Fund
Dividend Distribution 3/01/95 - 2/29/96*
Dividend Income
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
September 5.5 cents
October 5.5 cents
November 5.5 cents
December 5.5 cents
January 5.5 cents
February 5.5 cents
Total 66.0 cents
GRAPHIC MATERIAL 21 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, your fund's distribution rate was 5.37%,
based on an annualization of the current monthly dividend of 5.5 cents ($0.055)
per share and the maximum offering price of $12.28 on February 29, 1996. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, if you are in the maximum combined federal and
Indiana state personal income tax bracket of 41.7%, you would have to earn 9.21%
from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1988, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 22 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Indiana Tax-Free Income Fund
Period ended February 29, 1996
Since
Inception
1-Year 5-Year (9/1/87)
<S> <C> <C> <C>
Cumulative Total Return1 9.20% 47.18% 99.72%
Average Annual Total Return2 4.52% 7.10% 7.92%
Distribution Rate3 5.37%
Equivalent Taxable Distribution Rate4 9.21%
30-Day Standardized Yield5 4.49%
Equivalent Taxable Yield4 7.70%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current maximum 4.25% initial sales
charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge. See Note below.
3. Distribution rate is based on an annualization of the current 5.5 cent per
share monthly dividend and the maximum offering price of $12.28 on February 29,
1996.
4. Equivalent taxable distribution rate and yield assume the 1996 maximum
combined federal and Indiana state 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 February 29, 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.
Past expense reductions by the fund's manager increased the fund's total
returns.
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and New Jersey
state personal income taxes through a portfolio consisting primarily of New
Jersey municipal bonds.
State Notes
New Jersey's economy remained relatively stable due to the state's ability to
control financial operations during a period of slow revenue growth. Governor
Whitman's fiscal 1995 budget worked to curtail the growth of expenditures while
implementing tax reductions. Income taxes for most of the state's residents were
reduced 15%. Additionally, estimates of fiscal 1995 results showed an ending
undesignated balance of more than 6% of appropriations. The fiscal 1996 budget
has been designed to preserve this financial cushion.**
GRAPHIC MATERIAL 23 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.
**Source: Standard & Poor's Creditweek Municipal, 11/06/95.
Portfolio Notes
We took advantage of attractive investment opportunities in higher quality
municipal securities. In the declining interest-rate environment, the yields
available on high-quality, AAA-rated municipal securities were attractive
relative to lower-quality issues, as investor demand for higher yields pushed up
prices (and thus lowered yields) on lower-quality bonds. Overall, the result has
been a much smaller yield difference, or "narrow spread," between high-quality
AAA-rated insured bonds and lesser-grade bonds.
Franklin New Jersey Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 19.4%
Pre-Refunded 14.2%
Hospitals 14.2%
Transportation 13.1%
Housing 12.2%
Education 8.7%
Other Revenue 6.4%
Certificates of Participation 4.2%
Health Care 2.9%
General Obligations 2.5%
Industria 2.2%
For a complete list of portfolio holdings, please see page 91 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 37.)
We are pleased to report that the Franklin New Jersey Tax-Free Income Fund's
Class I share price, as measured by net asset value, increased to $11.68 on
February 29, 1996, from $11.28 on February 28, 1995.
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.21%, based on an annualization of the current monthly dividend of
5.3 cents ($0.053) per share and the maximum offering price of $12.20 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and New Jersey state personal income tax bracket of
43.6%, you would have to earn 9.24% from a taxable investment of similar quality
to match your fund's tax-free distribution rate.
Franklin New Jersey Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Income
Month per Share
March 5.3 cents
April 5.3 cents
May 5.3 cents
June 5.3 cents
July 5.3 cents
August 5.3 cents
September 5.3 cents
October 5.3 cents
November 5.3 cents
December 5.3 cents
January 5.3 cents
February 5.3 cents
Total 63.6 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1988, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 25 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin New Jersey Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $11.72 on
February 29, 1996, from $11.30 on May 1, 1995, the date the fund began offering
these shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.76%, based on an annualization of the current monthly dividend of
4.7 cents ($0.047) per share and the offering price of $11.84 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and New Jersey state personal income tax bracket of 43.6%, you would
have to earn 8.44% from a taxable investment of similar quality to match your
fund's tax-free distribution rate.
Franklin New Jersey Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend Income
Month per Share
May 3.5 cents
June 4.7 cents
July 4.7 cents
August 4.7 cents
September 4.7 cents
October 4.7 cents
November 4.7 cents
December 4.7 cents
January 4.7 cents
February 4.7 cents
Total 45.8 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since June 1995, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. Although the
fund has slightly underperformed the unmanaged Lehman Brothers Municipal Bond
Index, such unmanaged market indices have inherent performance differentials in
comparison with any fund. For example, they do not pay management fees to cover
salaries of security analysts or portfolio managers, or pay commissions or
market spreads to buy and sell bonds. Unlike unmanaged market indices, mutual
funds are never 100% invested because of the need to have cash on hand to redeem
shares. The fund's performance figures also include the initial sales charge,
all fund expenses and account fees. If operating expenses such as the fund's had
been applied to this index, its (the index's) performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly.Past performance is not predictive of future results.
GRAPHIC MATERIAL 27 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin New Jersey Tax-Free Income Fund
Periods ended February 29, 1996
Since Inception
Since Inception Class II
1-Year 5-Year (5/12/88) (5/1/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 9.43% 44.81% 88.07% --
Class II Shares -- -- -- 8.02%
Average Annual Total Return2
Class I Shares 4.72% 6.76% 7.83% --
Aggregate Total Return2
Class II Shares -- -- -- 5.98%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I Shares 5.21% Class I Shares 9.24%
Class II Shares 4.76% Class II Shares 8.44%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I Shares 4.52% Class I Shares 8.01%
Class II Shares 4.10% Class II Shares 7.27%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% Contingent
Deferred Sales Charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge for Class I shares. Aggregate total return includes the 1.0%
initial sales charge and represents the change in value of an investment since
the inception date. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of investment. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See Note
below.
3. Class I shares distribution rate is based on an annualization of the current
5.3 cent per share monthly dividend and the maximum offering price of $12.20 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.7 cent per share monthly dividend and the
offering price of $11.84 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and New Jersey state personal income tax rate of 43.6%, 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 February 29, 1996. Note: Prior to July 1,
1994, Class I 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 cannot guarantee future results.
FRANKLIN OREGON TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Oregon
state personal income taxes through a portfolio consisting primarily of Oregon
municipal bonds*.
State Notes
Oregon continued to experience a vibrant, expanding economy. Overall,
unemployment remained low during the reporting period -- 4.6% compared with the
national rate of 5.8%.** As Oregon moved away from its more narrow economic base
of timber and agriculture, its business climate remained strong. Affordable
land,coupled with a skilled work force, made the state appealing to corporations
looking to relocate their operations. Companies such as Intel Corp., Tektronix
Inc. and Hewlett-Packard Co. have established themselves in the metropolitan
Portland area. Rural areas in south central Oregon, however, have not
experienced the same strong growth as that of Portland and other metropolitan
areas, and showed slightly higher unemployment rates of around 8% for 1995.
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.
**Source: Standard & Poor's Creditweek Municipal, 8/25/95.
Franklin Oregon Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Hospitals 18.2%
Utilities 14.9%
Housing 14.5%
Pre-Refunded 14.2%
General Obligations 10.5%
Education 9.3%
Transportation 6.9%
Industrial 5.8%
Certificates of Participation 3.0%
Other Revenue 1.5%
Health Care 1.2%
For a complete list of portfolio holdings, please see page 96 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 44.)
We are pleased to report that the Franklin Oregon Tax-Free Income Fund's Class I
share price, as measured by net asset value, increased to $11.60 on February 29,
1996, from $11.22 on February 28, 1995.
Franklin Oregon Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Income
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
September 5.2 cents
October 5.2 cents
November 5.2 cents
December 5.2 cents
January 5.2 cents
February 5.2 cents
Total 62.4 cents
GRAPHIC MATERIAL 29 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.15%, based on an annualization of the current monthly dividend of
5.2 cents ($0.052) per share and the maximum offering price of $12.11 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Oregon state personal income tax bracket of
45.0%, you would have to earn 9.36% from a taxable investment of similar quality
to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1989, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 30 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Oregon Tax-Free Income Fund's Class
II share price, as measured by net asset value, increased to $11.65 on February
29, 1996, from $11.24 on May 1, 1995, the date the fund began offering these
shares.
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 4.69%, based on an annualization of the current monthly dividend of
4.6 cents ($0.046) per share and the offering price of $11.77 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Oregon state personal income tax bracket of 45.0%, you would have to
earn 8.53% from a taxable investment of similar quality to match your fund's
tax-free distribution rate.
Franklin Oregon Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend Income
Month per Share
May 3.4 cents
June 4.6 cents
July 4.6 cents
August 4.6 cents
September 4.6 cents
October 4.6 cents
November 4.6 cents
December 4.6 cents
January 4.6 cents
February 4.6 cents
Total 44.8 cents
GRAPHIC MATERIAL 31 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since June 1995, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. Although the
fund has slightly underperformed the unmanaged Lehman Brothers Municipal Bond
Index, such unmanaged market indices have inherent performance differentials in
comparison with any fund. For example, they do not pay management fees to cover
salaries of security analysts or portfolio managers, or pay commissions or
market spreads to buy and sell bonds. Unlike unmanaged market indices, mutual
funds are never 100% invested because of the need to have cash on hand to redeem
shares. The fund's performance figures also include the initial sales charge,
all fund expenses and account fees. If operating expenses such as the fund's had
been applied to this index, its (the index's) performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 32 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Oregon Tax-Free Income Fund
Periods ended February 29, 1996
Since Inception
Since Inception Class II
1-Year 5-Year (9/1/87) (5/1/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 9.19% 44.41% 88.46% --
Class II Shares -- -- -- 7.99%
Average Annual Total Return2
Class I Shares 4.53% 6.69% 7.19% --
Aggregate Total Return2
Class II Shares -- -- -- 5.86%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I Shares 5.15% Class I Shares 9.36%
Class II Shares 4.69% Class II Shares 8.53%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I Shares 4.43% Class I Shares 8.06%
Class II Shares 4.00% Class II Shares 7.28%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% Contingent
Deferred Sales Charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge for Class I shares. Aggregate total return includes the 1.0%
initial sales charge and represents the change in value of an investment since
the inception date. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of investment. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See Note
below.
3. Class I shares distribution rate is based on an annualization of the current
5.2 cent per share monthly dividend and the maximum offering price of $12.11 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.6 cent per share monthly dividend and the
offering price of $11.77 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Oregon state 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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 cannot guarantee future results.
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and
Pennsylvania state personal income taxes through a portfolio consisting
primarily of Pennsylvania municipal bonds.* The fund's shares are also free from
Pennsylvania personal property taxes.
State Notes
Pennsylvania's moderate debt burden, strong financial management, and a
slow-growth economy all contributed to its economic strength. As a result, the
state's general obligation bonds earned a AA- rating from Standard & Poor's, a
national rating agency.
Pennsylvania's economy was heavily dominated by the manufacturing sector, which
had grown at a remarkable rate during 1994. Unfortunately, the slow national
growth of early 1995 led to decreased demand for manufactured goods, which
translated into reduced factory orders and increased job losses for the state.
Pennsylvania's services sector, however, has grown, and it is hoped that
increased employment in this area may help to offset the manufacturing sector
job losses.
GRAPHIC MATERIAL 33 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
Over the past year, the quality of the portfolio has improved as we took
advantage of attractive investment opportunities in higher quality municipal
securities. In the declining interest-rate environment, the yields available on
high-quality, AAA-rated municipal securities were attractive relative to
lower-quality issues, as investor demand for higher yields pushed up prices (and
thus lowered yields) on lower-quality bonds. Overall, the result has been a much
smaller yield difference, or "narrow spread," between high-quality AAA-rated
insured bonds and lesser-grade bonds.
Franklin Pennsylvania Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Pre-Refunded 23.6%
Utilities 21.5%
Hospitals 14.3%
Housing 14.1%
Education 9.4%
General Obligations 5.5%
Other Revenue 4.3%
Industrial 3.9%
Transportation 1.7%
Health Care 1.7%
For a complete list of portfolio holdings, please see page 101 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on Page 51.)
We are pleased to report that the Franklin Pennsylvania Tax-Free Income Fund's
Class I share price, as measured by net asset value, increased to $10.44 on
February 29, 1996, from $10.16 on February 28, 1995.
Franklin Pennsylvania Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Income
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
September 5.2 cents
October 5.2 cents
November 5.2 cents
December 5.2 cents
January 5.2 cents
February 5.2 cents
Total 62.4 cents
GRAPHIC MATERIAL 34 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 5.72%, based on an annualization of the current monthly dividend of
5.2 cents ($0.052) per share and the maximum offering price of $10.90 on
February 29, 1996. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, if you are in
the maximum combined federal and Pennsylvania state personal income tax bracket
of 41.3%, you would have to earn 9.74% from a taxable investment of similar
quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1990, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 35 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Pennsylvania Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $10.47 on
February 29, 1996, from $10.17 on May 1, 1995, the date the fund began offering
these shares.
Franklin Pennsylvania Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend Income
Month per Share
May 3.4 cents
June 4.7 cents
July 4.7 cents
August 4.7 cents
September 4.7 cents
October 4.7 cents
November 4.7 cents
December 4.7 cents
January 4.7 cents
February 4.7 cents
Total 45.7 cents
GRAPHIC MATERIAL 36 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 5.33%, based on an annualization of the current monthly dividend of
4.7 cents ($0.047) per share and the offering price of $10.58 on February 29,
1996. This double tax-free rate is generally higher than the after-tax return on
a comparable taxable investment. For example, if you are in the maximum combined
federal and Pennsylvania state personal income tax bracket of 41.3%, you would
have to earn 9.08% from a taxable investment of similar quality to match your
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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all acrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since June 1995, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. Although the
fund has slightly underperformed the unmanaged Lehman Brothers Municipal Bond
Index, such unmanaged market indices have inherent performance differentials in
comparison with any fund. For example, they do not pay management fees to cover
salaries of security analysts or portfolio managers, or pay commissions or
market spreads to buy and sell bonds. Unlike unmanaged market indices, mutual
funds are never 100% invested because of the need to have cash on hand to redeem
shares. The fund's performance figures also include the initial sales charge,
all fund expenses and account fees. If operating expenses such as the fund's had
been applied to this index, its (the index's) performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 37 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Pennsylvania Tax-Free Income Fund
Periods ended February 29, 1996
Since Inception
Since Inception Class II
1-Year 5-Year (12/1/86) (5/1/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 9.15% 50.37% 92.48% --
Class II Shares -- -- -- 7.71%
Average Annual Total Return2
Class I Shares 4.53% 7.56% 6.83% --
Aggregate Total Return2
Class II Shares -- -- -- 5.67%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I Shares 5.72% Class I Shares 9.74%
Class II Shares 5.33% Class II Shares 9.08%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I Shares 4.54% Class I Shares 7.73%
Class II Shares 4.12% Class II Shares 7.02%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% Contingent
Deferred Sales Charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge for Class I shares. Aggregate total return includes the 1.0%
initial sales charge and represents the change in value of an investment since
the inception date. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of investment. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See Note
below.
3. Class I shares distribution rate is based on an annualization of the current
5.2 cent per share monthly dividend and the maximum offering price of $10.90 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.7 cent per share monthly dividend and the
offering price of $10.58 on February 29, 1996.
4. Equivalent taxable distribution rates and yields assume the 1996 maximum
combined federal and Pennsylvania state 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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 cannot guarantee future results.
Past expense reductions by thefund's manager increased the fund's Class I total
returns.
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal and Puerto Rico
state personal income taxes through a portfolio consisting primarily of Puerto
Rico municipal bonds.*
Commonwealth Notes
Puerto Rico's economy is mainly driven by the manufacturing and services
sectors. The Commonwealth's Gross Domestic Product (GDP) was between 2.5% and 3%
for 1995; additionally, unemployment dropped to 12.5% in December 1995, the
lowest level in 23 years. Currently, Puerto Rico is moving away from its
dominant manufacturing sector, which many believe is a positive economic step
for the Commonwealth.
GRAPHIC MATERIAL 38 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal and state alternative minimum tax, a small
portion of this income may be subject to such tax. Distributions of capital
gains and of ordinary income from accrued market discount, if any, are generally
taxable.
Portfolio Notes
Several municipal bond issues in Puerto Rico came to market during 1995. The
Commonwealth of Puerto Rico issued new general obligation bonds, and the
Electric Authority, the Housing Authority, the Public Building Authority, the
University of Puerto Rico and the Hospital Authority all issued new securities.
Additionally, there was a new issue for the City of Guaynabo. We purchased these
bonds for the fund's portfolio; further, several issues were insured by
municipal bond insurance companies and, as a result, were AAA-rated. The
inclusion of these insured bonds increased the AAA-rated portion of the
portfolio to 37.1% of total long-term investments on February 29, 1996, up from
27.2% on February 28, 1995.
Franklin Puerto Rico Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 23.9%
Pre-Refunded 18.0%
Transportation 14.9%
General Obligations 10.3%
Housing 8.3%
Other Revenue 7.2%
Industrial 5.7%
Hospitals 4.9%
Certificates of Participation 3.2%
Education 1.8%
Sales Tax Revenue 1.8%
For a complete list of portfolio holdings, please see page 107 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 58.)
We are pleased to report that the Franklin Puerto Rico Tax-Free Income Fund's
Class I share price, as measured by net asset value, increased to $11.59 on
February 29, 1996, from $11.31 on February 28, 1995.
Due to reduced income earned by the fund, we were compelled to adjust the fund's
monthly dividend to 5.5 cents ($0.055) from 5.7 cents ($0.057) per share,
effective with the June 1995 distribution. In addition to the dividend income,
your fund's Class I shares paid out a long-term capital gain of .96 cents
($0.0096) per share in December 1995. Distributions will vary depending on
income earned by the fund and the profit realized from the sale of securities in
the portfolio. Past distributions are not predictive of future results.
Franklin Puerto Rico Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Income
Month per Share
March 5.7 cents
April 5.7 cents
May 5.7 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents
September 5.5 cents
October 5.5 cents
November 5.5 cents
December 5.5 cents
January 5.5 cents
February 5.5 cents
Total 66.6 cents
GRAPHIC MATERIAL 39 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares 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 $12.10 on
February 29, 1996. This tax-free rate is generally higher than the after-tax
return on a comparable taxable investment. For example, if you are in the
maximum federal income tax bracket of 39.6%, you would have to earn 9.02% from a
taxable investment of similar quality to match your fund's tax-free distribution
rate. For shareholders residing in states in which the fund's income is exempt
from state taxes, you would be receiving double tax-free income.
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1988, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 40 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin Puerto Rico Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $11.62 on
February 29, 1996, from $11.32 on May 1, 1995, the date the fund began offering
these shares.
In addition to the dividend income, your fund's Class II shares paid out a
long-term capital gain of .96 ($0.0096) cents per share in December 1995.
Distributions will vary depending on income earned by the fund and the profit
realized from the sale of securities in the portfolio. Past distributions are
not predictive of future results.
Franklin Puerto Rico Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend Income
Month per Share
May 3.7 cents
June 4.9 cents
July 4.9 cents
August 4.9 cents
September 4.9 cents
October 4.9 cents
November 4.9 cents
December 4.9 cents
January 4.9 cents
February 4.9 cents
Total 47.8 cents
GRAPHIC MATERIAL 41 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class II
shares was 5.01%, based on an annualization of the current monthly dividend of
4.9 cents ($0.049) per share and the offering price of $11.74 on February 29,
1996. This tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum federal
income tax bracket of 39.6%, you would have to earn 8.29% from a taxable
investment of similar quality to match your fund's tax-free distribution rate.
For shareholders residing in states in which the fund's income is exempt from
state taxes, you would be receiving double tax-free income.
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since June 1995, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. Although the
fund has slightly underperformed the unmanaged Lehman Brothers Municipal Bond
Index, such unmanaged market indices have inherent performance differentials in
comparison with any fund. For example, they do not pay management fees to cover
salaries of security analysts or portfolio managers, or pay commissions or
market spreads to buy and sell bonds. Unlike unmanaged market indices, mutual
funds are never 100% invested because of the need to have cash on hand to redeem
shares. The fund's performance figures also include the initial sales charge,
all fund expenses and account fees. If operating expenses such as the fund's had
been applied to this index, its (the index's) performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 42 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Puerto Rico Tax-Free Income Fund
Periods ended February 29, 1996
Since Inception
Since Inception Class II
1-Year 5-Year 10-Year (4/3/85) (5/1/95)
<S> <C> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 8.68% 44.73% 103.04% 134.84% --
Class II Shares -- -- -- -- 7.21%
Average Annual Total Return2
Class I Shares 4.08% 6.75% 6.87% 7.71% --
Aggregate Total Return2
Class II Shares -- -- -- -- 5.19%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I Shares 5.45% Class I Shares 9.02%
Class II Shares 5.01% Class II Shares 8.29%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I Shares 4.45% Class I Shares 7.37%
Class II Shares 4.02% Class II Shares 6.66%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% Contingent
Deferred Sales Charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge for Class I shares. Aggregate total return includes the 1.0%
initial sales charge and represents the change in value of an investment since
the inception date. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of investment. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See Note
below.
3. Class I shares distribution rate is based on an annualization of the current
5.5 cent per share monthly dividend and the maximum offering price of $12.10 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 4.9 cent per share monthly dividend and the
offering price of $11.74 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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 cannot guarantee future results.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
The Franklin Puerto Rico Tax-Free Income Fund paid per share distributions
derived from long-term capital gains of .96 cents ($0.0096) in December 1995.
The fund hereby designates such distributions as capital gain dividends per
Section 852(b)(3) of the Internal Revenue Code.
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
Fund 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
In the declining interest-rate environment of the reporting period, yields
available on AAA- rated municipal bonds were attractive relative to
lower-quality issues, as investor demand for higher yields pushed up prices (and
thus lowered yields) on lower-quality bonds. Overall, this resulted in a much
smaller yield difference (spread) between high-quality AAA-rated bonds, and
lesser-grade BBB bonds, which led to attractive prices for high-quality issues.
GRAPHIC MATERIAL 43 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 minium 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.
While our trading activity was light during the fund's fiscal year, we were able
to take advantage of narrowed yield spreads by purchasing some bonds rated AA in
terms of credit quality. At the end of the reporting period, AAA-rated bonds
comprised 14.2% of the fund's total long-term investments, up from 10.4% one
year earlier. The fund's average maturity was 7.3 years at the end of the
reporting period, down slightly from 8.2 years on February 28, 1995.
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Hospitals 15.2%
Other Revenue 14.1%
Utilities 13.4%
Certificates of Participation 12.1%
Housing 8.1%
General Obligations 7.8%
Education 7.6%
Industrial 6.7%
Marks-Roos Bonds 5.6%
Special Assessment Bonds 4.8%
Transportation 4.6%
For a complete list of portfolio holdings, please see page 109 of this report.
Performance Summary
We are pleased to report that the Franklin Federal Intermediate-Term Tax-Free
Income Fund's share price, as measured by net asset value, increased to $10.95
on February 29, 1996, from $10.48 on February 28, 1995.
Due to increased income earned by the fund, we were able to raise the monthly
dividend to 4.6 cents ($0.046) from 4.5 cents ($0.045) per share, effective with
the August 1995 distribution. Dividends will vary based on the earnings of the
fund's portfolio, and past distributions are not predictive of future results.
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Income
Month per Share
March 4.5 cents
April 4.5 cents
May 4.5 cents
June 4.5 cents
July 4.5 cents
August 4.6 cents
September 4.6 cents
October 4.6 cents
November 4.6 cents
December 4.6 cents
January 4.6 cents
February 4.6 cents
Total 54.7 cents
GRAPHIC MATERIAL 44 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, your fund's distribution rate was 4.93%,
based on an annualization of the current monthly dividend of 4.6 cents ($0.046)
per share and the maximum offering price of $11.20 on February 29, 1996. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, if you are in the maximum federal income tax
bracket of 39.6%, you would have to earn 8.16% from a taxable investment of
similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1992, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 45 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Federal Intermediate-Term Tax-Free Income Fund
Periods ended February 29, 1996
Since
Inception
1-Year 3-Year (9/23/92)
<S> <C> <C> <C>
Cumulative Total Return1 9.93% 20.95% 28.62%
Average Annual Total Return2 7.47% 5.75% 6.89%
Distribution Rate3 4.93%
Equivalent Taxable Distribution Rate4 8.16%
30-Day Standardized Yield5 4.47%
Equivalent Taxable Yield4 7.40%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current 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 specified periods and includes the maximum 2.25% initial
sales charge. See Note below
3. Distribution rate is based on an annualization of the current 4.6 cent per
share monthly dividend and the maximum offering price of $11.20 on February 29,
1996.
4. Equivalent taxable distribution rate and yield assume the 1996 maximum 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 February 29, 1996.
Note: 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 has agreed of its management fees, which reduces operating
expenses and increases yield, distribution rate and total return to
shareholders. Without these reductions, the fund's distribution rate and total
return would have been lower, and yield for the period would have been 4.24%.
Fee waiver and expense reimbursements may be discontinued at any time upon
notice to the fund's Board of Trustees.
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
Fund Objective:
Seeks to provide high current income exempt from regular federal personal income
taxes through a portfolio consisting primarily of higher yielding, medium- to
lower-rated and non-rated municipal.* As discussed in the fund's prospectus,
these securities entail greater risk than higher-rated municipal securities.
Portfolio Notes
Throughout the fund's fiscal year, the non-rated market remained attractively
priced, allowing us to explore new investment opportunities there. We focused on
adding new non-rated securities to the portfolio as these securities gave us the
ability to work with an issuer to structure the issue's security features,
coupon, maturity, and call dates to help us meet the specific needs of the
portfolio.
GRAPHIC MATERIAL 46 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.
We also purchased high quality AA- and AAA-rated securities throughout the
reporting period as the quality spreads of rated securities (AAA to BBB)
remained narrow. As a result, we increased the AAA-rated portion of the
portfolio to 17.0% of total long-term investments on February 29, 1996, from
10.5% a year earlier. Additionally, we maintained the portfolio's broad
diversification to help minimize the effects of any interest rate or credit
risk.
Franklin High Yield Tax-Free Income Fund
Portfolio Breakdown on February 29, 1996
Based on total long-term investments
% of total
long-term
Sector investments
Utilities 20.8%
Transportation 13.7%
Hospitals 9.6%
Special Assessment Bonds 9.5%
General Obligations 9.3%
Pre-Refunded 9.0%
Industrial 5.7%
Health Care 5.0%
Other Revenue 4.6%
Housing 4.2%
Mello-Roos Bonds 2.9%
Certificates of Participation 2.3%
Tax Allocation Bonds 1.5%
Sales Tax 1.0%
Education 0.6%
Marks-Roos Bonds 0.3%
For a complete list of portfolio holdings, please see page 114 of this report.
Performance Summary
Class I Shares
(Class II Shares Performance Summary starts on page 70.)
We are pleased to report that the Franklin High Yield Tax-Free Income Fund's
Class I share price, as measured by net asset value, increased to $11.19 on
February 29, 1996, from $10.74 on February 28, 1995.
Franklin High Yield Tax-Free Income Fund
Class I Shares
Dividend Distributions 3/01/95 - 2/29/96*
Dividend Income
Month per Share
March 6.1 cents
April 6.1 cents
June 6.1 cents
July 6.1 cents
August 6.1 cents
September 6.1 cents
October 6.1 cents
November 6.1 cents
December 6.1 cents
January 6.1 cents
February 6.1 cents
Total 73.2 cents
GRAPHIC MATERIAL 47 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, the distribution rate of the fund's Class I
shares was 6.26%, based on an annualization of the current monthly dividend of
6.1 cents ($0.061) per share and the maximum offering price of $11.69 on
February 29, 1996. This tax-free rate is generally higher than the after-tax
return on a comparable taxable investment. For example, if you are in the
maximum federal personal income tax bracket of 39.6%, you would have to earn
10.36% from a taxable investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since 1987, keeping your purchasing power
well ahead of inflation -- a primary goal of any investment. Although the fund
has slightly underperformed the unmanaged Lehman Brothers Municipal Bond Index,
such unmanaged market indices have inherent performance differentials in
comparison with any fund. They do not pay management fees to cover salaries of
security analysts or portfolio managers, or pay commissions to buy and sell
bonds. Unlike unmanaged indices, mutual funds are never 100% invested because of
the need to have cash on hand to redeem shares. The fund's performance figures
also include the maximum initial sales charge, all fund expenses and account
fees. If operating expenses such as the fund's had been applied to this index,
its (the index's) performance would have been lower. Please remember that an
index is simply a measure of performance and one cannot invest in it directly.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 48 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Summary
Class II Shares
We are pleased to report that the Franklin High Yield Tax-Free Income Fund's
Class II share price, as measured by net asset value, increased to $11.24 on
February 29, 1996, from $10.81 on May 1, 1995, the date the fund began offering
these shares.
Due to increased income earned by the fund, we were able to raise the monthly
dividend to 5.56 cents ($0.0556) from 5.5 cents ($0.055) per share, effective
with the February 1996 distribution. Dividends will vary based on the earnings
of the fund's portfolio, and past distributions are not predictive of future
results.
Franklin High Yield Tax-Free Income Fund
Class II Shares
Dividend Distributions 5/01/95 - 2/29/96*
Dividend Income
Month per Share
May 4.1 cents
June 5.5 cents
July 5.5 cents
August 5.5 cents
September 5.5 cents
October 5.5 cents
November 5.5 cents
December 5.5 cents
January 5.5 cents
February 5.56 cents
Total 53.66 cents
GRAPHIC MATERIAL 49 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of the reporting period, your fund's Class II shares distribution
rate was 5.88%, based on an annualization of the current monthly dividend of
5.56 cents ($0.0556) per share and the offering price of $11.35 on February 29,
1996. This tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, if you are in the maximum federal
income tax bracket of 39.6%, you would have to earn 9.74% from a taxable
investment of similar quality to match your 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
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
As illustrated by the chart to the right, your fund's performance has exceeded
that of the Consumer Price Index (CPI) since June 1995, keeping your purchasing
power well ahead of inflation -- a primary goal of any investment. Although the
fund has slightly underperformed the unmanaged Lehman Brothers Municipal Bond
Index, such unmanaged market indices have inherent performance differentials in
comparison with any fund. For example, they do not pay management fees to cover
salaries of security analysts or portfolio managers, or pay commissions or
market spreads to buy and sell bonds. Unlike unmanaged market indices, mutual
funds are never 100% invested because of the need to have cash on hand to redeem
shares. The fund's performance figures also include the initial sales charge,
all fund expenses and account fees. If operating expenses such as the fund's had
been applied to this index, its (the index's) performance would have been lower.
Please remember that an index is simply a measure of performance, and one cannot
invest in it directly. Past performance is not predictive of future results.
GRAPHIC MATERIAL 50 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin High Yield Tax-Free Income Fund
Periods ended February 29, 1996
Since Inception
Since Inception Class II
1-Year 5-Year (3/18/86) (5/1/95)
<S> <C> <C> <C> <C>
Cumulative Total Return1
Class I Shares 11.35% 55.49% 130.44% --
Class II Shares -- -- -- 9.27%
Average Annual Total Return2
Class I Shares 6.58% 8.28% 8.27% --
Aggregate Total Return2
Class II Shares -- -- -- 7.18%
Distribution Rate3 Equivalent Taxable Distribution Rate4
Class I Shares 6.26% Class I Shares 10.36%
Class II Shares 5.88% Class II Shares 9.74%
30-Day Standardized Yield5 Equivalent Taxable Yield4
Class I Shares 5.53% Class I Shares 9.16%
Class II Shares 5.14% Class II Shares 8.51%
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.25% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% Contingent
Deferred Sales Charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.25% initial
sales charge for Class I shares. Aggregate total return includes the 1.0%
initial sales charge and represents the change in value of an investment since
the inception date. It also includes the 1.0% CDSC applicable to shares redeemed
within the first 18 months of investment. Since Class II shares have existed for
less than one year, average annual total returns are not provided. See Note
below.
3. Class I shares distribution rate is based on an annualization of the current
6.1 cent per share monthly dividend and the maximum offering price of $11.69 on
February 29, 1996. Class II shares distribution rate is based on an
annualization of the current 5.56 cent per share monthly dividend and the
offering price of $11.35 on February 29, 1996.
4. Equivalent taxable distribution rates and yields 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 February 29, 1996.
Note: Prior to July 1, 1994, Class I 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 cannot guarantee future results.
Past expense reductions by the fund's manager increased the fund's Class I total
returns.
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 29, 1996
Face Value
Amount Franklin Arizona Tax-Free Income Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.9%
Arizona Educational Loan Marketing Corp. Revenue,
$ 10,000,000 Senior Series, 6.375%, 09/01/05............................................................... $ 10,524,800
1,000,000 Series B, 7.00%, 03/01/03..................................................................... 1,062,390
1,000,000 Series B, 7.00%, 03/01/05..................................................................... 1,056,980
1,000,000 Series B, MBIA Insured, 7.35%, 09/01/04....................................................... 1,087,520
775,000 Series B, MBIA Insured, 7.375%, 09/01/05...................................................... 840,844
1,000,000 Sub-Series, 6.625%, 09/01/05.................................................................. 1,056,360
Arizona Health Facilities Authority, Hospital System Revenue,
2,000,000 Phoenix Baptist Hospital, MBIA Insured, 6.25%, 09/01/11....................................... 2,136,540
7,500,000 Refunding, Samaritan Health System, MBIA Insured, 5.625%, 12/01/15............................ 7,563,600
Arizona Health Facilities Authority Revenue, Arizona Voluntary Hospital, Series B, FGIC Insured,
770,000 Hospital Federal Pooled Loan Revenue, 7.75%, 10/01/07......................................... 855,986
5,000,000 7.25%, 10/01/13............................................................................... 5,426,000
5,000,000 Arizona State COP, Refunding, Series B, AMBAC Insured, 6.25%, 09/01/10......................... 5,349,500
5,000,000 Arizona State Department of Administration, COP, FSA Insured, 6.625%, 09/01/08................. 5,492,400
Arizona State Municipal Financing Program, COP, BIG Insured,
1,350,000 Dysart School, Series 22, Pre-Refunded, 7.875%, 08/01/05...................................... 1,402,920
85,000 Flagstaff School, Series 15, 8.75%, 08/01/07.................................................. 90,075
500,000 Peoria School, Series 19, 7.75%, 08/01/04..................................................... 610,695
255,000 Phoenix Civic Improvement, Series 17, Pre-Refunded, 8.125%, 08/01/12.......................... 262,678
825,000 Phoenix Water, Series 10, Pre-Refunded, 7.90%, 08/01/17....................................... 882,767
3,250,000 Series 20, ETM 08/01/04, 7.625%, 08/01/06..................................................... 3,906,045
500,000 Series 25, 7.875%, 08/01/14................................................................... 645,945
2,500,000 Series 29, Pre-Refunded, 7.125%, 08/01/14..................................................... 2,772,350
1,200,000 Arizona State Power Authority, Power Resources Revenue, Refunding, Hoover Uprating Project,
MBIA Insured, 5.375%, 10/01/13................................................................ 1,197,912
Arizona State Transportation Board, Excise Tax Revenue, Maricopa County Regional Area
Road Fund, Pre-Refunded,
4,515,000 MBIA Insured, 7.00%, 07/01/05................................................................. 5,026,233
2,485,000 MBIA Insured, 7.00%, 07/01/05................................................................. 2,766,377
1,750,000 Series A, 7.60%, 07/01/05..................................................................... 1,930,478
Arizona State University Research, Park Development Revenue, Refunding, MBIA Insured,
1,800,000 5.125%, 07/01/14.............................................................................. 1,748,826
750,000 5.00%, 07/01/21............................................................................... 705,840
Arizona State University System Revenue,
130,000 Series 1986-A, Pre-Refunded, 7.875%, 07/01/15................................................. 134,558
2,460,000 bSeries A, Refunding, 5.50%, 07/01/19....................................................... 2,434,268
4,000,000 Arizona State Waste Management Authority, Financial Assistance Revenue, 6.80%, 07/01/11........ 4,430,520
700,000 Avondale Municipal Development Corp. Facilities Revenue, Series 1992, MBIA Insured,
6.625%, 07/01/11.............................................................................. 753,144
930,000 Casa Grande Excise Tax Revenue, Series 1995, 6.20%, 04/01/15................................... 978,676
Casa Grande IDA, PCR, Frito Lay/PepsiCo,
1,800,000 6.60%, 12/01/10............................................................................... 1,964,610
500,000 6.65%, 12/01/14............................................................................... 543,845
3,000,000 Central Arizona Water Conservation District Contract Revenue, Central Project, Series 1990-A,
Pre-Refunded, 7.65%, 11/01/09................................................................. 3,482,730
Chandler GO, FGIC Insured,
1,625,000 6.85%, 07/01/14............................................................................... 1,806,561
1,000,000 Refunding, Series 1991, Pre-Refunded, 7.00%, 07/01/12......................................... 1,114,910
1,750,000 Series 1994, 6.80%, 07/01/13.................................................................. 1,939,683
4,055,000 Chandler IDA, MFHR, Refunding, Hacienda Apartments, Project A, 6.05%, 07/20/30................. 4,083,466
Chandler Street and Highway Revenue, Series 1994, MBIA Insured,
$ 1,250,000 6.85%, 07/01/13............................................................................... $ 1,377,225
2,200,000 6.90%, 07/01/14............................................................................... 2,431,198
Chandler Water and Sewer Revenue, Refunding, FGIC Insured,
6,715,000 Series 1991, Pre-Refunded, 7.00%, 07/01/12.................................................... 7,370,250
2,165,000 Series 1992, 6.25%, 07/01/13.................................................................. 2,304,751
City of Bullhead, Municipal Property Corp., Facilities Revenue,
2,125,000 Series 1990, MBIA Insured, 7.20%, 07/01/09.................................................... 2,308,069
4,000,000 Series 1991, FGIC Insured, 7.20%, 07/01/10.................................................... 4,414,440
Cochise County, Palominas Elementary School District No. 49, School Improvement, GO,
Series A, Pre-Refunded,
155,000 7.70%, 07/01/00............................................................................... 166,289
165,000 7.80%, 07/01/01............................................................................... 177,228
175,000 7.85%, 07/01/02............................................................................... 188,081
5,000,000 Cochise County USD No. 68, Sierra Vista, Series B, FGIC Insured, Pre-Refunded, 7.625%, 07/01/10 5,722,450
1,095,000 Coconino County, Flagstaff USD No. 1, AMBAC Insured, 6.20%, 07/01/06........................... 1,162,145
5,275,000 Coconino County Pollution Control Corp. Revenue, Refunding, Arizona Public Service Co.,
Series A, MBIA Insured, 5.875%, 08/15/28...................................................... 5,383,929
Coconino County USD No. 8, Page Elementary School Improvement Project, GO, Pre-Refunded,
1,500,000 7.125%, 07/01/06.............................................................................. 1,637,235
1,250,000 7.125%, 07/01/07.............................................................................. 1,364,363
625,000 Series D, AMBAC Insured, 7.00%, 07/01/06...................................................... 675,456
725,000 Series D, AMBAC Insured, 7.05%, 07/01/07...................................................... 784,327
1,475,000 Eloy Municipal Property Corp., Facilities Revenue, Series 1989, 7.80%, 07/01/09................ 1,617,205
3,320,000 Gila County IDA, PCR, Refunding, ASARCO, Inc. Project, 8.90%, 07/01/06......................... 3,581,052
1,500,000 Gilbert Improvement District No. 11, FGIC Insured, 7.60%, 01/01/05............................. 1,547,175
Gilbert Water and Sewer Revenue, Refunding, FGIC Insured,
1,500,000 6.50%, 07/01/12............................................................................... 1,631,535
3,250,000 6.50%, 07/01/22............................................................................... 3,500,835
Glendale IDA, Educational Facilities Revenue, Refunding, American Graduate School International,
Connie Lee Insured,
750,000 6.75%, 07/01/09............................................................................... 830,790
1,000,000 7.00%, 07/01/14............................................................................... 1,125,880
1,250,000 7.125%, 07/01/20.............................................................................. 1,418,713
750,000 Glendale IDA, Hospital Revenue, Northwest Development, Inc. Project, Pre-Refunded,
8.875%, 01/01/16.............................................................................. 786,105
2,400,000 Glendale Municipal Property Corp., Series 1991, MBIA Insured, 7.00%, 07/01/09.................. 2,585,232
Guam Power Authority Revenue, Series A,
3,630,000 6.30%, 10/01/12............................................................................... 3,668,042
4,000,000 6.30%, 10/01/22............................................................................... 4,015,480
2,700,000 Lake Havasu City, Wastewater COP, FGIC Insured, 7.00%, 06/01/05................................ 3,002,319
8,000,000 Maricopa County COP, 6.00%, 06/01/04........................................................... 8,351,120
50,000 Maricopa County Hospital District No. 1, Facilities Revenue, East Valley Behavioral Health Facility,
FGIC Insured, Pre-Refunded, 7.80%, 06/01/14.................................................... 53,570
1,115,000 Maricopa County IDA, SFMR, GNMA Secured, 8.00%, 09/01/09....................................... 1,172,233
5,000,000 Maricopa County IDAR, Citizens Utilities Co. Project, 6.20%, 05/01/30.......................... 5,172,350
Maricopa County IDAR, Mercy Health System, MBIA Insured, Pre-Refunded,
1,805,000 Series A, 7.125%, 07/01/07.................................................................... 2,010,355
750,000 Series C, 7.15%, 07/01/15..................................................................... 837,150
Maricopa County IDAR, Hospital Facility Revenues, Refunding,
2,750,000 John C. Lincoln Hospital, FSA Insured, 7.50%, 12/01/13........................................ 3,073,923
17,800,000 Samaritan Hospital Health Services, Series A, MBIA Insured, 7.00%, 12/01/13................... 19,439,024
1,890,000 Samaritan Hospital Health Services, Series A, MBIA Insured, 7.00%, 12/01/16................... 2,277,658
Maricopa County School District, No. 4, Mesa Unified, FGIC Insured,
$ 1,500,000 5.65%, 07/01/11............................................................................... $ 1,553,190
2,000,000 5.70%, 07/01/12............................................................................... 2,048,440
2,000,000 Maricopa County School District, No. 28, Kyrene Elementary, Series B, FGIC Insured, 6.00%, 07/01/14 2,078,040
1,125,000 Maricopa County School District No. 031, Balsz School, Series B, FGIC Insured, 5.25%, 07/01/13. 1,098,653
500,000 Maricopa County UHSD No. 210, Phoenix, Series A, 5.70%, 07/01/15............................... 511,685
600,000 Maricopa County UHSD No. 216, Series A, Pre-Refunded, 7.80%, 07/01/07.......................... 644,466
Maricopa County USD No. 8, Osborn School Improvement Project, Series B, Pre-Refunded,
500,000 7.10%, 07/01/05............................................................................... 552,115
1,075,000 7.15%, 07/01/07............................................................................... 1,188,703
1,885,000 7.20%, 07/01/09............................................................................... 2,087,279
Maricopa County USD No. 11, Peoria, Refunding,
6,300,000 AMBAC Insured, 6.10%, 07/01/10................................................................ 6,750,513
2,800,000 MBIA Insured, Pre-Refunded, 7.00%, 07/01/10................................................... 3,109,176
Maricopa County USD No. 41, Gilbert,
2,000,000 6.25%, 07/01/15............................................................................... 2,035,920
850,000 Series C, FGIC Insured, Pre-Refunded, 7.125%, 07/01/01........................................ 920,967
750,000 Series C, FGIC Insured, Pre-Refunded, 7.20%, 07/01/02......................................... 813,855
1,175,000 Maricopa County USD No. 65, Littleton School Improvement, Series B, FGIC Insured, 6.40%, 07/01/14 1,260,141
4,000,000 Maricopa County USD No. 68, Alhambra, Refunding & Improvement, AMBAC Insured, Pre-Refunded,
5.625%, 07/01/13.............................................................................. 4,181,960
Maricopa County USD No. 69, GO, Paradise Valley,
3,000,000 Project of 1994, Series B, MBIA Insured, 5.25%, 07/01/15...................................... 2,925,120
1,250,000 Refunding, 5.40%, 07/01/14.................................................................... 1,241,275
1,000,000 Series A, 7.10%, 07/01/05..................................................................... 1,153,600
1,600,000 Maricopa County USD No. 80, Chandler, FGIC Insured, 6.00%, 07/01/13............................ 1,672,000
Maricopa County USD No. 89, Dysart, Refunding & Improvement, FGIC Insured,
240,000 6.70%, 07/01/05............................................................................... 261,698
1,760,000 6.75%, 07/01/06............................................................................... 1,915,320
Maricopa County USD No. 92, Pendergast Elementary School, FGIC Insured, Pre-Refunded,
250,000 7.20%, 07/01/02............................................................................... 264,388
1,300,000 7.20%, 07/01/03............................................................................... 1,374,815
1,300,000 Maricopa County USD No. 98, Fountain Hills School, Improvement Bond, Refunding, FGIC Insured,
6.625%, 07/01/10.............................................................................. 1,411,956
Maricopa County USD No. 214, Tolleson GO,
1,000,000 FGIC Insured, 5.75%, 07/01/14................................................................. 1,019,920
500,000 Pre-Refunded, 7.30%, 07/01/03................................................................. 533,855
2,000,000 Pre-Refunded, 7.35%, 07/01/04................................................................. 2,136,700
Mesa IDA, Health Care Facilities Revenue, Western Health Network, BIG Insured,
750,000 Refunding, Series B-2, 7.50%, 01/01/08........................................................ 815,070
5,250,000 Series A-2, 7.625%, 01/01/13.................................................................. 5,796,000
250,000 Series A-3, 7.625%, 01/01/13.................................................................. 276,000
2,300,000 Series A-4, 7.625%, 01/01/09.................................................................. 2,533,358
Mesa Utility Systems Revenue, FGIC Insured,
8,500,000 5.375%, 07/01/14.............................................................................. 8,377,515
8,500,000 5.125%, 07/01/15.............................................................................. 8,122,855
Mohave County, Hospital District No. 1, GO, Kingman Regional Medical Center Project,
1,500,000 FGIC Insured, 6.50%, 06/01/15................................................................. 1,597,005
6,350,000 Pre-Refunded, 8.375%, 06/01/15................................................................ 7,421,309
Mohave County, IDA, Citizens Utilities Project,
4,100,000 Series 1994, 6.60%, 05/01/29.................................................................. 4,351,822
10,000,000 Series A, 7.15%, 02/01/26..................................................................... 10,751,400
5,000,000 Series B, 7.15%, 02/01/26..................................................................... 5,375,700
Mohave County, IDA, Hospital Systems Revenue, Refunding, Medical Environments, Inc.,
Phoenix Hospital and Medical Center,
$ 1,595,000 ETM 07/01/99, 5.80%, 07/01/99................................................................. $ 1,685,915
1,700,000 Pre-Refunded, 7.00%, 07/01/16................................................................. 1,992,842
Navajo County PCR, Arizona Public Service Co., Series A,
2,955,000 Refunding, MBIA Insured, 5.875%, 08/15/28..................................................... 2,983,634
50,000,000 5.875%, 08/15/28.............................................................................. 48,691,000
Nogales Municipal Development Authority, Inc., Municipal Facilities Revenue, Refunding, MBIA Insured,
6,350,000 7.20%, 06/01/08............................................................................... 7,035,229
500,000 8.00%, 06/01/08............................................................................... 549,215
Northern Arizona University System Revenue,
3,700,000 Pre-Refunded, 7.50%, 06/01/06................................................................. 4,089,388
2,750,000 Refunding, FGIC Insured, 6.40%, 06/01/07...................................................... 2,984,878
Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Series A, Saipan
Harbor Improvement,
310,000 5.35%, 10/01/98............................................................................... 311,907
330,000 5.45%, 10/01/99............................................................................... 332,749
345,000 5.55%, 10/01/00............................................................................... 348,585
365,000 5.65%, 10/01/01............................................................................... 368,449
385,000 5.75%, 10/01/02............................................................................... 389,173
7,150,000 6.85%, 10/01/25............................................................................... 7,194,831
3,000,000 Peoria Municipal Development Authority, Inc., Municipal Facilities Revenue, MBIA Insured,
Pre-Refunded, 7.00%, 07/01/09................................................................. 3,193,620
1,000,000 Peoria Municipal Development Authority, Water and Sewer Revenue, Refunding, FGIC Insured,
6.625%, 07/01/06............................................................................... 1,074,480
Phoenix Airport Revenue, MBIA Insured,
700,000 Refunding, Series B, 6.20%, 07/01/10.......................................................... 742,665
1,680,000 Refunding, Series C, 6.30%, 07/01/10.......................................................... 1,795,534
1,785,000 Refunding, Series C, 6.40%, 07/01/11.......................................................... 1,921,731
570,000 Refunding, Series C, 6.40%, 07/01/12.......................................................... 609,473
1,800,000 Series D, 6.30%, 07/01/10..................................................................... 1,923,786
3,825,000 Series D, 6.40%, 07/01/11..................................................................... 4,102,351
820,000 Series D, 6.40%, 07/01/12..................................................................... 876,785
Phoenix Civic Improvement Corp.,
5,000,000 Airport Terminal Excise Tax Revenue, Pre-Refunded, 7.80%, 07/01/11............................ 5,275,400
3,500,000 Airport Terminal Excise Tax Revenue, Pre-Refunded, 7.875%, 07/01/14........................... 3,701,670
275,000 Airport Terminal Excise Tax Revenue, Refunding, Pre-Refunded, 8.375%, 07/01/09................ 303,911
1,000,000 Municipal Facilities Excise Tax Revenue, MBIA Insured, 6.90%, 07/01/21........................ 1,104,400
4,210,000 Parking Facilities, Series B, FGIC Insured, Pre-Refunded, 7.50%, 07/01/09..................... 4,508,700
1,000,000 Refunding, Wastewater Systems, Lease Revenue, 5.00%, 07/01/18................................. 933,650
1,000,000 Wastewater Systems, AMBAC Insured, 5.50%, 07/01/21............................................ 985,130
4,300,000 Phoenix Civic Plaza Building Corp., 6.00%, 07/01/14............................................ 4,484,427
Phoenix GO,
5,000,000 Refunding, Pre-Refunded, 6.375%, 07/01/13..................................................... 5,356,900
1,000,000 Refunding, Pre-Refunded, 7.15%, 07/01/08...................................................... 1,092,040
1,000,000 Refunding, Pre-Refunded, 7.375%, 07/01/11..................................................... 1,068,670
1,705,000 Refunding, Pre-Refunded, 7.375%, 07/01/12..................................................... 1,822,082
4,360,000 Refunding, Series A, 5.05%, 07/01/12.......................................................... 4,218,431
5,000,000 Refunding, Series A, 5.50%, 07/01/15.......................................................... 4,999,550
3,525,000 Series B, 5.25%, 07/01/14..................................................................... 3,443,643
3,775,000 Series B, 5.25%, 07/01/15..................................................................... 3,663,222
Phoenix HFC, Mortgage Revenue, Refunding,
$ 2,750,000 Project A, MBIA Insured, 6.50%, 07/01/24...................................................... $ 2,804,120
1,750,000 Section 8 Project, Series A, MBIA Insured, 6.90%, 01/01/23.................................... 1,813,735
2,260,000 Section 8 Project, Series A, MBIA Insured, 7.25%, 01/01/23.................................... 2,246,169
1,000,000 Phoenix IDA, SFMR, FNMA Insured, 6.30%, 12/01/12............................................... 1,022,510
1,820,000 Phoenix IDAR, Home Purchase Mortgage, GNMA Secured, Series B, 8.20%, 04/01/22.................. 1,903,119
1,500,000 Phoenix Municipal Housing Revenue, Refunding, Fillmore Gardens Project, 6.30%, 06/01/09........ 1,548,615
Phoenix Street and Highway Revenue,
5,000,000 Refunding, Series 1992, 6.60%, 07/01/07....................................................... 5,504,650
1,000,000 Series 1987, 6.80%, 07/01/03.................................................................. 1,142,040
1,000,000 Series 1989, Pre-Refunded, 7.375%, 07/01/05................................................... 1,068,670
3,310,000 Series 1989, Pre-Refunded, 7.375%, 07/01/06................................................... 3,537,298
2,000,000 Series 1989, Pre-Refunded, 7.375%, 07/01/08................................................... 2,137,340
4,665,000 Series 1990, Pre-Refunded, 7.125%, 07/01/10................................................... 5,097,259
Pima County IDA, Health Care Revenue, Carondelet St. Joseph's and St. Mary's,
65,000 8.00%, 07/01/13............................................................................... 71,387
2,250,000 MBIA Insured, 6.75%, 07/01/10................................................................. 2,461,973
535,000 Pre-Refunded, 8.00%, 07/01/13................................................................. 594,251
745,000 Pima County IDA, MFHR, Fountains La Cholla Project, FHA Mortgage Insured, 8.00%, 12/01/25...... 758,835
Pima County IDA, SFMR,
1,350,000 GNMA Secured, 6.40%, 11/01/09................................................................. 1,416,663
1,640,000 GNMA Secured, 8.125%, 09/01/20................................................................ 1,711,799
6,050,000 GNMA Secured, 6.75%, 11/01/27................................................................. 6,274,213
6,080,000 Refunding, Series A, 7.625%, 02/01/12......................................................... 6,369,226
930,000 Refunding, Series A, 6.50%, 02/01/17.......................................................... 945,652
1,410,000 Pima County Sewer Revenue, Series 1991, FGIC Insured, 6.75%, 07/01/15.......................... 1,547,221
Pima County USD No. 1,
21,000,000 Tucson Project, FGIC Insured, 5.875%, 07/01/14................................................ 21,561,960
6,500,000 Tucson School Improvement, Series B, Pre-Refunded, 7.20%, 07/01/10............................ 7,317,180
500,000 Pima County USD No. 10, Amphitheater School, Refunding & Improvement, Pre-Refunded,
7.70%, 07/01/03............................................................................... 531,640
Pinal County USD No. 43, Apache Junction, Refunding & Improvement, FGIC Insured, Pre-Refunded,
500,000 7.15%, 07/01/05............................................................................... 541,190
700,000 7.20%, 07/01/07............................................................................... 776,272
2,360,000 Prescott Muni Property, Series 1990-C, MBIA Insured, Pre-Refunded, 7.00%, 07/01/10............. 2,602,584
6,405,000 Price Elliott Resh Park, Inc. Revenue, Refunding, Arizona State University Research Park,
MBIA Insured, Pre-Refunded, 7.00%, 07/01/21................................................... 7,354,541
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
75,000 Refunding, Series 1985-A, Pre-Refunded, 9.00%, 07/01/09....................................... 99,109
6,000,000 Series 1988-A, Pre-Refunded, 7.875%, 07/01/17................................................. 6,669,360
750,000 Puerto Rico Commonwealth Highway Authority Revenue, Series P, Pre-Refunded, 8.125%, 07/01/13... 836,910
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
9,215,000 7.75%, 07/01/08............................................................................... 9,967,589
2,000,000 7.50%, 07/01/09............................................................................... 2,152,500
130,000 Puerto Rico Commonwealth Public Improvement GO, Pre-Refunded, 7.90%, 07/01/11.................. 135,922
Puerto Rico Electric Power Authority, Revenue,
125,000 Refunding, Series 1987-L, Pre-Refunded, 8.40%, 07/01/15....................................... 135,309
3,000,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08....................................... 3,339,390
1,255,000 Refunding, Series 1989-N, Pre-Refunded, 7.00%, 07/01/07....................................... 1,393,665
2,205,000 Refunding, Series 1989-N, 7.125%, 07/01/14.................................................... 2,397,960
745,000 Refunding, Series N, 7.00%, 07/01/07.......................................................... 804,734
3,745,000 Refunding, Series R, 6.25%, 07/01/17.......................................................... 3,849,635
1,510,000 Series 1989-0, 7.125%, 07/01/14............................................................... 1,642,140
Puerto Rico Electric Power Authority, Revenue, (cont.)
$ 600,000 Series 1991-P, Pre-Refunded, 7.00%, 07/01/11.................................................. $ 690,504
25,720,000 Series X, 6.125%, 07/01/21.................................................................... 26,318,247
4,850,000 Puerto Rico GO, 6.50%, 07/01/23................................................................ 5,209,482
1,445,000 Puerto Rico HFC, MFMR, Portfolio A, Series I, 7.50%, 04/01/22.................................. 1,525,573
40,000 Puerto Rico HFC Revenue, FHA Mortgage Insured, Section 8 Assisted, Sixth Portfolio, Pre-Refunded,
7.75%, 12/01/26................................................................................ 48,978
1,185,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series 1988-B, GNMA Secured, 7.65%, 10/15/22........... 1,254,939
Puerto Rico Industrial, Tourist, Educational, Medical & Environmental Control Facilities,
Financing Authority, Hospital Revenue,
1,950,000 Auxilio Mutuo Obligation Group, Series A, MBIA Insured, 6.25%, 07/01/24....................... 2,050,016
5,225,000 Refunding, Dr. Pila Hospital, Series A, FHA Insured, 5.875%, 08/01/12......................... 5,375,637
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Pre-Refunded,
1,000,000 Series F, 8.00%, 07/01/12..................................................................... 1,045,700
1,000,000 Series H, 7.875%, 07/01/16.................................................................... 1,077,110
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
2,435,000 Refunding, Series A, 5.75%, 01/01/13.......................................................... 2,478,587
2,900,000 Refunding, Series B, 5.25%, 01/01/13.......................................................... 2,830,168
5,420,000 Refunding, Series B, 5.25%, 01/01/19.......................................................... 5,163,417
1,000,000 Refunding, Series D, 5.50%, 01/01/25.......................................................... 973,140
6,000,000 Refunding, Series D, 6.25%, 01/01/27.......................................................... 6,286,260
2,000,000 Refunding, Series D, 5.00%, 01/01/30.......................................................... 1,796,400
2,000,000 Series A, 6.50%, 01/01/22..................................................................... 2,132,720
4,600,000 Series A, 6.00%, 01/01/31..................................................................... 4,649,312
1,845,000 Series A, MBIA Insured, 6.00%, 01/01/31....................................................... 1,874,077
2,500,000 Series A, Pre-Refunded, 7.875%, 01/01/28...................................................... 2,731,175
9,975,000 Series B, 6.25%, 01/01/19..................................................................... 10,515,645
5,925,000 Series C, 6.20%, 01/01/12..................................................................... 6,227,471
5,760,000 Series C, 5.50%, 01/01/28..................................................................... 5,599,411
110,000 Series E, Pre-Refunded, 8.25%, 01/01/13....................................................... 118,732
625,000 Series E, Pre-Refunded, 8.25%, 01/01/28....................................................... 674,613
3,245,000 San Luis Municipal Property Corp., Municipal Facilities Revenue, 8.125%, 07/01/19.............. 3,449,273
8,000,000 Santa Cruz County IDAR, Citizens Utilities Co. Project, 6.60%, 05/01/29........................ 8,447,120
50,000 Scottsdale, City of, Municipal Property Corp., Refunding, Series 1987, Pre-Refunded,
7.75%, 07/01/05............................................................................... 53,708
Scottsdale IDA, Hospital Revenue, Scottsdale Memorial Hospital, AMBAC Insured,
180,000 Refunding, Series 1987-A, 8.50%, 09/01/17..................................................... 194,386
1,660,000 Series A, 7.05%, 09/01/18..................................................................... 1,735,148
2,750,000 Series B, 7.00%, 09/01/08..................................................................... 2,932,765
Sedona Sewer Sales Tax Revenue,
3,800,000 Refunding, Series 1992, 6.75%, 07/01/07....................................................... 4,199,228
5,000,000 Refunding, Series 1992, 7.00%, 07/01/12....................................................... 5,418,700
6,500,000 Series A, Pre-Refunded, 7.50%, 07/01/20....................................................... 7,461,805
Tucson Airport Authority Revenue, MBIA Insured,
6,700,000 Refunding, 5.70%, 06/01/13.................................................................... 6,853,832
1,090,000 Series A, 6.875%, 06/01/20.................................................................... 1,166,169
1,175,000 Series B, 7.125%, 06/01/15.................................................................... 1,292,042
1,125,000 Series B, 7.25%, 06/01/20..................................................................... 1,242,383
1,930,000 Tucson IDA, MFHR, La Entrada, Refunding, 7.40%, 07/01/26....................................... 2,023,624
900,000 Tucson Local Development Corp., Leasehold Revenue, Series F, FGIC Insured, Pre-Refunded,
7.30%, 07/01/10............................................................................... 974,187
Tucson Water Revenue, Pre-Refunded,
$ 2,270,000 1984 Project, Series B, 7.70%, 07/01/18....................................................... $2,325,842
2,250,000 Refunding, MBIA Insured, 7.00%, 07/01/10...................................................... 2,409,435
6,750,000 Series D, 7.10%, 07/01/18..................................................................... 7,747,650
1,500,000 University of Arizona COP, Telecommunications System, Pre-Refunded, 7.60%, 07/15/03............ 1,609,560
University of Arizona Medical Center Corp., Hospital Revenue,
2,000,000 b Refunding, MBIA Insured, 5.00%, 07/01/21...................................................... 1,853,740
225,000 Series 1986, Pre-Refunded, 8.10%, 07/01/16.................................................... 242,386
250,000 Series 1987, Pre-Refunded, 8.10%, 07/01/16.................................................... 269,318
University of Arizona System Revenue,
1,700,000 Series 1988, Pre-Refunded, 7.625%, 06/01/11................................................... 1,869,405
1,000,000 Series 1994, 6.25%, 06/01/11.................................................................. 1,069,330
1,300,000 Series 1994, 6.35%, 06/01/14.................................................................. 1,396,018
2,650,000 Williams Municipal Development Authority, Inc., Municipal Facilities Revenue, 7.625%, 07/01/05. 2,764,203
1,500,000 Yavapai County, USD No. 22, Humboldt, Series A, FGIC Insured, 5.95%, 07/01/14.................. 1,553,625
Yuma IDA, MFHR, Alexandrite Sands Apartments Project, FHA Insured,
1,000,000 7.60%, 12/01/15............................................................................... 1,055,470
2,000,000 7.70%, 12/01/29............................................................................... 2,071,000
------------
Total Long Term Investments (Cost $697,691,283)................................................ 743,973,045
------------
c Short Term Investments.4%
1,300,000 Maricopa County IDA, Hospital Facilities Revenue, Samaritan Health Service Hospital, Series B-2,
MBIA Insured, Daily VRDN and Put, 3.45%, 12/01/08............................................. 1,300,000
700,000 Maricopa County PCR, Pollution Control Corp., Arizona Public Service Co., Series D, Refunding,
Daily VRDN and Put, 3.35%, 05/01/29........................................................... 700,000
600,000 Phoenix GO, Series 95-2, Daily VRDN and Put, 3.25%, 06/01/20................................... 600,000
700,000 Pinal County IDA, PCR, DATES, Newmont Mining Corp., Daily VRDN and Put, 3.40%, 12/01/09........ 700,000
------------
Total Short Term Investments (Cost $3,300,000)................................................. 3,300,000
------------
Total Investments (Cost $700,991,283)99.3%..................................................... 747,273,045
Other Assets and Liabilities, Net.7%........................................................... 5,416,655
------------
Net Assets 100.0%............................................................................. $752,689,700
============
At February 29, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of $701,004,193 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 46,959,491
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (690,639)
------------
Net unrealized appreciation.................................................................... $ 46,268,852
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BIG - Bond Investors 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 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.
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
bSee Note 1(g) regarding securities purchased on a when-issued basis
cVariable 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 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, February 29, 1996
Face Value
Amount Franklin Colorado Tax-Free Income Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 99.6%
$ 770,000 Adams County PCR, Refunding, Public Service Co. of Colorado Project, Series A, 7.375%, 11/01/09. $ 797,451
6,000,000 Arapahoe County Capital Improvements Transportation Fund Highway Revenue, Vehicle Registration,
Series A, MBIA Insured, 6.15%, 08/31/26........................................................ 6,288,060
400,000 Arapahoe County COP, Building Finance Corp., CGIC Insured, 7.50%, 12/01/10...................... 445,428
805,000 Arapahoe County COP, Refunding, CGIC Insured, 6.625%, 12/01/16.................................. 878,472
Arapahoe County School District No. 5, Cherry Creek,
500,000 7.125%, 12/15/10............................................................................... 556,665
7,650,000 5.15%, 12/15/15................................................................................ 7,320,056
5,000,000 Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 06/01/11......................... 5,717,700
1,000,000 Arvada MFHR, Refunding, Springwood Community Project, 6.35%, 08/20/16........................... 1,023,500
Auraria Higher Education Center,
2,500,000 Parking Facilities Revenue, Refunding, Pre-Refunded, 7.875%, 04/01/12.......................... 2,830,500
2,040,000 b Student Fee Revenue, Refunding, AMBAC Insured, 5.25%, 05/01/15............................. 1,972,864
2,490,000 b Student Fee Revenue, Refunding, AMBAC Insured, 5.30%, 05/01/21............................. 2,396,152
2,000,000 Student Fee Revenue, Series A, AMBAC Insured, 6.50%, 11/01/16.................................. 2,127,640
300,000 Student Fee Revenue, Series A, MBIA Insured, 7.35%, 05/01/09................................... 322,524
2,850,000 Aurora COP, Refunding, 6.25%, 12/01/09.......................................................... 3,065,517
150,000 Aurora MFHR, Dayton Place Project, GNMA Secured, Series 1988-A, 8.25%, 01/20/29................. 156,290
750,000 Aurora Urban Renewal Authority, Tax Increment Revenue, 7.50%, 11/15/07.......................... 809,700
1,000,000 Bayfield School District No. 10, MBIA Insured, 6.65%, 06/01/15.................................. 1,087,600
1,000,000 Beaver Creek Metropolitan District GO, Unlimited Tax, Refunding, MBIA Insured, 7.25%, 12/01/09.. 1,042,010
Boulder County Hospital Revenue, Longmont United Hospital Project,
2,000,000 5.80%, 12/01/13................................................................................ 1,937,400
1,285,000 5.875%, 12/01/20............................................................................... 1,227,676
3,000,000 Pre-Refunded, 8.20%, 12/01/20.................................................................. 3,513,960
1,250,000 Boulder GO, Refunding, 7.20%, 08/15/13.......................................................... 1,358,913
2,900,000 Castle Pines Metropolitan District, Refunding & Improvement, CGIC Insured, 7.625%, 12/01/15..... 3,252,756
1,750,000 Colorado Association of School Boards, COP, Pueblo School District No. 60, Project A, MBIA
Insured, 7.25%, 12/01/09....................................................................... 1,954,155
Colorado Health Facilities Authority Revenue,
1,615,000 Birchwood Manor Project, Series A, GNMA Secured, 7.625%, 04/01/26.............................. 1,678,082
2,500,000 Children's Hospital Association Project, MBIA Insured, 5.25%, 10/01/26......................... 2,355,100
954,000 Community Provider Pooled, CGIC Insured, 6.75%, 07/15/17....................................... 1,025,197
6,570,000 Community Provider Pooled, Series A, CGIC Insured, 7.25%, 07/15/17............................. 7,185,543
1,750,000 Covenant Retirement Communities, 6.75%, 12/01/15............................................... 1,801,240
4,950,000 Covenant Retirement Communities, 6.75%, 12/01/25............................................... 5,053,901
1,250,000 Mercy Medical Center Durango, 6.20%, 11/15/15.................................................. 1,280,200
420,000 Oakbrook I Manor, Series A, GNMA Secured, 7.25%, 04/01/11...................................... 435,091
885,000 Oakbrook I Manor, Series A, GNMA Secured, 7.625%, 04/01/26..................................... 925,816
6,000,000 PSL Health System Project, Series B, Pre-Refunded, 8.50%, 02/15/21............................. 7,178,940
775,000 Refunding, Porter Memorial Hospital Project, Series A, Pre-Refunded, 7.40%, 02/01/16........... 861,955
1,000,000 Sisters of Charity Health Care System, 5.25%, 05/15/14......................................... 958,090
3,000,000 Swedish Medical Center, Project A, Pre-Refunded, 6.80%, 01/01/23............................... 3,426,450
Colorado HFA, GO,
3,830,000 MF, Series A, 6.80%, 08/01/14.................................................................. 3,973,395
6,215,000 MF, Series A, 6.85%, 08/01/24.................................................................. 6,447,192
2,455,000 MF, Series A, 6.875%, 08/01/30................................................................. 2,545,835
100,000 Series A, Pre-Refunded, 8.375%, 01/01/30....................................................... 109,839
1,000,000 SF, Series A, 7.50%, 05/01/29.................................................................. 1,050,540
20,000 SFMR, Series C, 8.75%, 09/01/17................................................................ 20,795
460,000 SFMR Program, Series A-3, 7.90%, 08/01/21...................................................... 482,821
1,080,000 SFMR, Series A-2, 7.70%, 02/01/23.............................................................. 1,132,758
Colorado HFA, GO, (cont.)
$ 1,950,000 SFMR, Series C-2, 7.375%, 08/01/10............................................................. $ 2,040,129
270,000 SFMR, Series C-2, 7.85%, 02/01/21.............................................................. 281,753
285,000 Colorado HFA, SFMR Program, Series A-1, 8.00%, 08/01/17......................................... 299,236
Colorado Post Secondary Educational Facilities Authority Revenue,
1,000,000 Auraria Foundation Project, CGIC Insured, 6.00%, 09/01/15...................................... 1,032,090
3,250,000 University of Denver Project, Connie Lee Insured, 6.625%, 06/01/13............................. 3,436,583
300,000 University of Denver Project, Series B, Pre-Refunded, 9.00%, 12/01/07.......................... 332,139
Colorado Springs Hospital Revenue,
75,000 Memorial Hospital, Pre-Refunded, 8.75%, 12/15/07............................................... 82,788
5,575,000 Refunding, MBIA Insured, 6.00%, 12/15/15....................................................... 5,789,192
5,955,000 Refunding, MBIA Insured, 6.00%, 12/15/24....................................................... 6,131,864
Colorado Springs Utilities System Revenue,
295,000 Series 1988-A, Pre-Refunded, 8.00%, 11/15/20................................................... 310,016
2,000,000 Series A, 6.10%, 11/15/24...................................................................... 2,075,340
1,090,000 Colorado State, Board Community Colleges and Occupational Educational Revenue, Red Rocks
Community College Project, AMBAC Insured, 6.00%, 11/01/19...................................... 1,125,360
Colorado Water Resources and Power Development Authority Revenue,
1,765,000 Clean Water Revenue, Series A, 6.15%, 09/01/11................................................. 1,876,389
1,000,000 Clean Water Revenue, Series A, 6.30%, 09/01/14................................................. 1,074,820
750,000 Small Water Resources, Series A, FGIC Insured, 6.70%, 11/01/12................................. 812,543
65,000 Stagecoach Project, Pre-Refunded, 8.00%, 11/01/17.............................................. 73,167
Denver City and County Airport System Revenue,
4,000,000 Series 1990-A, 8.50%, 11/15/23................................................................. 4,697,520
7,500,000 Series A, 7.50%, 11/15/12...................................................................... 8,709,225
4,000,000 Series A, 7.50%, 11/15/23...................................................................... 4,703,120
1,000,000 Series D, 7.75%, 11/15/13...................................................................... 1,215,080
100,000 Denver City and County Excise Tax Revenue, BIG Insured, Pre-Refunded, 8.30%, 09/01/14........... 107,702
1,880,000 Denver City and County IDR, University of Denver Project, 7.50%, 03/01/11....................... 2,052,678
Denver City and County Revenue,
3,400,000 Children's Hospital Association Project, FGIC Insured, 6.00%, 10/01/15......................... 3,512,234
1,000,000 Leavenworth Hospital, Sisters of Charity Health Care System, MBIA Insured, 5.00%, 12/01/14..... 936,340
150,000 Refunding, St. Anthony's Hospital, Sisters of Charity Health Care System, Series A, MBIA Insured,
7.75%, 05/01/14................................................................................ 167,832
315,000 Denver City and County SFMR, Series A, GNMA Secured, 8.125%, 12/01/20........................... 327,874
2,000,000 Denver City and County Special Facilities Airport Revenue, United Airlines Project, Series A,
6.875%, 10/01/32............................................................................... 2,053,840
1,000,000 Donala Colorado Water and Sanitary District, Improvement Series B, 6.50%, 12/01/14.............. 1,067,770
4,100,000 Douglas County, School District No. 1, Douglas and Elbert Counties, Improvement Series A,
MBIA Insured, 6.50%, 12/15/16.................................................................. 4,400,038
El Paso County,
165,000 HMR, Series A, GNMA Secured, 8.00%, 03/01/21................................................... 172,633
130,000 HMR, Series B, GNMA Secured, 8.125%, 11/01/13.................................................. 136,873
100,000 Revenue, Refunding, St. Francis Hospital System, Sisters of Charity Health Care System,
Series A, MBIA Insured, Pre-Refunded, 7.75%, 05/01/14......................................... 109,827
El Paso County, School District No. 20, GO, Series B,
20,000 8.00%, 12/01/06................................................................................ 21,074
30,000 Pre-Refunded, 8.00%, 12/01/06.................................................................. 32,124
1,500,000 Estes Park Urban Renewal Authority, Tax Increment Revenue, Pre-Refunded, 7.625%, 05/15/08....... 1,669,845
1,035,000 Foothill Metropolitan Recreational and Park District, Golf Course Revenue, Series A, Pre-Refunded,
8.00%, 11/15/04................................................................................ 1,116,185
190,000 Fort Collins IDR, Vipont Pharmaceutical, Inc. Project, Pre-Refunded, 9.25%, 08/01/13............ 215,631
500,000 Fort Collins PCR, Anheuser-Busch Co. Project, Series 1984, 7.375%, 12/01/14..................... 515,440
$ 250,000 Frisco Fire Protection District, Refunding & Improvement, 7.20%, 12/01/05....................... $ 269,843
Guam Airport Authority Revenue, Refunding, Series A,
400,000 6.375%, 10/01/10............................................................................... 403,536
800,000 6.50%, 10/01/23................................................................................ 802,768
1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08........................................ 1,028,830
Jefferson County, District Wide Sales Tax Revenue, Local Improvement District,
7,450,000 MBIA Insured, 6.30%, 06/01/22.................................................................. 7,789,571
200,000 Pre-Refunded, 8.20%, 12/01/13.................................................................. 221,566
1,000,000 Jefferson County School District No. R-001, AMBAC Insured, 6.25%, 12/15/12...................... 1,058,660
675,000 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13...................... 726,246
750,000 La Plata County School District No. 9-R, Durango COP, FGIC Insured, 7.40%, 11/15/07............. 810,030
Lakewood MFHR Mortgage, FHA Insured Mortgage,
1,235,000 6.65%, 10/01/25................................................................................ 1,270,062
3,025,000 6.70%, 10/01/36................................................................................ 3,098,175
250,000 Larimer County Health Care Facilities Revenue, Refunding, Western Health Network, Inc.,
BIG Insured, 7.625%, 01/01/12.................................................................. 269,543
Las Animas County School District No. 1, Refunding,
1,000,000 6.15%, 12/01/08................................................................................ 1,020,360
935,000 6.20%, 12/01/10................................................................................ 951,755
735,000 Left Hand Water District, Boulder and Weld Counties Water Revenue Bonds, MBIA Insured,
Pre-Refunded, 7.40%, 11/15/09.................................................................. 838,562
675,000 Logan County, SFMR, Refunding, Series A, 8.50%, 11/01/11........................................ 700,353
910,000 Louisville Water District GO, Refunding, FGIC Insured, 7.20%, 12/01/09.......................... 966,320
350,000 Mesa County Sales Tax Revenue, Refunding, MBIA Insured, 7.75%, 12/01/13......................... 379,250
575,000 Metropolitan of Denver Revenue, Sewer Disposal District No. 1, Series A, MBIA Insured,
Pre-Refunded, 7.60%, 04/01/14.................................................................. 626,560
1,850,000 Montrose County COP, 6.35%, 06/15/06............................................................ 1,968,400
450,000 Northern Colorado Water Conservancy District Revenue, Municipal Sub-District, Series D,
7.75%, 12/01/12................................................................................ 469,845
550,000 Pueblo County COP, Public Parking, 6.90%, 07/01/15.............................................. 553,531
1,000,000 Pueblo County School District No. 70, Pueblo Rural, GO, AMBAC Insured, 6.40%, 12/01/14.......... 1,073,870
1,000,000 Pueblo Urban Renewal Authority Tax Increment Revenue, Refunding, AMBAC Insured,
6.10%, 12/01/15................................................................................ 1,049,570
Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue, Refunding,
55,000 Series 1985-A, FSA Insured, Pre-Refunded, 9.00%, 07/01/09...................................... 72,680
1,000,000 Puerto Rico Commonwealth Highway Authority Revenue, Series G, Pre-Refunded, 8.00%, 07/01/18..... 1,169,730
Puerto Rico Electric Power Authority Revenue,
50,000 Series 1987-L, Pre-Refunded, 8.40%, 07/01/15................................................... 54,124
155,000 Series N, 7.125%, 07/01/14..................................................................... 168,564
180,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series 1988-A, GNMA Secured, 7.80%, 10/15/21............ 188,696
600,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA, Baxter Travenol Labs., Series A,
8.00%, 09/01/12................................................................................ 664,128
1,335,000 Puerto Rico Industrial, Tourist, Educational, Medical & Environmental Control Facilities, Financing
Authority, Industrial Revenue, Guaynabo Municipal Government Center, Series A, 5.625%, 07/01/15 1,265,660
145,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08............................ 158,215
Regional Transportation District, Sales Tax Revenue,
1,080,000 Refunding, FGIC Insured, 6.25%, 11/01/12....................................................... 1,141,333
100,000 Series 1988, Pre-Refunded, 8.00%, 11/01/08..................................................... 109,974
760,000 Southwestern SFMR, Refunding, Series A, 7.375%, 09/01/11........................................ 793,022
230,000 Summit County SFMR, Series A, 7.50%, 12/01/11................................................... 241,061
2,750,000 Summit County Sports Facilities Revenue, Refunding, Keystone Resorts Project, Ralston Purina Co.,
7.875%, 09/01/08............................................................................... 3,265,590
2,000,000 Summit County USD No. 1, GO, FGIC Insured, 6.70%, 12/01/14...................................... 2,299,240
$ 7,000,000 University of Colorado, Hospital Authority Revenue, Series A, AMBAC Insured, 6.40%, 11/15/22.... $ 7,380,590
50,000 University of Colorado Revenue, Refunding, Recreations and Parking Facilities, Pre-Refunded,
7.90%, 05/01/06................................................................................ 51,356
250,000 University of Puerto Rico Revenue, Refunding, Series L, Pre-Refunded, 7.75%, 06/01/07........... 257,805
2,000,000 Westminster City Sales and Use Tax Revenue, Refunding & Improvement, FGIC Insured,
7.00%, 12/01/08................................................................................ 2,186,960
------------
Total Long Term Investments (Cost $201,214,010)............................................ 216,541,997
------------
c Short Term Investments .6%
Colorado Health Facilities Authority Revenue,
500,000 Boulder Community Hospital Project, MBIA Insured, Weekly VRDN and Put, 3.25%, 10/01/14......... 500,000
300,000 Denver City and County Revenue, Children's Hospital Association Project, Weekly VRDN and Put,
3.65%, 10/01/18............................................................................... 300,000
200,000 North Colorado Medical Center, MBIA Insured, Weekly VRDN and Put, 3.25%, 05/15/20.............. 200,000
200,000 Sisters of Charity Health, Weekly VRDN and Put, 3.25%, 05/15/22................................ 200,000
------------
Total Short Term Investments (Cost $1,200,000).................................................. 1,200,000
------------
Total Investments (Cost $202,414,010) 100.2%................................................... 217,741,997
Liabilities in Excess of Other Assets, Net(.2%)................................................. (477,012)
------------
Net Assets 100.0%.............................................................................. $217,264,985
============
At February 29, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of $202,414,898 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................................. $ 15,626,541
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................................. (299,442)
------------
Net unrealized appreciation..................................................................... $ 15,327,099
============
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
SFHR - Single Family Housing Revenue
SFMR - Single Family Mortgage Revenue
USD - Unified School District
bSee note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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 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, February 29, 1996
Face Value
Amount Franklin Connecticut Tax-Free Income Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments 97.9%
Bridgeport GO,
$ 300,000 Series A, 7.25%, 06/01/00..................................................................... $ 324,630
600,000 Series A, 7.625%, 01/15/09.................................................................... 642,504
1,375,000 Series B, 7.55%, 11/15/00..................................................................... 1,515,718
3,750,000 Series B, 7.75%, 11/15/10..................................................................... 4,105,238
425,000 Series B, State Guaranteed, 7.30%, 01/15/09................................................... 462,468
750,000 Unlimited Tax, Series A, 7.30%, 03/01/99...................................................... 800,550
Connecticut HFA, Housing Mortgage Finance, State Program,
200,000 Series A, 7.60%, 11/15/05..................................................................... 208,064
5,000 Series A, 7.50%, 11/15/09..................................................................... 5,226
1,380,000 Series A, Sub-Series 2, 7.20%, 11/15/08....................................................... 1,470,155
445,000 Series B, 7.20%, 11/15/09..................................................................... 462,778
17,485,000 Series B, 6.75%, 11/15/23..................................................................... 18,373,238
580,000 Series B-1, 7.55%, 11/15/08................................................................... 594,552
1,615,000 Series C, 7.625%, 11/15/17.................................................................... 1,651,305
500,000 Series C-1, 6.60%, 11/15/23................................................................... 520,380
6,000,000 Series C-2, 6.70%, 11/15/22................................................................... 6,145,920
3,900,000 Series E, 6.30%, 05/15/17..................................................................... 3,984,747
1,250,000 Sub-Series A-1, 6.10%, 05/15/17............................................................... 1,269,113
640,000 Sub-Series B-1, 6.50%, 05/15/18............................................................... 657,677
700,000 Sub-Series B-1, 6.30%, 05/15/25............................................................... 716,289
500,000 Sub-Series B-2, 6.75%, 05/15/22............................................................... 518,960
1,340,000 Sub-Series F-1, 6.00%, 05/15/17............................................................... 1,352,181
1,380,000 Sub-Series G-1, 6.20%, 11/15/16............................................................... 1,400,189
410,000 Sub-Series H-1, 6.00%, 05/15/14............................................................... 414,157
Connecticut Higher Education Supplemental Loan Authority, Series A
890,000 7.00%, 11/15/05............................................................................... 950,778
255,000 7.20%, 11/15/10............................................................................... 272,294
435,000 7.50%, 11/15/10............................................................................... 460,939
1,020,000 Connecticut South Central Regional Water Authority, Water System Revenue, Refunding,
Pre-Refunded, 7.125%, 08/01/12................................................................ 1,056,496
5,800,000 Connecticut State Development Authority, Health Care Revenue, Masonic Charity of Connecticut,
6.50%, 08/01/20............................................................................... 6,181,756
750,000 Connecticut State Development Authority, PCR, New England Power Co., 7.25%, 10/15/15........... 810,368
2,000,000 Connecticut State Development Authority, Solid Waste Disposal Facilities Revenue, Pfizer, Inc.
Project, 7.00%, 07/01/25...................................................................... 2,243,560
1,000,000 Connecticut State Development Authority, Water Facility Revenue, Refunding, Bridgeport
Hydraulic Co. Project, 7.25%, 06/01/20........................................................ 1,094,660
Connecticut State Health and Educational Facilities Authority Revenue,
635,000 Capital Assets, Series B, 7.00%, 01/01/00..................................................... 686,416
1,995,000 Capital Assets, Series C, 7.00%, 01/01/20..................................................... 2,209,842
5,600,000 Choate Rosemary Hall, Series A, 7.00%, 07/01/25............................................... 6,326,096
800,000 Danbury Hospital, Series F, AMBAC Insured, 5.375%, 07/01/23................................... 779,256
1,395,000 Hartford University, Series C, Pre-Refunded, 8.00%, 07/01/18.................................. 1,663,259
5,000,000 Hartford University, Series D, 6.80%, 07/01/22................................................ 5,110,700
1,250,000 Hebrew Home and Hospital, Series A, 7.00%, 08/01/30........................................... 1,291,738
1,645,000 Kimball Hospital, Series A, FSA Insured, 5.375%, 07/01/26..................................... 1,593,479
1,000,000 Lawrence Memorial Hospital, Series B, MBIA Insured, Pre-Refunded, 7.00%, 07/01/20............. 1,126,250
500,000 Lutheran General Health Care System, ETM 07/01/05, 7.375%, 07/01/19........................... 614,715
1,000,000 New Britain Memorial Hospital, Series A, 7.75%, 07/01/22...................................... 1,072,320
2,905,000 New Horizons Village Project, 7.30%, 11/01/16................................................. 3,284,393
1,000,000 Quinnipiac College, Series C, Pre-Refunded, 7.75%, 07/01/20................................... 1,153,450
615,000 Sacred Heart University, Series A, 6.85%, 07/01/22............................................ 644,680
Connecticut State Health and Educational Facilities Authority Revenue, (cont.)
$ 100,000 St. Mary's Hospital, Series B, 7.50%, 07/01/02................................................ $ 105,959
1,000,000 St. Mary's Hospital, Series C, Pre-Refunded, 7.375%, 07/01/20................................. 1,056,070
275,000 San Raphael Hospital, Series C, AMBAC Insured, Pre-Refunded, 7.50%, 07/01/14.................. 302,429
1,000,000 Taft School, Issue A, 7.375%, 07/01/20........................................................ 1,138,790
12,350,000 Yale New Haven Hospital, Series F, MBIA Insured, 7.10%, 07/01/25.............................. 13,616,246
200,000 Connecticut State Municipal Electric Energy, Coop Power Supply, MBIA Insured, Pre-Refunded,
6.875%, 01/01/08.............................................................................. 204,000
Connecticut State Resource Recovery Authority Revenue,
200,000 American Refunding, Series A, 7.70%, 11/15/01................................................. 217,994
200,000 American Refunding, Series A, 8.10%, 11/15/15................................................. 219,394
835,000 Bridgeport Resco, Ltd. Partnership Project, Series A, 7.625%, 01/01/09........................ 873,552
1,850,000 Connecticut System Bonds, Series B, MBIA Insured, 7.30%, 11/15/12............................. 1,944,572
205,000 Wallingford Recovery Project, Series A, 7.125%, 11/15/08...................................... 216,138
Connecticut State Special Tax Obligation Revenue, Transportation Infrastructure Purpose,
Series A, Pre-Refunded,
900,000 7.30%, 02/15/08............................................................................... 976,977
2,000,000 7.20%, 02/01/09............................................................................... 2,212,360
200,000 East Haven, Utah Bank Qualified GO, 7.00%, 09/15/07............................................ 217,706
200,000 Griswold GO, AMBAC Insured, 7.50%, 04/01/06.................................................... 242,362
Guam Airport Authority Revenue, Series B,
250,000 6.60%, 10/01/10............................................................................... 253,520
1,300,000 6.70%, 10/01/23............................................................................... 1,313,611
5,500,000 Guam Power Authority Revenue, Series A, 6.75%, 10/01/24........................................ 5,714,390
210,000 Montville Town GO, Pre-Refunded, 7.35%, 12/01/10............................................... 232,407
New Haven GO,
1,100,000 Series A, 7.00%, 03/01/96..................................................................... 1,100,077
2,250,000 Series A, 7.10%, 03/01/97..................................................................... 2,319,683
4,545,000 Series A, 7.40%, 03/01/12..................................................................... 4,913,009
2,000,000 Series B, 6.75%, 12/01/05..................................................................... 2,176,160
Plainfield GO,
150,000 Series 1988, 7.30%, 09/01/10.................................................................. 166,149
335,000 Series 1991, 7.25%, 09/01/05.................................................................. 374,868
335,000 Series 1991, 7.30%, 09/01/07.................................................................. 374,292
335,000 Series 1991, 7.30%, 09/01/09.................................................................. 371,572
100,000 Plainville GO, 7.20%, 06/15/08................................................................. 105,106
1,500,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A,
Pre-Refunded, 7.00%, 07/01/19................................................................. 1,638,390
1,000,000 Puerto Rico Commonwealth Highway Authority and Transportation Revenue, Series S,
Partial Pre-Refunded, 6.625%, 07/01/18........................................................ 1,138,890
1,800,000 Puerto Rico Commonwealth Highway Authority Revenue, Refunding, Series R, 6.75%, 07/01/05....... 1,967,652
Puerto Rico Electric Power Authority Revenue,
700,000 Series P, Pre-Refunded, 7.00%, 07/01/11....................................................... 805,588
2,950,000 Series 1991-P, Pre-Refunded, 7.00%, 07/01/21.................................................. 3,394,978
5,000,000 Series R, 6.375%, 07/01/24.................................................................... 5,204,650
800,000 Puerto Rico HFC, SFMR, Series C, GNMA Insured, 6.85%, 10/15/23................................. 840,496
5,000,000 Puerto Rico Municipal Finance Agency, Series 1994-A, 6.50%, 07/01/19........................... 5,377,550
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
1,000,000 Series H, Pre-Refunded, 7.25%, 07/01/17....................................................... 1,093,170
700,000 Series J, Pre-Refunded, 7.25%, 07/01/17....................................................... 765,219
1,130,000 Stratford GO, Unlimited Tax, Pre-Refunded, 7.30%, 03/01/12..................................... 1,296,280
750,000 University of Connecticut, Series A, FGIC Insured, 5.00%, 02/01/13............................. 723,413
6,550,000 Virgin Islands Water and Power Authority, Electric System Revenue, 7.40%, 07/01/11............. 6,954,784
Waterbury GO, Pre-Refunded,
$ 785,000 7.25%, 03/01/03............................................................................... $ 898,770
785,000 7.25%, 03/01/04............................................................................... 898,770
780,000 7.50%, 03/01/07............................................................................... 901,703
------------
Total Investments (Cost $153,637,992) 97.9%.................................................... 165,083,180
Other Assets and Liabilities, Net 2.1%........................................................ 3,617,597
------------
Net Assets 100.0%............................................................................. $168,700,777
============
At February 29, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of $153,663,702 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 11,488,658
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (69,180)
------------
Net unrealized appreciation.................................................................... $ 11,419,478
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
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, February 29, 1996
Face Value
Amount Franklin Indiana Tax-Free Income Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 97.4%
$ 75,000 Allen County COP, Fort Wayne Memorial Coliseum, Pre-Refunded, 8.125%, 11/01/17 .................. $ 80,197
50,000 Beech Grove EDR, Westvaco Corp., 8.75%, 07/01/10 ................................................ 50,651
500,000 Boonville Junior High School Building Corp., Pre-Refunded, 7.25%, 07/15/09 ...................... 560,405
1,000,000 Carmel EDR, Refunding, Cool Creek Association, 6.50%, 09/01/15 .................................. 1,023,420
75,000 Center Grove Central Elementary School Building Corp., First Mortgage, Pre-Refunded,
7.375%, 07/01/09 .............................................................................. 81,072
50,000 Chesterton Sewer Revenue, Pre-Refunded, 8.10%, 08/01/07.......................................... 54,796
250,000 Clarke County Hospital Association, Refunding, First Mortgage, MBIA Insured, 7.50%, 09/01/07 .... 272,842
Columbus Sewage Works Revenue,
710,000 MBIA Insured, 6.50%, 02/15/13 ................................................................ 755,532
260,000 Series 1990, 7.25%, 02/15/09 ................................................................. 280,602
500,000 Crawfordsville School Building Corp., First Mortgage, Pre-Refunded, 7.70%, 07/15/11 ............. 575,215
50,000 Crown Point Redevelopment District, Lake County Tax Increment, 8.10%, 02/01/07 .................. 51,626
1,000,000 Eastern Hancock Middle School Building Corp., Indianapolis First Mortgage, Refunding,
6.00%, 01/15/21 ................................................................................ 1,004,810
1,750,000 Elkhart County, Hospital Authority Revenue, Goshen Hospital Association, Inc. Project, 7.35%, 07/01/12 1,827,088
500,000 Elwood Middle School Building Corp., Refunding, First Mortgage, 7.30%, 01/01/08 ................. 551,355
55,000 Flat Rock-Hawcreek Elementary School Building Corp., First Mortgage, Pre-Refunded, 8.30%, 01/01/09 61,258
1,000,000 Fort Wayne Hospital Authority Revenue, Parkview Memorial Hospital Project, Series A, FGIC Insured,
6.50%, 11/15/12 ................................................................................ 1,041,280
150,000 Franklin Community Elementary School Building Corp., First Mortgage, Pre-Refunded, 7.80%, 01/01/09 160,914
200,000 Franklin Township of Marion County, Multi-School Building Corp., First Mortgage, Pre-Refunded,
7.50%, 01/15/12 ................................................................................ 222,304
50,000 Frankton-Lapel School Building Corp., First Mortgage, Pre-Refunded, 7.90%, 01/01/09 ............. 53,702
500,000 Hamilton Heights High School Building Corp., First Mortgage, Pre-Refunded, 7.375%, 07/15/10 ..... 572,515
125,000 Hamilton Southeastern Building Corp., Consolidated School Building Corp., First Mortgage,
Pre-Refunded, 8.40%, 01/01/15 .................................................................. 139,499
3,000,000 Hammond Industrial Sewer and Solid Waste Disposal Revenue, American Maize-Products Co. Project,
Series A, 8.00%, 12/01/24 ...................................................................... 3,340,710
1,500,000 Hammond Multi-School Building Corp., Refunding, First Mortgage, Series A, 6.20%, 07/10/15 ....... 1,551,405
300,000 Hammond PCR, Stauffer Chemical Project, Guaranteed Imperial 82, 8.00%, 11/01/12 ................. 340,788
Indiana Bond Bank, Special Program,
110,000 Series 1986-C, 8.00%, 08/01/11 ............................................................... 113,757
300,000 Series 1988-A, Pre-Refunded, 8.375%, 02/01/18 ................................................ 317,304
250,000 Series 1990-A, 7.50%, 02/01/20 ............................................................... 272,123
Indiana Health Facility Financing Authority, Hospital Revenue,
500,000 Bartholomew Indiana County Hospital, CGIC Insured, Pre-Refunded, 7.75%, 08/15/20 ............. 578,470
750,000 Community Hospitals of Indiana, MBIA Insured, Pre-Refunded, 7.00%, 07/01/21 .................. 857,318
1,000,000 Daughters of Charity, St. Marys Medical, 5.25%, 11/01/15 ..................................... 942,620
1,250,000 Hancock Memorial Hospital Project, Series 1990, 8.30%, 08/15/20 .............................. 1,356,900
1,835,000 Jackson County Schneck Memorial Hospital, 7.50%, 02/15/22 .................................... 1,968,992
1,280,000 Methodist Hospital, Inc., 6.75%, 09/15/09 .................................................... 1,359,974
1,000,000 Refunding and Improvement, Community Hospitals Projects, MBIA Insured, 5.70%, 05/15/22 ....... 973,390
55,000 St. Anthony's Medical Center/Home, Inc., Pre-Refunded, 9.25%, 10/01/17........................ 60,611
1,000,000 St. Anthony's Medical Center/Home, Inc., Series A, 7.00%, 10/01/17............................ 1,061,210
50,000 Welborn Memorial Baptist Hospital Project, Pre-Refunded, 8.00%, 07/01/02 ..................... 53,732
65,000 Indiana Municipal Power Agency, Power Supply System Revenue, Refunding, Series A, 5.75%, 01/01/18 63,884
Indiana State Educational Facilities Authority Revenue,
175,000 Anderson University Project, 8.40%, 10/01/08 ................................................. 192,938
175,000 Butler University Project No. 2, Series B, FGIC Insured, Pre-Refunded, 8.00%, 11/01/09 ....... 195,841
100,000 Refunding, Valparaiso University Project, BIG Insured, Pre-Refunded, 7.80%, 10/01/08 ......... 111,263
500,000 University of Evansville, 8.125%, 11/01/10 ................................................... 557,040
Indiana State HFA, SFMR,
$ 20,000 Series A, 7.875%, 01/01/17 ................................................................... $ 20,890
60,000 Series A, GNMA Secured, 8.125%, 07/01/06 ..................................................... 63,266
460,000 Series F-2, GNMA Secured, 7.75%, 07/01/22 .................................................... 487,034
1,000,000 Indiana State Office Building Commission, Correctional Facilities Program Revenue, 6.375%, 07/01/16 1,033,200
95,000 Indiana State Vocational Technical College Building Facilities, Student Fee, Series B, MBIA Insured,
Pre-Refunded, 7.90%, 07/01/07 .................................................................. 103,649
100,000 Indiana Transportation Finance Authority, Highway Revenue, Series A, Pre-Refunded, 8.125%, 06/01/11 110,684
200,000 Indiana University Hospital Facilities Revenue, 7.30%, 01/01/03 ................................. 218,252
Indianapolis Airport Authority, Indianapolis International Airport Revenue,
85,000 BIG Insured, 8.30%, 07/01/18 ................................................................. 92,840
1,000,000 6.50%, 11/15/31 .............................................................................. 1,010,480
200,000 Indianapolis Gas Utility Revenue, Series A, FGIC Insured, Pre-Refunded, 7.10%, 06/01/20 ......... 205,840
Indianapolis Local Public Improvement Bond Bank,
1,250,000 Refunding, Series A, 5.00%, 01/01/17 ......................................................... 1,144,013
2,300,000 Refunding, Series D, 6.75%, 02/01/20 ......................................................... 2,412,631
1,100,000 Refunding, Series D, 6.50%, 02/01/22 ......................................................... 1,125,355
225,000 Series D, Pre-Refunded, 8.50%, 02/01/18 ...................................................... 247,559
Indianapolis Resource Recovery Revenue, Ogden Martin System, Inc.,
100,000 Series A, 7.90%, 12/01/08 .................................................................... 105,624
150,000 Series B, 7.90%, 12/01/08 .................................................................... 158,436
500,000 Jasper County PCR, Refunding, Collateralized, Northern Indiana Public Service Co., MBIA Insured,
7.10%, 07/01/17 ................................................................................ 541,985
300,000 Jefferson County Hospital Authority Facility Revenue, Refunding, King's Daughters' Hospital,
8.50%, 08/15/13 ................................................................................ 320,436
50,000 Kendallville Sewage Works Revenue, GO, Pre-Refunded, 7.60%, 07/01/07 ............................ 54,244
Kokomo Hospital Authority Revenue, Refunding, St. Joseph's Hospital and Health Center of Kokomo,
300,000 Series A, Pre-Refunded, 8.75%, 02/15/13 ...................................................... 338,682
230,000 Series B, Pre-Refunded, 8.75%, 02/15/13 ...................................................... 259,656
2,100,000 Lake Central Industrial Multi-School Building, First Mortgage, MBIA Insured, 6.50%, 01/15/14 .... 2,244,858
95,000 Madison County Authority, Anderson Hospital Revenue, Refunding, Series A, BIG Insured,
8.00%, 01/01/14 ................................................................................ 102,167
100,000 Manchester Community, Elementary School Building Corp., First Mortgage, Pre-Refunded,
7.80%, 01/01/12 ................................................................................ 110,398
250,000 Marion County Convention and Recreational Facilities Authority, Excise Tax Revenue, Lease Rental,
Series A, AMBAC Insured, 7.00%, 06/01/21 ....................................................... 275,045
1,000,000 Merrillville Multi-School Building Corp., First Mortgage, Pre-Refunded, 7.50%, 07/15/09 ......... 1,144,710
300,000 Monroe County, Hospital Authority Revenue, Bloomington Hospital Project, MBIA Insured,
6.70%, 05/01/12 ................................................................................ 325,110
250,000 Monroe-Gregg School Building Corp., First Mortgage, Pre-Refunded, 7.30%, 01/15/11 ............... 283,670
2,000,000 Muncies Edit Building Corp., Industrial First Mortgage, Series A, AMBAC Insured, 6.60%, 12/01/17 2,133,140
500,000 North Harrison High School Building Corp., First Mortgage, Pre-Refunded, 7.30%, 07/15/12 ........ 572,075
85,000 North Lawrence Community School, COP, Multi-School Building Corp., Pre-Refunded, 8.10%, 01/01/10 92,877
60,000 North Montgomery Elementary School Building Corp., COP, Pre-Refunded, 8.375%, 07/01/08 .......... 65,848
125,000 Northridge High School Additions, Building Corp., Middlebury, First Mortgage, Pre-Refunded,
8.00%, 12/30/08 ................................................................................ 138,388
100,000 Perry Township Multi-School Building Corp. Revenue, First Mortgage, Pre-Refunded, 7.80%, 01/01/03 108,837
Peru Community School Building Corp., First Mortgage,
150,000 Series 1988, Pre-Refunded, 7.90%, 07/01/08 ................................................... 167,921
100,000 Series 1989, Pre-Refunded, 7.80%, 01/01/11 ................................................... 111,683
400,000 Plymouth Industry Multi-School Building Corp., First Mortgage, AMBAC Insured, Pre-Refunded,
6.75%, 01/01/13 ................................................................................ 453,996
Princeton PCR, Refunding, Public Service Co. of Indiana Project, Series C,
$ 300,000 BIG Insured, 7.60%, 03/15/12 ................................................................. $ 314,436
250,000 MBIA Insured, 7.375%, 03/15/12 ............................................................... 272,448
150,000 South Bend Redevelopment Authority Lease Revenue, Rental Parking Facility Project, Pre-Refunded,
7.90%, 02/01/07 ................................................................................ 161,193
225,000 Southern Hancock County Community School Corp., COP, AMBAC Insured, Pre-Refunded,
7.10%, 07/01/11 ................................................................................ 250,052
500,000 Steuben County Metropolitan School District, COP, 6.90%, 01/01/08 ............................... 539,475
750,000 Sullivan Industrial PCR, Refunding, Hoosier Energy, Meron Project, 7.10%, 04/01/19 .............. 811,058
250,000 Twin Lakes School Building Improvement Corp., First Mortgage, Pre-Refunded, 7.50%, 01/15/08 ..... 277,520
1,000,000 b Vincennes University of Indiana, University Revenue, Refunding, Housing and Dining System,
MBIA Insured, 5.125%, 10/01/21 ................................................................. 916,760
50,000 Warsaw High School Building Corp., First Mortgage, Pre-Refunded, 8.10%, 01/01/09 ................ 55,529
------------
Total Long Term Investments (Cost $44,372,281)................................................... 47,675,303
------------
c Short Term Investments 1.4%
300,000 Indiana Health Facility Financing Authority, Hospital Revenue, Aces-Methodist Hospital Industry Inc.,
Series B, Weekly VRDN and Put, 3.15%, 09/01/22 ................................................. 300,000
100,000 Indiana Secondary Market, Educational Loans Inc., Student Loan Revenue, Series B, AMBAC Insured,
Weekly VRDN and Put, 3.40%, 12/01/13 ........................................................... 100,000
300,000 Indianapolis EDR, Jewish Federation Campus, Weekly VRDN and Put, 3.30%, 04/01/05 ................ 300,000
------------
Total Short Term Investments (Cost $700,000)..................................................... 700,000
------------
Total Investments (Cost $45,072,281) 98.8%...................................................... 48,375,303
Other Assets and Liabilities, Net 1.2%.......................................................... 573,973
------------
Net Assets 100.0%............................................................................... $48,949,276
============
At February 29, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of $45,072,281 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................... $ 3,370,395
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................... (67,373)
------------
Net unrealized appreciation...................................................................... $ 3,303,022
============
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 Obligation
HFA - Housing Finance Agency/Authority
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
bSee note 1(g) regarding securities purchased on a when-issued basis.
cVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate 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, February 29, 1996
Face Value
Amount Franklin New Jersey Tax-Free Income Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.4%
$ 1,000,000 Allamuchy Town Board of Education, COP, MBIA Insured, 6.00%, 11/01/14.......................... $ 1,039,820
2,000,000 Atlantic City Municipal Utilities Authority Revenue, Water System, Pre-Refunded, 7.75%, 05/01/17 2,297,500
9,500,000 Atlantic County Improvement Authority, Luxury Tax Revenue, Convention Center Project,
MBIA Insured, ETM, 7.40%, 07/01/16............................................................ 11,691,080
Atlantic County Utilities Authority, Solid Waste Revenue, Series 1992,
2,000,000 7.00%, 03/01/08............................................................................... 1,960,360
6,600,000 7.125%, 03/01/16.............................................................................. 6,472,620
2,000,000 Bedminister Township Board of Education, COP, 7.125%, 09/01/10................................. 2,245,160
Bergen County Utility Authority, Solid Waste System Revenue, Series A, FGIC Insured,
1,325,000 6.25%, 06/15/11............................................................................... 1,403,771
100,000 Pre-Refunded, 7.75%, 03/15/13................................................................. 107,840
100,000 Bridgeview Manor Housing Corp. Revenue, Series A, Pre-Refunded, 8.20%, 12/01/08................ 109,378
5,400,000 Cape May County, IPC, Financing Authority Revenue, Refunding, Atlantic City Electric Co., Series A,
MBIA Insured, 6.80%, 03/01/21................................................................. 6,463,800
2,750,000 Carteret Board of Education, COP, MBIA Insured, 6.25%, 04/15/19................................ 2,913,928
1,890,000 Church Street Corp., Keansburg Elderly Housing Mortgage Revenue, Refunding, 5.625%, 03/01/11... 1,847,910
200,000 Delaware River, Joint Toll Bridge System Commission Revenue, Series I-78, Pre-Refunded,
7.875%, 07/01/18.............................................................................. 221,126
1,000,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue,
AMBAC Insured, 7.375%, 01/01/07............................................................... 1,089,040
24,000,000 Delaware River Port Authority Revenue, Pennsylvania and New Jersey, Series 1995, FGIC Insured,
5.50%, 01/01/26............................................................................... 23,549,520
Essex County Improvement Authority GO, Lease Revenue,
6,000,000 Jail and Youth Housing Projects, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/24................. 6,844,920
2,510,000 MBIA Insured, 6.00%, 12/01/17................................................................. 2,614,918
3,000,000 Evesham Municipal Utilities Authority Revenue, Series B, MBIA Insured, 7.00%, 07/01/10......... 3,263,100
3,675,000 Evesham Township Board of Education, COP, FGIC Insured, 6.875%, 09/01/11....................... 4,084,469
Gloucester County Improvement Authority Revenue,
1,000,000 Justice Complex Lease Project, Pre-Refunded, 7.50%, 12/15/10.................................. 1,124,490
275,000 Solid Waste Resource Recovery, SES Gloucester Co., Limited Partnership Project, Series B,
8.375%, 07/01/10.............................................................................. 291,434
2,000,000 Gloucester County, Industrial Refunding, Mobil Oil Refinance Corp. Project, 5.625%, 12/01/28... 1,995,340
4,670,000 Hamilton Township Board of Education, COP, Series B, FSA Insured, 7.00%, 12/15/15.............. 5,167,775
95,000 Hillsborough Township School District, Board of Education, COP, Lease Purchase Agreement,
MBIA Insured, Pre-Refunded, 8.00%, 08/15/08................................................... 98,908
2,600,000 Hoboken Union City, Weehawken Sewerage Authority Revenue, MBIA Insured, Pre-Refunded,
7.25%, 08/01/19................................................................................ 2,911,844
1,750,000 Howell Township, GO, Refunding, FGIC Insured, 6.80%, 01/01/14.................................. 1,913,048
100,000 Howell Township Municipal Utilities Authority Revenue, Monmouth County, BIG Insured,
Pre-Refunded, 7.375%, 01/01/14................................................................ 109,699
2,550,000 Hudson County Correctional Facility, COP, BIG Insured, Pre-Refunded, 7.60%, 12/01/21........... 2,842,026
2,000,000 Hudson County Improvement Authorities Facilities Lease Revenue, Hudson County Lease Project,
FGIC Insured, 6.00%, 12/01/25................................................................. 2,064,240
1,000,000 Jersey City Sewer Authority Revenue, Refunding, FGIC Insured, Pre-Refunded, 7.00%, 01/01/19.... 1,043,050
Lacey Municipal Utilities Authority, Water Revenue, MBIA Insured,
1,225,000 6.125%, 12/01/14.............................................................................. 1,297,557
2,500,000 6.10%, 12/01/23............................................................................... 2,613,600
100,000 Lumberton Township School District, COP, Fiscal Funding, New Jersey, Inc., MBIA Insured,
Pre-Refunded, 7.70%, 10/01/13................................................................. 110,760
Mercer County Improvement Authority Revenue,
2,050,000 Guaranteed Social Services, School District, Pre-Refunded, 7.20%, 12/15/12.................... 2,263,118
2,500,000 Library Systems, Series A, 6.00%, 12/01/14.................................................... 2,589,200
Middlesex County COP, MBIA Insured,
$ 1,500,000 6.00%, 08/15/14............................................................................... $ 1,573,215
2,300,000 6.125%, 02/15/19.............................................................................. 2,423,050
2,000,000 Middlesex County Improvement Authority Revenue, Guaranteed Educational Services,
Commission Project, 6.00%, 09/15/14............................................................ 2,103,560
2,100,000 Middlesex County Utilities Authority, Sewer Revenue, Refunding, Series A, FGIC Insured,
5.375%, 09/15/15.............................................................................. 2,083,662
100,000 Monmouth County Improvement Authority Revenue, Wall and Keyport Projects, BIG Insured,
Pre-Refunded, 7.90%, 07/15/13................................................................. 109,469
New Jersey EDA,
5,000,000 Clara Maas Health Systems, FSA Insured, 5.00%, 07/01/25....................................... 4,603,600
2,455,000 Absecon Manor Nursing Facility, Refunding, FHA Insured, 5.75%, 11/01/27....................... 2,423,060
4,010,000 Series N, 6.90%, 12/01/11..................................................................... 4,372,464
450,000 Series P, 6.90%, 12/01/11..................................................................... 490,676
575,000 First Mortgage Gross Revenue, Mega Care, Inc. Project, Pre-Refunded, 8.625%, 08/01/07......... 625,157
6,370,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series A, 6.20%, 12/01/10................ 6,406,182
3,375,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.10%, 12/01/04................ 3,429,844
2,720,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.20%, 12/01/07................ 2,735,450
550,000 Jersey Central Power and Light, 7.10%, 07/01/15............................................... 598,158
3,000,000 Market Transition Facilities Revenue, Senior Lien, Series A, MBIA Insured, 5.875%, 07/01/11... 3,137,940
6,000,000 Middlesex Water Co. Project, Water Facilities Revenue, 7.25%, 07/01/21........................ 6,562,200
8,200,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series A, AMBAC Insured,
6.25%, 08/01/24............................................................................... 8,645,014
7,810,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series B, 7.25%, 03/01/21. 8,251,265
1,625,000 Performing Arts Center Site Revenue, 6.75%, 06/15/12.......................................... 1,742,731
1,640,000 School Revenue, Blair Academy, 1995 Project, Series A, 5.85%, 09/01/16........................ 1,662,616
385,000 Series M, 7.90%, 12/01/08..................................................................... 405,667
725,000 Series MM, 7.50%, 12/01/19.................................................................... 741,363
7,440,000 Terminal GATX Corp. Project, 6.65%, 09/01/22.................................................. 7,889,822
New Jersey Health Care Facilities Financing Authority Revenue,
2,500,000 Atlantic City Medical Center, Series C, 6.80%, 07/01/11.......................................... 2,676,275
1,000,000 Berkeley Heights Convalescent Hospital, AMBAC Insured, 5.00%, 07/01/26........................ 915,560
3,380,000 Beth Israel Hospital Association Passaic, 7.80%, 07/01/04........................................ 3,650,941
1,000,000 Beth Israel Hospital Association Passaic, Refunding, 7.875%, 07/01/07............................ 1,082,400
9,540,000 Cathedral Health, Series A, FHA Insured, 7.25%, 02/15/10......................................... 10,390,962
2,020,000 Cathedral Health, Series A, FHA Insured, 7.25%, 02/15/21......................................... 2,184,670
1,000,000 Clara Maas Medical Center, Series B, Pre-Refunded, 7.30%, 07/01/09............................... 1,115,840
2,435,000 Clara Maas Medical Center, Series B, Pre-Refunded, 7.25%, 07/01/19............................... 2,713,321
100,000 Community Memorial Hospital Association, Series C, 8.00%, 07/01/14............................... 108,687
5,445,000 East Orange General Hospital, Series B, 7.75%, 07/01/20.......................................... 5,792,445
4,890,000 Elizabeth General Medical Center, Series C, 7.375%, 07/01/15..................................... 5,131,468
3,150,000 Franciscan St. Mary's Hospital, 5.875%, 07/01/12................................................. 3,061,202
2,400,000 Hackensack Medical Center, FGIC Insured, 6.25%, 07/01/21......................................... 2,478,480
4,000,000 Holy Name Hospital, Series B, AMBAC Insured, 7.00%, 07/01/08..................................... 4,416,200
230,000 Kennedy Memorial Hospitals-University Medical Center, Inc., Series D, 7.875%, 07/01/09........... 245,005
4,900,000 Monmouth Medical Center, Series C, CGIC Insured, 6.25%, 07/01/16................................. 5,225,801
8,250,000 Monmouth Medical Center, Series C, CGIC Insured, 6.25%, 07/01/24................................. 8,764,965
1,800,000 Morristown Memorial Hospital, Series C, 7.125%, 07/01/08......................................... 1,935,216
4,150,000 Newcomb Medical Center, Series A, 7.875%, 07/01/03............................................... 4,521,882
130,000 New Jersey Geriatric Center of Workmen's Circle, Inc., Series A, FHA Mortgage Insured,
8.00%, 02/01/28............................................................................... 140,174
8,500,000 Overlook Hospital Association, Series E, FGIC Insured, 6.70%, 07/01/13........................... 8,894,740
3,565,000 Pascack Valley Hospital, 6.90%, 07/01/21......................................................... 3,669,561
$ 10,000,000 Riverview Medical Center, 5.875%, 07/01/16 ...................................................... $ 10,283,500
100,000 St. Claire's Riverside Medical Center, Series D, BIG Insured, Pre-Refunded, 7.75%, 07/01/14...... 107,347
1,940,000 Wayne General Hospital, Series B, 5.75%, 08/01/11................................................ 1,971,758
1,000,000 Wayne General Hospital, Series B, 5.875%, 08/01/18............................................ 1,005,730
475,000 Zurbrugg Memorial Hospital Issue, Series C, 8.50%, 07/01/12................................... 499,838
1,850,000 New Jersey State Building Authority Revenue, Refunding, 7.20%, 06/15/13........................ 1,998,500
New Jersey State Educational Facilities Authority Revenue,
4,000,000 Institute of Technology, Series A, MBIA Insured, 6.00%, 07/01/15.............................. 4,187,640
2,000,000 Jersey State College, Series D, MBIA Insured, 6.125%, 07/01/22................................ 2,081,020
2,500,000 New Jersey Institute of Technology, Series 95-E, MBIA Insured, 5.375%, 07/01/25............... 2,405,300
2,000,000 Princeton University, Series A, 5.875%, 07/01/18.............................................. 2,061,480
2,760,000 bPrinceton University, Series C, 5.25%, 07/01/25............................................ 2,656,417
500,000 Ramapo College, Series C, BIG Insured, Pre-Refunded, 7.70%, 07/01/13.......................... 551,480
3,000,000 Rider College, Series D, AMBAC Insured, 6.20%, 07/01/17....................................... 3,175,380
1,000,000 Seton Hall University Project, Series C, BIG Insured, 6.85%, 07/01/19......................... 1,086,020
4,400,000 Seton Hall University Project, Series D, 7.00%, 07/01/21...................................... 4,766,388
4,780,000 Trenton State College, Series B, AMBAC Insured, 6.125%, 07/01/19.............................. 5,020,386
7,845,000 Trenton State College, Series B, AMBAC Insured, 6.125%, 07/01/24.............................. 8,212,695
New Jersey State Highway Authority, Garden State Parkway, Senior Parkway Revenue,
5,000,000 6.20%, 01/01/10............................................................................... 5,519,350
2,500,000 6.25%, 01/01/14............................................................................... 2,681,625
2,900,000 6.00%, 01/01/16............................................................................... 2,991,495
1,540,000 5.75%, 01/01/19............................................................................... 1,554,245
New Jersey State Housing and Mortgage Finance Agency,
810,000 Home Buyer Revenue, Series B, MBIA Insured, 7.90%, 10/01/22................................... 853,659
5,210,000 Home Buyer Revenue, Series D, MBIA Insured, 7.70%, 10/01/29................................... 5,478,784
5,000,000 Home Buyer Revenue, Series J, MBIA Insured, 6.20%, 10/01/25................................... 5,093,400
1,250,000 Home Buyer Revenue, Series N, MBIA Insured, 6.00%, 04/01/16................................... 1,275,013
4,000,000 Home Buyer Revenue, Series N, MBIA Insured, 6.35%, 10/01/27................................... 4,075,240
40,000 Home Mortgage Purchase Revenue, Series A, MBIA Insured, 7.875%, 10/01/17...................... 41,965
2,215,000 MFHR, Montclarion Project, Series J, FHA Insured, 7.70%, 11/01/29............................. 2,322,405
5,000,000 MFHR, Refunding, Series A, AMBAC Insured, 6.00%, 11/01/14..................................... 5,093,150
10,000,000 MFHR, Refunding, Series A, AMBAC Insured, 6.05%, 11/01/20..................................... 10,185,800
450,000 MFHR, Regency Park Project, Series H, 7.70%, 11/01/30......................................... 469,116
5,000,000 Section 8, Refunding, Series 1, 6.70%, 11/01/28............................................... 5,226,200
12,400,000 Section 8, Refunding, Series A, 6.95%, 11/01/13............................................... 13,027,316
4,670,000 Wastewater Treatment Trust Revenue, Series B, 7.00%, 07/01/11................................. 5,056,629
New Jersey State Sports and Expo Authority, State Contract,
6,800,000 Refunding, Series A, MBIA Insured, 6.25%, 07/01/20............................................ 7,150,132
8,000,000 Series A, MBIA Insured, 6.60%, 07/01/15....................................................... 8,738,960
3,250,000 Newark Board of Education, MBIA Insured, 5.875%, 12/15/14...................................... 3,345,128
1,000,000 North Bergen Township Municipal Utility Authority Sewer Revenue, FGIC Insured, Pre-Refunded,
7.625%, 12/15/19.............................................................................. 1,087,400
2,000,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Series A, Saipan
Harbor Improvement, 6.85%, 10/01/25........................................................... 2,012,540
100,000 Ocean Township Municipal Utilities Authority Revenue, Refunding, MBIA Insured, Pre-Refunded,
7.875%, 08/01/15.............................................................................. 111,105
Passaic Valley Sewerage Commissioners, Sewer System,
6,500,000 Series C, AMBAC Insured, Pre-Refunded, 7.10%, 12/01/20........................................ 7,001,800
7,400,000 Series D, AMBAC Insured, 5.80%, 12/01/18...................................................... 7,500,418
5,000,000 Series D, AMBAC Insured, 5.875%, 12/01/22..................................................... 5,076,200
$ 1,000,000 Pine Hill Borough School District COP, Fiscal Funding of New Jersey, Inc., BIG Insured,
Pre-Refunded, 7.60%, 12/30/09................................................................. $ 1,061,890
1,000,000 Piscataway Township School District COP, MBIA Insured, Pre-Refunded, 7.50%, 06/15/09........... 1,106,430
Port Authority of New York and New Jersey,
5,000,000 Delta Airlines, Inc., Special Project, Series 1R, 6.95%, 06/01/08............................. 5,380,400
500,000 Consolidated 62nd Series, 8.00%, 12/01/23..................................................... 513,440
500,000 Consolidated 64th Series, Pre-Refunded, 7.25%, 04/01/14....................................... 511,455
3,875,000 Consolidated 65th Series, 7.00%, 09/01/24..................................................... 4,001,325
2,500,000 Consolidated 67th Series, AMBAC Insured, 6.875%, 01/01/25..................................... 2,687,125
750,000 Consolidated 67th Series, AMBAC Insured, 6.875%, 01/01/25..................................... 797,790
2,500,000 Consolidated 71st Series, 6.50%, 01/15/26..................................................... 2,610,225
12,000,000 Consolidated 72nd Series, Pre-Refunded, 7.35%, 10/01/27....................................... 14,091,000
1,000,000 Consolidated 74th Series, 6.75%, 08/01/26..................................................... 1,075,820
1,125,000 Consolidated 84th Series, 6.00%, 01/15/28..................................................... 1,146,555
2,000,000 Consolidated 94th Series, 6.00%, 12/01/16..................................................... 2,044,260
5,000,000 Consolidated 94th Series, 6.00%, 06/01/17..................................................... 5,110,650
5,000,000 Consolidated 102nd Series, MBIA Insured, 5.75%, 10/15/23...................................... 5,026,600
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue,
6,500,000 Series A, Pre-Refunded, 7.90%, 07/01/07....................................................... 7,228,715
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
275,000 Series P, Pre-Refunded, 8.125%, 07/01/13...................................................... 306,867
8,000,000 Series Q, Pre-Refunded, 8.00%, 07/01/18....................................................... 9,357,840
2,360,000 Series R, 7.25%, 07/01/02..................................................................... 2,650,068
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
350,000 7.90%, 07/01/07............................................................................... 379,726
5,500,000 7.75%, 07/01/08............................................................................... 5,949,185
250,000 7.50%, 07/01/09............................................................................... 269,063
Puerto Rico Commonwealth Public Improvement, GO,
5,000,000 6.45%, 07/01/17............................................................................... 5,354,100
100,000 Series A, Pre-Refunded, 7.75%, 07/01/13....................................................... 110,880
1,000,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04.......... 1,123,700
Puerto Rico Electric Power Authority Revenue,
590,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08....................................... 656,747
2,355,000 Refunding, Series 1989-N, 7.125%, 07/01/14.................................................... 2,561,086
10,535,000 Refunding, Series T, 6.00%, 07/01/16.......................................................... 10,638,770
4,500,000 Refunding, Series U, 6.00%, 07/01/14.......................................................... 4,572,180
5,000,000 Series X, 6.125%, 07/01/21.................................................................... 5,116,300
Puerto Rico HFC Revenue,
125,000 FHA Mortgage Insured, Section 8 Assisted, Sixth Portfolio, Pre-Refunded, 7.75%, 12/01/26...... 153,056
5,000,000 MF, Portfolio A, Series 1, 7.50%, 04/01/22.................................................... 5,278,800
1,345,000 SFM, Portfolio 1, Series A, GNMA Secured, 7.80%, 10/15/21..................................... 1,409,977
1,325,000 SFM, Portfolio 1, Series B, GNMA Secured, 7.65%, 10/15/22..................................... 1,403,202
2,000,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA, Baxter Travenol Labs., Series A,
8.00%, 09/01/12............................................................................... 2,213,760
100,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08........................... 109,114
785,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
7.25%, 07/01/17............................................................................... 858,138
4,250,000 Rutgers State University, Series A, 6.50%, 05/01/18............................................ 4,564,500
5,000,000 Salem County IPC, Financing Authority Revenue, Refunding, Public Services, Electric and Gas Co.,
Series D, MBIA Insured, 6.55%, 10/01/29....................................................... 5,439,050
1,970,000 Sayreville HDC, Mortgage Revenue, Refunding, Lakeview, Section 8, FHA Insured, 7.75%, 08/01/24. 2,025,219
1,000,000 Stony Brook Regional Sewerage Authority Revenue, Series 1989-A, Pre-Refunded, 7.40%, 12/01/09.. 1,128,540
$ 100,000 Sussex County Municipal Utilities Authority, Solid Waste Revenue, Series A, BIG Insured,
Pre-Refunded, 7.875%, 12/01/13................................................................ $ 112,160
University of Medicine and Dentistry Revenue, Series C, Pre-Refunded,
750,000 7.20%, 12/01/09............................................................................... 839,873
2,725,000 7.20%, 12/01/19............................................................................... 3,051,537
1,200,000 Warren Hills Regional School District COP, BIG Insured, Pre-Refunded, 7.375%, 12/15/09......... 1,323,156
1,000,000 West Morris Regional High School District COP, BIG Insured, Pre-Refunded, 7.50%, 03/15/09...... 1,093,160
100,000 Winslow Township GO, Camden County, Refunding, AMBAC Insured, Pre-Refunded, 7.80%, 07/01/18.... 109,718
------------
Total Long Term Investments (Cost $525,154,849)................................................ 560,381,415
------------
c Short Term Investments 0.6%
500,000 New Jersey EDA, El Dorado Terminals, Series 1984-B, Daily VRDN and Put, 3.10%, 05/01/03........ 500,000
2,600,000 New Jersey Sports and Exposition Authority, State Contract, Series C, MBIA Insured, Weekly VRDN
and Put, 3.10%, 09/01/24...................................................................... 2,600,000
------------
Total Short Term Investments (Cost $3,100,000)................................................. 3,100,000
------------
Total Investments (Cost $528,254,849)99.0%..................................................... 563,481,415
Other Assets and Liabilities, Net1.0%.......................................................... 5,923,982
------------
Net Assets100.0%............................................................................... $569,405,397
============
At February 29, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of $528,254,849 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 35,592,884
Aggregate gross unrealized depreciation for all investments in which there was an
excess tax cost over value..................................................................... (366,318)
------------
Net unrealized appreciation.................................................................... $ 35,226,566
============
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
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
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
SFM - Single Family Mortgage
bSee Note 1(g) regarding securities issued on a when-issued basis.
cVariable 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 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, February 29, 1996
Face Value
Amount Franklin Oregon Tax-Free Income Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 97.8%
$ 750,000 Albany Sewer Revenue, Series A, Pre-Refunded, 7.00%, 02/01/12.................................. $ 838,658
1,000,000 Albany Water Revenue, Second Lien, Pre-Refunded, 7.25%, 08/01/09............................... 1,102,460
2,000,000 Bay Area Health District Hospital Facility Authority, Health Facilities Revenue, Evergreen Court Project,
7.25%, 10/01/14............................................................................... 2,155,720
Bear Creek Valley Sanitary Authority GO,
50,000 Series 1987, 7.70%, 05/01/07................................................................. 52,403
100,000 Series 1988, 7.30%, 06/01/05................................................................. 106,839
105,000 Series 1988, 7.35%, 06/01/06................................................................. 112,292
115,000 Series 1988, 7.40%, 06/01/07................................................................. 123,209
125,000 Series 1988, 7.40%, 06/01/08................................................................. 133,923
1,125,000 Benton County, Oregon Hospital Facilities Authority, Good Samaritan Hospital, Corvallis,
6.25%, 10/01/09............................................................................... 1,149,615
1,000,000 Central Lincoln Utility District Electric Revenue, Pre-Refunded, 6.75%, 01/01/11............... 1,105,590
City of Bend, Urban Renewal Agency Tax Revenue, Series A,
600,000 6.85%, 09/01/06.............................................................................. 621,552
750,000 7.00%, 09/01/11.............................................................................. 776,708
4,000,000 City of Oregon, Sewer Revenue, Series 1994, 6.875%, 10/01/19................................... 4,353,800
4,945,000 Clackamas County Health Facilities Authority Hospital Revenue, Refunding, Adventist Health,
Series A, MBIA Insured, 6.35%, 03/01/09....................................................... 5,315,034
Clackamas County, Hospital Facilities Authority Revenue,
1,250,000 Elderly Housing, 7.00%, 11/15/11.............................................................. 1,311,238
2,990,000 GNMA Secured, Jennings Lodge Project, 7.50%, 10/20/31......................................... 3,279,970
1,635,000 Kaiser Permanente, Series A, 6.50%, 04/01/11.................................................. 1,728,653
4,950,000 Kaiser Permanente, Series A, 6.25%, 04/01/21.................................................. 5,245,020
4,250,000 Refunding, Gross Willamette Falls, 5.75%, 04/01/15............................................ 4,064,998
110,000 Sisters of Providence Project, 8.125%, 10/01/07............................................... 116,596
4,000,000 Clackamas County USD No. 115, AMBAC Insured, 6.15%, 06/01/14................................... 4,236,400
1,125,000 Clairmont Water District Revenue, 6.50%, 02/01/12.............................................. 1,173,206
50,000 Coos Bay Waste Water GO, MBIA Insured, Pre-Refunded, 7.50%, 09/01/06........................... 52,914
Deschutes County Hospital Facilities Authority, Hospital Revenue, St. Charles Medical Center,
390,000 Pre-Refunded, 7.50%, 01/01/08................................................................. 413,876
125,000 Pre-Refunded, 7.60%, 01/01/13................................................................. 132,753
3,000,000 6.00%, 01/01/13............................................................................... 3,108,450
1,950,000 Douglas County, Hospital Facilities Authority Revenue, Catholic Health Facilities, Series B,
MBIA Insured, 6.00%, 11/15/15................................................................. 2,035,859
Emerald People's Utility District, Electric System Revenue, Refunding, AMBAC Insured,
100,000 Series A, Pre-Refunded, 7.20%, 11/01/06....................................................... 102,164
55,000 Series A, Pre-Refunded, 7.35%, 11/01/13....................................................... 56,465
195,000 Series B, 7.35%, 11/01/13..................................................................... 198,812
500,000 Series B, Pre-Refunded, 7.30%, 11/01/11....................................................... 554,660
Eugene Electric Utility System Revenue,
125,000 Series 1987, Pre-Refunded, 7.90%, 08/01/11.................................................... 129,886
1,145,000 Series 1991, 6.65%, 08/01/08.................................................................. 1,231,768
615,000 Series 1991, 6.65%, 08/01/09.................................................................. 658,604
655,000 Series 1991, 6.65%, 08/01/10.................................................................. 698,898
700,000 Series 1991, 6.70%, 08/01/11.................................................................. 745,157
840,000 Eugene Trojan Nuclear Project Revenue, Refunding, 5.90%, 09/01/09.............................. 841,058
70,000 Florence Improvement GO, Lane County, Pre-Refunded, 8.50%, 10/01/07............................ 75,138
Guam Airport Authority Revenue, Series B,
750,000 6.60%, 10/01/10............................................................................... 760,560
1,900,000 6.70%, 10/01/23............................................................................... 1,919,893
825,000 Guam Power Authority, Series A, 6.30%, 10/01/12................................................ 833,646
1,000,000 Hermiston GO, AMBAC Insured, 6.00%, 08/01/15................................................... 1,044,850
$ 1,280,000 Hillsboro Hospital Facility Authority, First Mortgage Revenue, Refunding, First Mortgage-Tuality
Community, Pre-Refunded, 7.60%, 10/01/12...................................................... $ 1,336,397
500,000 Jefferson County School District No. 509J, GO, FSA Insured, 5.50%, 06/15/13.................... 504,640
Klamath Falls Intercommunity Hospital Revenue, Merle West Medical Center Project,
1,500,000 7.00%, 06/01/02............................................................................... 1,617,285
2,310,000 7.25%, 06/01/06............................................................................... 2,491,589
1,000,000 Lane County COP, Fairground Project, 7.00%, 08/01/04........................................... 1,069,920
11,575,000 Lane County PCR, Refunding, Weyerhaeuser Co. Project, 6.50%, 07/01/09.......................... 12,509,103
2,425,000 Lebanon Wastewater Revenue, Refunding, 5.875%, 06/01/20........................................ 2,420,077
1,250,000 Marion County Housing Authority Revenue, Elliott Residence Project, GNMA Secured,
7.50%, 10/20/25................................................................................ 1,381,788
495,000 Marion County Solid Waste and Electric Revenue, Ogden Martin System, Marion Inc. Project,
AMBAC Insured, 7.70%, 10/01/09................................................................ 515,117
1,000,000 Marion County Union High School District No. 7J, 6.00%, 06/01/13............................... 1,056,750
4,475,000 Medford Hospital Facilities Authority Revenue, Gross Rogue Valley Health Services, MBIA Insured,
6.75%, 12/01/20............................................................................... 4,840,563
Metropolitan Service District, Convention Center GO,
4,865,000 Series A, 6.25%, 01/01/13..................................................................... 5,207,058
115,000 Unlimited Tax, Pre-Refunded, 7.60%, 12/01/10.................................................. 122,777
80,000 Unlimited Tax, Pre-Refunded, 7.65%, 12/01/11.................................................. 85,477
85,000 Unlimited Tax, Pre-Refunded, 7.65%, 12/01/12.................................................. 90,819
2,000,000 Waste Disposal System, Revenue Bonds, Pre-Refunded, 7.30%, 01/01/11........................... 2,254,580
175,000 Multnomah County School District COP, Series A, Pre-Refunded, 6.90%, 08/01/09.................. 187,558
3,500,000 Northern Mariana Islands Commonwealth Ports Authority Revenue, Series A, Port of Saipan Harbor,
6.85%, 10/01/25............................................................................... 3,521,945
Oak Lodge Water District GO, AMBAC Insured,
215,000 7.40%, 12/01/08............................................................................... 255,001
215,000 7.50%, 12/01/09............................................................................... 254,831
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............................................................................... 1,531,260
1,675,000 GNMA Secured, 7.00%, 06/01/12................................................................. 1,734,848
1,610,000 Oregon State Bond Bank Revenue, EDR, Series 1991-B, Pre-Refunded, 6.80%, 01/01/11.............. 1,762,387
Oregon State Department of General Services, COP,
750,000 Real Property Financing Program, Series A, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/15....... 864,405
4,110,000 Real Property Financing Program, Series A, MBIA Insured, Pre-Refunded, 7.20%, 01/15/15........ 4,622,805
2,000,000 Refunding, Series D, MBIA Insured, 5.80%, 03/01/15............................................ 2,021,700
150,000 Series B, MBIA Insured, Pre-Refunded, 7.20%, 01/15/15......................................... 168,716
3,150,000 Series F, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/15........................................ 3,630,501
750,000 Series G, AMBAC Insured, 6.25%, 09/01/15...................................................... 790,650
7,000,000 Oregon State EDR, Georgia-Pacific Corp., Series CLVII, 6.35%, 08/01/25......................... 6,871,480
Oregon State Elderly and Disabled Housing Authority,
1,000,000 Series A, 6.00%, 08/01/15..................................................................... 1,023,150
500,000 Series A, 6.00%, 08/01/21..................................................................... 507,390
1,470,000 Series B, 6.10%, 08/01/17..................................................................... 1,507,456
2,100,000 Series B, 6.25%, 08/01/23..................................................................... 2,238,831
1,155,000 Series B, 6.375%, 08/01/24.................................................................... 1,241,406
6,000,000 Series C, 6.50%, 08/01/22..................................................................... 6,523,440
635,000 Oregon State Elderly Housing GO, Series A, 7.125%, 08/01/30.................................... 693,318
Oregon State GO, Board of Higher Education,
750,000 Series 1991, 6.50%, 10/01/17.................................................................. 802,208
60,000 Series A, Pre-Refunded, 8.125%, 10/01/17...................................................... 64,111
300,000 Series A, Pre-Refunded, 7.50%, 05/01/18....................................................... 322,743
$ 400,000 Oregon State GO, Department of Energy, Series B, 6.80%, 01/01/17............................... $ 424,636
Oregon State GO, Department of Transportation Revenue, Regional Light Rail, Federal Westside
Project, MBIA Insured,
2,000,000 6.10%, 06/01/07............................................................................... 2,193,460
2,500,000 6.20%, 06/01/08............................................................................... 2,735,375
1,750,000 6.25%, 06/01/09............................................................................... 1,908,183
1,000,000 Oregon State GO, Series B, 6.875%, 12/01/13.................................................... 1,081,950
5,475,000 Oregon State HFA, SFMR Program, Series 1991-A, 7.20%, 07/01/15................................. 5,786,035
1,445,000 Oregon State Higher Education GO, Series C, Pre-Refunded, 7.25%, 10/15/18...................... 1,565,845
Oregon State Housing and Community Service Department, Finance Housing Revenue,
6,710,000 Multi-Unit, Series A, 6.80%, 07/01/13......................................................... 7,023,558
180,000 Multi-Unit, Series C, 6.85%, 07/01/22......................................................... 187,855
850,000 SFM, Series A, 5.75%, 07/01/12................................................................ 857,242
3,250,000 SFM, Series A, 6.35%, 07/01/14................................................................ 3,374,248
1,500,000 SFM, Series A, 6.40%, 07/01/18................................................................ 1,539,705
3,100,000 SFM, Series A, 6.45%, 07/01/26................................................................ 3,146,903
12,000,000 SFM, Series B, 6.875%, 07/01/28............................................................... 12,726,960
2,500,000 SFM, Series C, 6.20%, 07/01/15................................................................ 2,528,100
1,200,000 SFM, Series C, 6.40%, 07/01/26................................................................ 1,213,344
1,750,000 SFM, Series D, 6.80%, 07/01/27................................................................ 1,843,415
500,000 SFM, Series E, 7.00%, 07/01/09................................................................ 527,760
1,000,000 SFM, Series E, 5.80%, 07/01/16................................................................ 986,980
2,915,000 SFM, Series E, 6.75%, 07/01/16................................................................ 2,997,524
2,000,000 SFM, Series E, 7.15%, 07/01/25................................................................ 2,124,200
2,755,000 SFM, Series F, 7.00%, 07/01/22................................................................ 2,879,498
645,000 SFM, Series G, 6.80%, 07/01/22................................................................ 679,817
Oregon State Housing, Educational and Cultural Facility Authority,
10,500,000 Lewis and Clark College Project, Series A, 6.125%,10/01/24.................................... 10,994,550
2,100,000 Lewis and Clark College Project, Series A, MBIA Insured, Pre-Refunded, 7.125%, 07/01/20....... 2,379,867
700,000 Reed College Project, 6.75%, 07/01/11......................................................... 790,132
1,250,000 Reed College Project, Series A, 6.75%, 07/01/21............................................... 1,414,138
Oregon State Veteran's Welfare GO,
2,500,000 Series 73-A, 7.00%, 12/01/11.................................................................. 2,721,000
875,000 Series 75, 5.85%, 10/01/15.................................................................... 903,945
500,000 Series 75, 5.875%, 10/01/18................................................................... 510,715
2,050,000 Series 75, 6.00%, 04/01/27.................................................................... 2,152,910
750,000 Port of Astoria, GO, MBIA Insured, 6.60%, 09/01/11............................................. 797,003
2,200,000 Port of Morrow PCR, Idaho Power Co., Boardman Project, 7.25%, 08/01/08......................... 2,224,706
500,000 Port of Morrow Revenue, Refunding, Pre-Refunded, 8.00%, 12/01/11............................... 552,715
4,000,000 Port of Portland Special Obligation Revenue, Delta Airlines, Inc. Project, 6.20%, 09/01/22..... 4,002,560
1,500,000 Port of St. Helens PCR, Refunding, Boise Cascade Corp. Project, 7.375%, 11/01/04............... 1,564,020
320,000 Port of Umpqua PCR, International Paper Co. Project, Series A, 6.60%, 03/15/05................. 331,338
2,000,000 Portland COP, Refunding, PBA, Series A, Pre-Refunded, 7.25%, 04/01/08.......................... 2,186,060
125,000 Portland EDR, Public Broadcasting, Series A, 7.20%, 06/01/09................................... 125,500
Portland Hospital Facilities Authority Hospital Revenue, Legacy Health System,
10,500,000 Series A, AMBAC Insured, 6.70%, 05/01/21...................................................... 11,479,335
10,475,000 Series B, AMBAC Insured, 6.70%, 05/01/21...................................................... 11,452,003
1,000,000 Portland Housing Authority Revenue, Series 1990, 7.10%, 07/01/15............................... 1,060,900
635,000 Portland Hydroelectric Power Revenue, Bull Run Project, Series C, 7.00%, 10/01/16.............. 635,083
Portland International Airport,
1,500,000 Series 7-A, MBIA Insured, 6.75%, 07/01/09..................................................... 1,637,130
3,000,000 Series 7-B, MBIA Insured, 7.10%, 07/01/21..................................................... 3,308,070
500,000 Series 10, 5.75%, 07/01/25.................................................................... 505,760
$ 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................................................... $ 3,182,447
170,000 Portland Parking Revenue, Pre-Refunded, 8.625%, 10/01/12....................................... 186,012
Portland Sewer System Revenue,
5,000,000 Series 1990, Pre-Refunded, 7.125%, 03/01/10................................................... 5,330,350
14,100,000 Series A, 6.25%, 06/01/15..................................................................... 15,075,015
950,000 Series A, FGIC Insured, 6.00%, 10/01/12....................................................... 1,003,998
Portland Urban Renewal and Redevelopment, Downtown Waterfront,
125,000 Series H, Pre-Refunded, 8.25%, 12/01/07....................................................... 134,701
5,555,000 Refunding, Series A, 6.40%, 06/01/08.......................................................... 6,028,786
1,000,000 Puerto Rico Commonwealth GO, 6.45%, 07/01/17................................................... 1,070,820
75,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Refunding, Series 1985-A,
FSA Insured, Pre-Refunded, 9.00%, 07/01/09.................................................... 99,109
4,000,000 Puerto Rico Commonwealth Highway Authority Revenue, Series Q, Pre-Refunded, 8.00%, 07/01/18.... 4,678,920
35,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03......................... 35,176
2,400,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
7.75%, 07/01/08............................................................................... 2,596,008
Puerto Rico Commonwealth Public Improvement GO, Pre-Refunded,
355,000 7.90%, 07/01/11............................................................................... 371,170
250,000 Series A, 7.75%, 07/01/06..................................................................... 277,200
280,000 Series A, 7.75%, 07/01/13..................................................................... 310,464
Puerto Rico Electric Power Authority Revenue, Refunding, Pre-Refunded,
2,070,000 Series 1980-R, 6.25%, 07/01/17................................................................ 2,127,836
1,500,000 Series 1980-X, 6.00%, 07/01/15................................................................ 1,525,740
190,000 Series 1987-L, 8.40%, 07/01/15................................................................ 205,669
600,000 Series 1988-M, 8.00%, 07/01/08................................................................ 667,878
2,000,000 Series 1989-O, 7.125%, 07/01/14............................................................... 2,200,115
Puerto Rico HFC Revenue,
395,000 FHA Mortgage Insured, Section 8 Assisted, Sixth Portfolio, Pre-Refunded, 7.75%, 12/01/26...... 483,658
725,000 Portfolio No. 1, Series 1988-A, GNMA Secured, 7.80%, 10/15/21................................. 760,025
645,000 Portfolio No. 1, Series 1988-B, GNMA Secured, 7.65%, 10/15/22................................. 683,068
500,000 Puerto Rico Housing Bank and Finance Agency, SFMR, Homeowner's Development Program,
Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15................................................ 565,485
205,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08........................... 223,684
90,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Refunding, Series G,
Pre-Refunded, 7.875%, 07/01/07................................................................ 96,940
1,000,000 Puerto Rico PBA, Guaranteed Revenue, Refunding, Series L, 5.75%, 07/01/16...................... 991,620
1,100,000 Puerto Rico Telephone Authority Revenue, Series 1992-L, 6.125%, 01/01/22....................... 1,122,803
50,000 Redmond Improvement GO, Pre-Refunded, 7.80%, 05/01/17.......................................... 52,411
Roseburg Urban Sanitary Authority, Improvement GO, Unlimited Tax, Douglas County,
60,000 7.40%, 01/01/06............................................................................... 63,595
230,000 7.50%, 01/01/08............................................................................... 244,998
1,250,000 Salem GO, Series A, 5.875%, 01/01/07........................................................... 1,307,188
Salem-Keizer School District No. 24J, FGIC Insured,
4,345,000 6.00%, 06/01/13............................................................................... 4,551,388
4,395,000 6.00%, 06/01/14............................................................................... 4,588,820
280,000 Springfield Improvement GO, Refunding, Pre-Refunded, 8.70%, 06/01/04........................... 283,671
2,765,000 Tillamook People Utilities District, 5.75%, 01/01/28........................................... 2,659,488
1,235,000 Tri-County, Metro Transportation District, COP, 7.50%, 12/15/02................................ 1,264,887
2,500,000 Tri-County, Metro Transportation District, Light Rail Extended, Series A, 6.00%, 07/01/12...... 2,618,725
1,375,000 Umatilla County Hospital Facility Authority, Hospital Revenue, Refunding, Good Shepherd
Community Hospital, 7.50%, 01/01/10........................................................... 1,409,953
5,300,000 Umatilla County USD No. 16R, Pendletron Project, AMBAC Insured, 6.00%, 07/01/14................ 5,610,209
$ 2,000,000 Wasco County Hospital Facility Authority Hospital Revenue, Pre-Refunded, 7.375%, 07/01/00...... $ 2,091,500
100,000 Washington County Building GO, Pre-Refunded, 7.75%, 12/01/06................................... 106,926
Washington County Unified Sewerage Agency, Sewer Revenue,
50,000 Pre-Refunded, 7.90%, 07/01/07................................................................. 52,848
2,700,000 Pre-Refunded, 7.00%, 11/01/09................................................................. 2,967,921
4,000,000 Refunding, Series A, 6.20%, 10/01/10.......................................................... 4,293,640
1,000,000 Refunding, Series A, 6.125%, 10/01/12......................................................... 1,057,610
7,500,000 Sub Lien-Series One, AMBAC Insured, 6.125%, 10/01/12.......................................... 7,932,063
1,000,000 Washington County USD No. 88J, 6.10%, 06/01/12................................................. 1,063,000
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.............................................................................. 4,546,740
700,000 5.75%, 08/01/19............................................................................... 708,148
2,700,000 Pre-Refunded, 7.125%, 08/01/17................................................................ 3,017,763
5,000,000 Yamhill County USD No. 29J, 6.10%, 06/01/11.................................................... 5,358,500
------------
Total Long Term Investments (Cost 345,554,059)................................................. 369,294,097
------------
c Short Term Investments .6%
1,200,000 Medford Oregon Hospital Facilities Authority Revenue, Rogue Valley Health Services, Daily VRDN
and Put, 3.55%, 10/01/16...................................................................... 1,200,000
800,000 Puerto Rico Commonwealth Government Development Bank, Revenue, Weekly VRDN and Put,
2.80%, 12/01/15............................................................................... 800,000
------------
Total Short Term Investments (Cost $2,000,000)................................................. 2,000,000
------------
Total Investments (Cost $347,554,059 98.4%.................................................... 371,294,097
Other Assets and Liabilities, Net 1.6%........................................................ 6,164,807
------------
Net Assets 100.0%............................................................................. $377,458,904
============
At February 29, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $347,554,059 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................................. $ 24,152,053
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (412,015)
------------
Net unrealized appreciation.................................................................... $ 23,740,038
============
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
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
cVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate 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, February 29, 1996
Face Value
Amount Franklin Pennsylvania Tax-Free Income Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 97.9%
$ 2,000,000 b Allegheny County Higher Educational Building Authority University Revenue, Duquesne University
Project AMBAC Insured, 5.00%, 03/01/21........................................................ $ 1,859,920
Allegheny County Hospital Development Authority Revenue, Refunding,
10,000,000 Allegheny General Hospital, Series A, MBIA Insured, 6.25%, 09/01/20........................... 10,416,100
500,000 Divine Providence Hospital, Series 1988-B, 8.75%, 01/01/14.................................... 540,530
5,250,000 Southside Hospital, Pittsburgh, Series 1987, 8.75%, 06/01/10.................................. 5,475,225
1,000,000 Allegheny County IDA, Presbyterian University Hospital, Kaufman Medical Project, Refunding,
Series A, MBIA Insured, 6.80%, 03/01/15....................................................... 1,080,540
3,270,000 Allegheny County RDAR, Refunding, Home Improvement, Series A, 5.90%, 02/01/11.................. 3,269,771
Allegheny County Residential Finance Authority,
2,000,000 Ladies Grand Army Republic Health Facilities, Series G, FHA Secured, 6.35%, 10/01/36.......... 2,015,540
3,870,000 Lemington Home, Series E, 7.125%, 02/01/27.................................................... 3,998,174
20,000 Series D, SFMR, FGIC Insured, 8.90%, 12/01/10................................................. 21,170
1,400,000 Series D, MFMR, FHA Secured, 7.50%, 06/01/33.................................................. 1,457,918
1,415,000 Series H, SFMR, GNMA Secured, 8.00%, 06/01/17................................................. 1,468,572
2,655,000 Series J, GNMA Secured, 7.50%, 06/01/17....................................................... 2,743,597
2,495,000 Series K, GNMA Secured, 7.75%, 12/01/22....................................................... 2,605,404
1,505,000 Series M, SFMR, GNMA Secured, 7.90%, 06/01/11................................................. 1,583,937
810,000 Series T, SFMR, GNMA Secured, 6.95%, 05/01/17................................................. 852,898
1,200,000 Allegheny County Sanitary Authority, Sewer Revenue, Series A, FGIC Insured, Pre-Refunded,
7.45%, 12/01/09............................................................................... 1,322,568
5,000,000 Beaver County Hospital Authority Revenue, Refunding, Medical Center Beaver County, Inc.,
AMBAC Insured, 6.625%, 07/01/10............................................................... 5,443,050
Beaver County IDA, PCR, Refunding,
4,400,000 Beaver Co., Ohio Edison/Pennsylvania Power Project, Series A, 7.15%, 09/01/21................. 4,682,348
6,475,000 Ohio Edison/Pennsylvania Power Project, Series A, 7.75%, 09/01/24............................. 6,925,919
9,695,000 Berks County GO, FGIC Insured, Pre-Refunded, 7.25%, 11/15/20................................... 11,079,349
Berks County Municipal Authority Revenue,
4,000,000 FGIC Insured, Pre-Refunded, 7.00%, 05/15/18................................................... 4,648,880
1,000,000 Highlands Wyomissing Project, Series 1989-A, Pre-Refunded, 7.25%, 10/01/19.................... 1,100,150
2,500,000 Bradford County IDA, Solid Waste Disposal Revenue, International Paper Co., 6.60%, 03/01/19.... 2,592,925
2,000,000 Bucks County Technical School Authority School Revenue, AMBAC Insured, 5.375%, 08/15/15........ 1,951,640
1,400,000 Butler County Hospital Authority, Hospital Revenue, Butler Memorial Hospital, 8.00%, 07/01/16.. 1,443,330
2,000,000 Butler County IDA, PCR, Refunding, Witco Corp. Project, 5.85%, 12/01/23........................ 2,002,720
Cambria County Hospital Development Authority Revenue, Refunding, Conemaugh Valley Memorial
Hospital, Series B,
3,500,000 6.375%, 07/01/18.............................................................................. 3,645,040
1,000,000 Pre-Refunded, 8.875%, 07/01/18................................................................ 1,126,420
Cambria County IDA, PCR, Refunding, Pennsylvania Electric Company Project,
5,000,000 Series A, MBIA Insured, 5.80%, 11/01/20....................................................... 5,020,550
5,000,000 Series B, MBIA Insured, 6.05%, 11/01/25....................................................... 5,062,050
Cambria County IDA, Resource Recovery Revenue, Cambria Cogen Project,
4,000,000 Series F-1, 7.75%, 09/01/19................................................................... 4,183,280
2,715,000 Series F-2, 7.75%, 09/01/19................................................................... 2,839,401
1,000,000 Charleroi Area School Authority Revenue, MBIA Insured, Pre-Refunded, 7.35%, 02/01/14........... 1,090,980
Chartiers Valley Industrial and Commercial Development Authority Revenue, Refunding,
1,000,000 First Mortgage, United Methodist Health Center, Series A, Pre-Refunded, 9.25%, 12/01/08....... 1,152,750
1,315,000 Friendship Village of South Hills Project, 9.25%, 08/15/08.................................... 1,369,717
Dauphin County General Authority Revenue,
750,000 11-15 Terminal School District, Central Fulton, Mandatory Tender 06/01/06, 7.70%, 06/01/26.... 756,330
4,500,000 Hapsco-Western Hospital Project, Series A, MBIA Insured, 6.50%, 07/01/12...................... 4,815,405
5,000,000 Hapsco-Western Hospital Project, Series B, MBIA Insured, 6.25%, 07/01/16...................... 5,216,700
$ 1,000,000 Municipal Pooled Program, Downingtown, Series A, BIG Insured, 7.75%, 01/01/06................. $ 1,042,310
1,000,000 Northeast Bradford School, 7.50%, 06/01/26.................................................... 1,053,650
2,000,000 Delaware County Authority Revenue Bond 1990, Elwyn, Inc. Project, 8.35%, 06/01/15.............. 2,188,700
5,000,000 Delaware County IDAR, PCR, Philadelphia Electric Co. Project, 7.375%, 04/01/21................. 5,409,400
Delaware County IDAR, Resources Recovery, Refunding, Series A,
1,000,000 7.90%, 12/01/05............................................................................... 1,043,240
6,000,000 8.10%, 12/01/13............................................................................... 6,262,200
450,000 Delaware River Joint Toll Bridge System Commission Revenue, Series I-78, Pre-Refunded,
7.875%, 07/01/18.............................................................................. 497,530
7,350,000 Delaware River Port Authority, Pennsylvania and New Jersey Revenue, FGIC Insured, 5.50%, 01/01/26 7,212,041
1,000,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue, Refunding,
AMBAC Insured, 7.375%, 01/01/07............................................................... 1,089,040
400,000 Dubois Hospital Authority Revenue, Refunding, Dubois Regional Medical Center Project,
Series 1987-A, Pre-Refunded, 8.75%, 07/01/11.................................................. 427,636
250,000 Edinboro Municipal Authority Sewer Revenue, Guaranteed, Series 1987, Pre-Refunded,
8.25%,08/01/07................................................................................ 265,603
4,000,000 Elizabeth Forward School District GO, AMBAC Insured, Pre-Refunded, 7.25%, 01/15/10............. 4,422,880
7,000,000 Erie County Hospital Authority Revenue, St. Vincent Health Center Project, Series A, AMBAC
Insured, 6.375%, 07/01/22..................................................................... 7,370,510
2,110,000 Erie County IDAR, Nursing Home-Sarah Reed Center Project, 8.625%, 07/01/14..................... 2,239,427
3,000,000 Erie Higher Educational Building Authority, Gannon University, Series A, Pre-Refunded,
8.50%, 6/01/15................................................................................. 3,448,860
1,850,000 Erie Western Pennsylvania Port Authority GO, 8.625%, 06/15/10.................................. 2,004,568
1,250,000 Fayette County Hospital Authority Revenue, Refunding, Uniontown Hospital Project, 7.625%, 07/01/15 1,289,050
2,000,000 Greensburg Salem School District GO, Westmoreland County, MBIA Insured, Pre-Refunded,
7.10%, 01/01/19............................................................................... 2,163,740
4,000,000 Harrisburg Authority Water Revenue, FGIC Insured, Pre-Refunded, 7.00%, 07/15/15................ 4,501,720
800,000 Harrisburg RDAR, Capital Improvement, Series A, FGIC Insured, 7.875%, 11/02/16................. 832,032
4,000,000 Jeannette County Health Service Authority Hospital Revenue, Jeannette District Memorial Hospital,
8.625%, 01/01/18.............................................................................. 4,429,760
1,250,000 Jeannette County Municipal Authority Sewer Revenue, 7.00%, 07/01/17............................ 1,352,800
1,000,000 Lancaster County Hospital Authority Revenue, Willow Valley Lakes Manor, Series B, Pre-Refunded,
9.00%, 06/01/12............................................................................... 1,105,950
1,000,000 Lancaster County Solid Waste Management Authority, Resource Recovery System Revenue,
Series A, 8.50%, 12/15/10..................................................................... 1,076,470
5,595,000 Lawrence County IDA, PCR, Refunding, Ohio Edison/Pennsylvania Power Co., 7.15%, 03/01/17....... 5,948,660
2,500,000 Lebanon County, Good Samaritan Hospital Authority Revenue, Good Samaritan Hospital Project,
Refunding, 6.00%, 11/15/18.................................................................... 2,352,425
Lehigh County General Purpose Authority Revenue,
1,000,000 Exempt Facility, FGIC Insured, Pre-Refunded, 7.25%, 01/01/10.................................. 1,079,700
3,000,000 Good Shepherd Rehabilitation Hospital, 7.50%, 11/15/21........................................ 3,178,950
1,100,000 Horizon Health Systems, Inc., Pre-Refunded, 8.25%, 07/01/13................................... 1,175,130
5,800,000 Muhlenburg Hospital, Series A, 6.60%, 07/15/22................................................ 5,922,438
1,600,000 Muhlenburg Hospital, Series A, Pre-Refunded, 8.00%, 07/15/01.................................. 1,816,432
1,700,000 Muhlenburg Hospital, Series B, 8.00%, 07/15/01................................................ 1,880,727
1,000,000 Lehigh Valley Hospital, Inc., Series A, MBIA Insured, Refunding, 5.875%, 07/01/15............. 1,013,520
Lehigh County IDA, PCR, Pennsylvania Power & Light Co. Project,
5,000,000 Series A, MBIA Insured, 6.40%, 11/01/21....................................................... 5,320,300
5,550,000 Series A, MBIA Insured, 6.15%, 08/01/29....................................................... 5,775,885
10,000,000 Series B, MBIA Insured, 6.40%, 09/01/29....................................................... 10,619,900
Lower Providence Township, Sewer Authority, Sewer Revenue,
$ 2,000,000 MBIA Insured, 5.25%, 05/01/14................................................................. $ 1,949,600
2,185,000 Pre-Refunded, 6.75%, 05/01/22................................................................. 2,440,383
Luzerne County IDA, Exempt Facilities Revenue, Refunding, Gas and Water Co. Project, Series A,
4,750,000 6.05%, 01/01/19............................................................................... 4,646,070
5,000,000 AMBAC Insured, 7.00%, 12/01/17................................................................ 5,636,100
2,285,000 Meadville GO, Series A, AMBAC Insured, 5.25%, 10/01/25......................................... 2,173,126
5,000,000 Montgomery County GO, Series A, 6.10%, 10/15/25................................................ 5,140,800
Montgomery County Higher Education and Health Authority, Hospital Revenue,
2,500,000 Bryn Mawr Hospital Project, Pre-Refunded, 7.375%, 12/01/19.................................... 2,819,225
500,000 Bryn Mawr Hospital Project, Pre-Refunded, 9.375%, 12/01/19.................................... 556,690
2,375,000 Holy Redeemer Hospital, Series A, AMBAC Insured, 7.625%, 02/01/20............................. 2,556,070
610,000 Jeanes Health System Project, Series 1987, 7.625%, 07/01/17................................... 618,089
10,000,000 Jeanes Health System Project, Series 1990, Pre-Refunded, 8.75%, 07/01/20...................... 11,881,700
1,315,000 Pottstown Memorial Medical Center Project, 7.35%, 11/15/05.................................... 1,438,189
1,750,000 St. Joseph's University, Series 1990, 6.50%, 12/15/22......................................... 1,854,108
5,500,000 St. Joseph's University, Series 1990, Pre-Refunded, 8.30%, 06/01/10........................... 6,423,780
Montgomery County IDAR,
2,530,000 Refunding, PCR, Philadelphia Electric Co., Series A, 7.60%, 04/01/21........................ 2,737,460
10,000,000 Resources Recovery, 7.50%, 01/01/12......................................................... 10,875,000
5,000,000 Montgomery County PCR, Philadelphia Electric Revenue, Series B, MBIA Insured, 6.70%, 12/01/21.. 5,395,350
1,000,000 Moon Township Municipal Authority, Allegheny County Water and Sewer, Series 1990, FGIC Insured,
Pre-Refunded, 7.20%, 12/01/09.................................................................. 1,125,320
600,000 Moon Transportation Authority, Highway Improvement Revenue, 9.50%, 02/01/16.................... 654,504
1,000,000 Neshaminy School District GO, FGIC Insured, 7.00%, 02/15/14.................................... 1,103,030
6,600,000 North Allegheny School District GO, AMBAC Insured, Pre-Refunded, 7.60%, 05/01/13............... 7,433,580
600,000 North Eastern Pennsylvania Hospital Authority Revenue, Wilkes Barre General Hospital, Series B,
Pre-Refunded, 8.375%, 07/01/06................................................................. 647,658
North Eastern Pennsylvania Hospital and Educational Authority Revenue, Refunding,
1,000,000 Kings College Project, Series B, 6.00%, 07/15/11.............................................. 993,960
1,000,000 Kings College Project, Series B, 6.00%, 07/15/18.............................................. 991,400
5,000,000 Wilkes University, 6.125%, 10/01/11........................................................... 4,999,650
2,500,000 Wilkes University, 5.625%, 10/01/18........................................................... 2,340,825
400,000 North Eastern York County Sewer Authority Revenue, Series 1987, Pre-Refunded, 8.75%, 09/01/18.. 429,296
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......................................... 1,262,032
6,100,000 North Hampton County IDA, PCR, Refunding, 6.10%, 07/15/21...................................... 6,332,471
North Hampton County IDAR, Refunding, Moravian Hall Square Project, Series B,
1,000,000 5.55%, 07/01/14............................................................................... 950,290
500,000 5.75%, 07/01/25............................................................................... 472,935
5,000,000 Pennsylvania Convention Center Authority Revenue, Series A, Refunding, 6.60%, 09/01/09......... 5,376,100
Pennsylvania EDA,
3,000,000 MacMillian L.P. Project, 7.60%, 12/01/20...................................................... 3,350,370
5,000,000 Resources Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15........................ 5,374,300
Pennsylvania HFA,
12,500,000 Refunding, Rental Housing, FNMA Insured, 5.75%, 07/01/14...................................... 12,525,625
1,000,000 SFMR, Series 1986-K, 7.375%, 04/01/11......................................................... 1,021,010
2,785,000 SFMR, Series 1987-K, 7.125%, 10/01/13......................................................... 2,843,569
5,655,000 SFMR, Series 1987-K, 6.125%, 10/01/24......................................................... 5,720,315
50,000 SFMR, Series 1987-L, 7.125%, 04/01/14......................................................... 52,215
750,000 SFMR, Series 1987-P, 8.00%, 04/01/16.......................................................... 776,535
1,980,000 SFMR, Series 1988-R, 8.125%, 10/01/19......................................................... 2,050,686
4,885,000 SFMR, Series 1988-U, 7.80%, 10/01/20.......................................................... 5,191,338
$ 1,965,000 SFMR, Series 1989-W, 7.80%, 10/01/20.......................................................... $ 2,071,896
3,570,000 SFMR, Series 1989-Y, 7.45%, 04/01/16.......................................................... 3,759,960
5,715,000 SFMR, Series 1990-29, 7.375%, 10/01/16........................................................ 6,130,995
4,500,000 SFMR, Series 1991-30, 7.30%, 10/01/17......................................................... 4,835,340
5,000,000 SFMR, Series 1991-32, 7.15%, 04/01/15......................................................... 5,282,950
3,000,000 SFMR, Series 1992-34-A, 6.85%, 04/01/16....................................................... 3,127,980
6,000,000 SFMR, Series 1992-34-B, 7.00%, 04/01/24....................................................... 6,235,260
Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue, Philadelphia
Funding Project, FGIC Insured,
6,400,000 7.00%, 06/15/14............................................................................... 7,213,568
8,190,000 6.75%, 06/15/21............................................................................... 9,082,301
12,565,000 Pennsylvania State Financial Authority Revenue, Refunding, 6.60%, 11/01/09..................... 13,690,950
Pennsylvania State Higher Educational Facilities Authority, College and University Revenue,
1,000,000 Allegheny College Project, Series B, 6.125%, 11/01/13......................................... 1,011,880
3,140,000 Allegheny College Project, Series B, 6.00%, 11/01/22.......................................... 3,119,025
5,220,000 Drexel University, 6.375%, 05/01/17........................................................... 5,326,331
2,000,000 Hahnemann University Project, MBIA Insured, 7.20%, 07/01/09................................... 2,167,540
5,350,000 Hahnemann University Project, MBIA Insured, 7.20%, 07/01/19................................... 5,782,762
1,000,000 Lycoming College, Pre-Refunded, 8.375%, 10/01/18.............................................. 1,123,940
1,000,000 Medical College of Pennsylvania, Series A, 8.375%, 03/01/11................................... 1,096,400
3,135,000 Medical College of Pennsylvania, Series A, 7.50%, 03/01/14.................................... 3,261,027
2,250,000 Philadelphia College of Textiles and Science, Pre-Refunded, 7.50%, 02/01/07................... 2,329,425
1,955,000 Temple University, 7.375%, 10/01/06........................................................... 2,032,359
4,505,000 Temple University, 7.40%, 10/01/10............................................................ 4,665,333
1,000,000 Widner University, AMBAC Insured, Pre-Refunded, 7.625%, 10/01/13.............................. 1,090,280
2,220,000 Pennsylvania State Higher Educational Facilities Authority Revenue, State System of Higher
Education, Series L, AMBAC Insured, 6.20%, 06/15/19........................................... 2,307,024
4,250,000 Pennsylvania State IDAR, Economic Revenue, AMBAC Insured, 6.00%, 01/01/12...................... 4,425,568
890,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09................................................................. 943,302
1,000,000 Pennsylvania State Public School, Building Authority, Revenue, Refunding, Shenandoah Valley
School District Project, AMBAC Insured, 7.375%, 09/15/10...................................... 1,098,860
Pennsylvania State Turnpike Commission Revenue,
1,000,000 Series A, Pre-Refunded, 7.875%, 12/01/15...................................................... 1,052,560
1,000,000 Series C, FGIC Insured, Pre-Refunded, 7.625%, 12/01/17........................................ 1,113,780
1,000,000 Series H, FGIC Insured, Pre-Refunded, 7.40%, 12/01/17......................................... 1,150,210
2,500,000 Series K, MBIA Insured, Pre-Refunded, 7.50%, 12/01/12......................................... 2,829,925
1,900,000 Series K, Pre-Refunded, 7.50%, 12/01/19....................................................... 2,150,743
5,000,000 Pennsylvania State University, Refunding, MBIA Insured, 5.50%, 08/15/16........................ 4,909,550
3,000,000 Philadelphia City GO, Refunding, Series 1987-B, Pre-Refunded, 8.125%, 08/01/17................. 3,241,320
Philadelphia Gas Works Revenue,
8,300,000 11th Series A, Pre-Refunded, 7.875%, 07/01/17................................................. 8,917,437
795,000 11th Series C, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/10................................... 851,373
1,000,000 12th Series, MBIA Insured, ETM, 7.00%, 05/15/20............................................... 1,199,220
1,255,000 13th Series, Pre-Refunded, 7.70%, 06/15/11.................................................... 1,467,986
2,745,000 13th Series, Pre-Refunded, 7.70%, 06/15/11.................................................... 3,217,964
10,100,000 14th Series, 6.375%, 07/01/26................................................................. 10,286,951
205,000 Pre-Refunded, AMBAC, 7.25%, 01/01/10.......................................................... 226,263
Philadelphia Hospitals and Higher Educational Facilities Authority, Hospital Revenue,
5,225,000 Albert Einstein Medical Center, 7.30%, 10/01/08............................................... 5,716,411
7,755,000 Albert Einstein Medical Center, 7.625%, 04/01/11.............................................. 8,325,303
1,000,000 Children's Seashore House, Series A, 7.00%, 08/15/17.......................................... 1,043,250
$ 2,600,000 Children's Seashore House, Series B, 7.00%, 08/15/22.......................................... $ 2,712,450
100,000 Presbyterian Medical Center, AMBAC Insured, Pre-Refunded, 8.00%, 07/01/13..................... 107,531
2,750,000 Philadelphia Municipal Authority, Gas Works Lease Revenue, 7.625%, 05/01/14.................... 2,955,755
Philadelphia Municipal Authority Revenue, Refunding,
3,475,000 Lease, Series A, FGIC Insured, 5.625%, 11/15/18............................................... 3,424,300
2,000,000 Lease, Series D, 6.30%, 07/15/17.............................................................. 2,042,300
1,360,000 FGIC Insured, Pre-Refunded, 7.80%, 04/01/18................................................... 1,538,718
300,000 Series 1987, Pre-Refunded, 7.875%, 07/15/17................................................... 322,791
50,000 Philadelphia Parking Authority, Airport Revenue, Refunding, 7.30%, 09/01/03.................... 50,596
Philadelphia RDA, Home Improvement Loan Revenue,
185,000 Series A, FHA Mortgage Insured, 7.375%, 06/01/03.............................................. 188,493
1,000,000 Series B, FHA Mortgage Insured, 6.10%, 06/01/17............................................... 998,700
Philadelphia RDA, Housing Revenue,
295,000 Sub-Series 2-B, 8.625%, 08/01/26.............................................................. 299,561
500,000 Sub-Series 3-B, 8.00%, 08/01/13............................................................... 551,450
5,000,000 Philadelphia School District, Series B, AMBAC Insured, 5.50%, 09/01/15......................... 4,929,400
Philadelphia Water and Sewer Revenue,
6,940,000 Series 10, ETM 09/01/04, 7.35%, 09/01/04...................................................... 7,968,924
11,000,000 Series 16, Pre-Refunded, 7.50%, 08/01/10...................................................... 12,826,770
10,000,000 Philadelphia Water and Wastewater Revenue, Refunding, 5.75%, 06/15/13.......................... 10,027,500
4,000,000 Pittsburgh Urban RDA, Series A, Refunding, AMBAC Insured, 5.65%, 10/01/24...................... 3,916,520
Pittsburgh Urban RDA, SFMR,
3,750,000 Series A, 7.15%, 10/01/27..................................................................... 3,952,125
2,500,000 Series B, GNMA Secured, 7.375%, 12/01/16...................................................... 2,616,275
1,250,000 Pittsburgh Water and Sewer Authority, Crossover System Revenue, Refunding, FGIC Insured,
ETM, 7.25%, 09/01/14.......................................................................... 1,461,738
Pottstown Borough Authority,
4,000,000 Sewer Revenue, 7.70%, 11/01/21................................................................ 4,290,760
1,000,000 Water Revenue, Pre-Refunded, 7.80%, 08/01/10.................................................. 1,064,340
6,195,000 Schuylkill County, IDA, Resource Recovery Revenue, Refunding, Schuylkill Energy Resource, Inc.,
6.50%, 01/01/10............................................................................... 6,329,493
1,500,000 Schuylkill County, RDA Lease Revenue, Series A, FGIC Insured, 7.125%, 06/01/13................. 1,685,325
500,000 Scranton-Lackawanna Health and Welfare Authority, Health Facilities Revenue, Allied Services,
FHA Insured, Series C, Pre-Refunded, 8.125%, 01/15/28......................................... 555,695
750,000 Silver Spring Towership Authority, Sewer Revenue, FGIC Insured, Pre-Refunded, 6.70%, 07/15/21.. 803,888
2,715,000 Southside Area School District, AMBAC Insured, Pre-Refunded, 7.00%, 04/15/10................... 2,886,642
1,975,000 Temple University, System of Higher Education, Pennsylvania Hospital Revenue, Series A,
FHA Insured, Pre-Refunded, 7.25%, 08/01/16..................................................... 2,127,766
100,000 Union County Higher Educational Facilities Financing Authority, University Revenue, Bucknell
University, MBIA Insured, Pre-Refunded, 7.75%, 04/01/07....................................... 104,214
3,000,000 Union School District GO, AMBAC Insured, Pre-Refunded, 7.25%, 04/01/15......................... 3,204,240
100,000 University of Pittsburgh Higher Education, University Capital Project, Series 1987-A, Pre-Refunded,
8.375%, 06/01/05.............................................................................. 107,639
1,000,000 Venango County GO, AMBAC Insured, Pre-Refunded, 7.25%, 09/15/19................................ 1,104,190
1,000,000 Warren County GO, MBIA Insured, Pre-Refunded, 7.20%, 07/01/16.................................. 1,134,020
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............................. 2,292,040
100,000 Washington County Hospital Authority Revenue, Washington Hospital, Series 1987, Pre-Refunded,
9.50%, 07/01/17............................................................................... 108,428
1,500,000 Westmoreland County IDAR, Refunding, Citizen's General Hospital Project, Series A, 8.25%, 07/01/13 1,570,410
3,000,000 Wilkes Barre Area School District, GO, FGIC Insured, 6.375%, 04/01/15.......................... 3,213,300
750,000 Wyoming Valley Sanitary Authority, Sewer Revenue, BIG Insured, Pre-Refunded, 7.25%, 11/15/05... 841,695
York County Solid Waste and Refuse Authority, IDR, Resource Recovery Project,
$ 105,000 Series B, 8.20%, 12/01/14..................................................................... $ 114,387
900,000 Series C, 8.20%, 12/01/14..................................................................... 980,460
------------
Total Long Term Investments (Cost $586,362,825)................................................ 629,158,067
------------
c Short Term Investments .9%
Allegheny County, Hospital Development Authority, Health Center Presbyterian, MBIA Insured,
Weekly VRDN and Put
1,600,000 Series A, 3.35%, 03/01/20..................................................................... 1,600,000
700,000 Series C, 3.35%, 03/01/20..................................................................... 700,000
500,000 Series D, 2.75%, 03/01/20..................................................................... 500,000
3,400,000 Schuylkill County, IDA, Westwood Energy Property, Daily VRDN and Put, 3.70%, 11/01/09.......... 3,400,000
------------
Total Short-Term Investments (Cost $6,200,000)................................................. 6,200,000
------------
Total Investments (Cost $592,562,825) 98.8%................................................... 635,358,067
Other Assets and Liabilities, Net 1.2%........................................................ 7,598,444
------------
Net Assets 100.0%............................................................................. $642,956,511
============
At February 29, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of $592,562,825 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 43,204,886
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................. (409,644)
------------
Net unrealized appreciation.................................................................... $ 42,795,242
============
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
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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, February 29, 1996
Face Value
Amount Franklin Puerto Rico Tax-Free Income Fund (Note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments 97.2%
Guam Airport Authority Revenue, Series B,
$ 1,675,000 6.60%, 10/01/10 ............................................................................... $ 1,698,584
5,800,000 6.70%, 10/01/23 ............................................................................... 5,860,726
Guam Government, GO, Series A,
4,775,000 5.90%, 09/01/05 ............................................................................... 4,790,471
1,085,000 6.00%, 09/01/06 ............................................................................... 1,090,855
5,590,000 Guam Government Limited Obligation Highway, Refunding, Series A, 6.30%, 05/01/12 ............... 5,944,350
Guam Power Authority Revenue,
7,190,000 GO, 6.30%, 10/01/22 ........................................................................... 7,217,825
2,680,000 Series A, 6.75%, 10/01/24 ..................................................................... 2,784,466
5,000,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Port Saipan
Improvement, Series A, 6.85%, 10/01/25 ........................................................ 5,031,350
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A, Pre-Refunded,
4,340,000 7.875%, 07/01/17 .............................................................................. 4,824,170
3,620,000 7.00%, 07/01/19 ............................................................................... 3,953,981
Puerto Rico Commonwealth GO,
250,000 6.25%, 07/01/10 ............................................................................... 261,853
3,905,000 6.40%, 07/01/11 ............................................................................... 4,179,482
1,930,000 Pre-Refunded, 7.90%, 07/01/11 ................................................................. 2,017,912
1,515,000 Public Improvement, Series B, Pre-Refunded, 7.25%, 07/01/12 ................................... 1,619,687
2,000,000 Refunding, MBIA Insured, 5.75%, 07/01/24 ...................................................... 2,031,420
400,000 Refunding, Series A, 6.00%, 07/01/14 .......................................................... 408,356
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
70,000 Refunding, Series N, Pre-Refunded, 8.00%, 07/01/03 ............................................ 77,919
1,940,000 Refunding, Series X, FSA Insured, 5.00%, 07/01/22 ............................................. 1,793,084
3,925,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ...................................................... 4,379,829
350,000 Series Q, Pre-Refunded, 7.75%, 07/01/10 ....................................................... 406,732
4,250,000 Series T, 6.625%, 07/01/18 .................................................................... 4,637,643
3,000,000 Series W, FSA Insured, 5.50%, 07/01/17 ........................................................ 2,981,100
2,430,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ......................... 2,442,199
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series 1988-A,
3,000,000 7.90%, 07/01/07 ............................................................................... 3,254,790
2,300,000 7.75%, 07/01/08 ............................................................................... 2,487,841
2,600,000 7.50%, 07/01/09 ............................................................................... 2,798,250
3,350,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Refunding, 7.875%, 10/01/04 .......... 3,764,395
Puerto Rico Electric Power Authority Revenue,
500,000 Refunding, Series 1987-L, Pre-Refunded, 8.375%, 07/01/07 ...................................... 541,420
2,160,000 Refunding, Series 1987-L, Pre-Refunded, 8.40%, 07/01/15 ....................................... 2,338,135
3,850,000 Refunding, Series 1988-M, Pre-Refunded, 8.00%, 07/01/08 ....................................... 4,285,551
2,115,000 Refunding, Series 1991-P, Pre-Refunded, 7.00%, 07/01/11 ....................................... 2,434,027
1,445,000 Refunding, Series K, Pre-Refunded, 9.375%, 07/01/17 ........................................... 1,583,214
1,525,000 Series O, 7.125%, 07/01/14 .................................................................... 1,658,453
1,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ....................................................... 1,150,840
10,000,000 Series T, 6.375%, 07/01/24 .................................................................... 10,409,300
7,225,000 Series X, 6.125%, 07/01/21 .................................................................... 7,393,054
Puerto Rico HFC Revenue,
2,060,000 FHA Mortgage Insured, Section 8 Assisted, Sixth Portfolio, Pre-Refunded, 7.75%, 12/01/26 ...... 2,522,367
2,405,000 GNMA, SFMR, Series C, 6.85%, 10/15/23 ......................................................... 2,526,741
420,000 MFMR, Portfolio A-1, 7.50%, 10/01/15 .......................................................... 444,196
1,750,000 MFMR, Portfolio A-1, 7.50%, 04/01/22 .......................................................... 1,847,580
380,000 MFMR, Series A, 8.25%, 06/01/11 ............................................................... 383,925
Puerto Rico Housing Bank and Finance Agency, SFMR, Homeownership Development Program,
$ 3,025,000 Affordable Housing Mortgage, First Portfolio, 6.25%, 04/01/29 ................................. $ 3,051,257
955,000 Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15 ................................................ 1,080,076
5,810,000 Puerto Rico Industrial, Educational, Medical and Environmental Control Facilities, Hospital Auxilio
Mutuo Obligation Group, Series A, 6.25%, 07/01/24 ............................................. 6,107,995
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA,
2,575,000 American Cyanamid Co. Project, 8.75%, 05/01/13 ................................................ 2,631,727
4,010,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12 .............................................. 4,438,589
140,000 Higher Citiproperties, Inc., 8.75%, 12/01/00 .................................................. 145,386
900,000 PepsiCo, Inc. Project, 6.25%, 11/15/13 ........................................................ 964,476
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities,
Financing Authority,
2,500,000 Hospital Revenue, Refunding, Dr. Pila Hospital Project, Series A, 6.125%, 08/01/25 ............ 2,571,125
500,000 Hospital Revenue, Refunding, Dr. Pila Hospital Project, Series A, 6.25%, 08/01/32 ............. 515,180
6,550,000 Industrial Revenue, Guaynabo Municipal Government Center, Series A, 5.625%, 07/01/15 .......... 6,292,323
Puerto Rico Municipal Finance Agency,
4,550,000 Series 1988-A, 8.25%, 07/01/08 ................................................................ 4,964,687
2,000,000 Series 1994-A, 6.50%, 07/01/19 ................................................................ 2,151,020
1,000,000 Puerto Rico PBA Revenue, Government Facilities, Series A, AMBAC Insured, 5.75%, 07/01/22 ....... 1,009,850
5,655,000 Puerto Rico Port Authority Revenue, Special Facilities, American Airlines, Series A, 6.30%, 06/01/23 5,705,499
Puerto Rico Telephone Authority Revenue,
6,450,000 Series 1992-L, 6.125%, 01/01/22 ............................................................... 6,583,709
500,000 Series 1993-N, 5.50%, 01/01/13 ................................................................ 489,755
1,885,000 Series 1993-N, 5.50%, 01/01/22 ................................................................ 1,812,032
University of Puerto Rico, University System Revenues,
245,000 Series J, Pre-Refunded, 6.50%, 06/01/13 ....................................................... 259,862
3,500,000 Series M, MBIA Insured, 5.50%, 06/01/15 ....................................................... 3,505,460
Virgin Islands HFA, SFR, Refunding, Series A,
950,000 6.45%, 03/01/16 ............................................................................... 967,955
2,250,000 6.50%, 03/01/25 ............................................................................... 2,292,413
5,600,000 Virgin Islands Water and Power Authority, Electric System Revenue, Series A, 7.40%, 07/01/11 ... 5,946,080
------------
Total Investments (Cost $175,461,236) Net 97.2%................................................ 185,744,529
Other Assets and Liabilities, Net 2.8%......................................................... 5,365,376
------------
Net Assets 100.0%.............................................................................. $191,109,905
============
At February 29, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of $175,494,360 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................................. $ 10,275,184
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................................. (25,015)
------------
Net unrealized appreciation..................................................................... $ 10,250,169
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
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.
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
SFMR - Single Family Mortgage Revenue
SFR - Single Family Revenue
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, February 29, 1996
Face Value
Amount Franklin Federal Intermediate-Term Tax-Free Income Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 97.9%
Alabama 1.2%
$ 1,000,000 Morgan County, Decatur Health Care Authority Revenue, Refunding, Connie Lee Insured,
5.80%, 03/01/04................................................................................. $ 1,050,130
------------
Alaska .8%
480,000 Alaska State HFC, Collateral, First Mortgage Program, 5.80%, 06/01/04............................ 498,403
200,000 Anchorage Parking Authority Lease Revenue, Refunding, 5th Avenue Garage, 6.50%, 12/01/02......... 215,896
------------
714,299
------------
Arizona 3.9%
2,000,000 Maricopa County COP, 5.625%, 06/01/00............................................................ 2,058,580
200,000 Mohave County IDA, Hospital Systems Revenue, Refunding, Medical Environments, Inc.,
Phoenix Baptist Hospital and Medical Center, 6.00%, 07/01/00.................................... 214,488
1,000,000 Phoenix GO, Refunding, Series A, 4.85%, 07/01/09................................................. 982,600
70,000 Phoenix HFC, Mortgage Revenue, Project A, MBIA Insured, 6.00%, 07/01/02.......................... 72,749
------------
3,328,417
------------
California 19.7%
100,000 ABAG Finance Corp., COP, Association XXVI, Series B, 6.30%, 10/01/02............................. 105,427
3,000,000 Bakersfield Public Financing Authority Revenue, Series A, 5.80%, 09/15/05........................ 3,064,050
1,500,000 California Educational Facilities Authority Revenue, College & University Financing, Refunding,
Series B, 5.90%, 06/01/03....................................................................... 1,559,775
California Statewide CDA Revenue, Refunding, COP, Health Facilities, Barton Memorial Hospital, Series B,
200,000 5.70%, 12/01/00................................................................................. 209,342
300,000 6.40%, 12/01/05................................................................................. 320,217
300,000 Coalinga Public Financing Authority Revenue, Series B, 6.10%, 09/15/04........................... 305,799
2,600,000 Fresno Joint Powers Financing Authority, Local Agency Revenue, Refunding, Series A, 6.00%, 09/02/01 2,644,876
Hesperia Public Finance Authority Revenue, Highway and Street Improvement, Series A,
505,000 4.75%, 10/01/96................................................................................. 506,964
555,000 5.00%, 10/01/97................................................................................. 560,406
605,000 5.25%, 10/01/98................................................................................. 612,950
100,000 Los Angeles County Transportation Commission, COP, Series B, 5.90%, 07/01/00..................... 105,155
450,000 Merced Irrigation District COP, Water Facilities Project, 6.00%, 11/01/02........................ 477,000
500,000 New Haven USD, COP, Refunding, 5.30%, 07/01/01................................................... 516,080
200,000 Paso Robles USD, COP, Measure D, Capital Projects, Phase III, 5.75%, 08/01/02.................... 208,346
100,000 San Diego County COP, Children's Center Project, 6.00%, 10/01/02................................. 101,479
100,000 San Diego Port Facilities Revenue, Refunding, National Steel and Shipbuilding Co., 6.60%, 12/01/02 89,869
140,000 San Francisco City and County RDA, Refunding, MBIA Insured, Series A, 6.125%, 07/01/02........... 139,978
200,000 San Francisco Downtown Parking Corp. Revenue, 6.25%, 04/01/04.................................... 214,916
200,000 San Joaquin County COP, General Hospital Project, 5.90%, 09/01/03................................ 206,214
520,000 San Juan USD, COP, Golden River Elementary School Construction Project, 5.40%, 04/01/01.......... 520,130
2,000,000 San Ramon Valley USD, COP, Measure A, Capital Project, Series A, 5.95%, 10/01/01................. 2,103,220
Snowline Joint USD, COP, Series 1993,
245,000 5.50%, 07/01/00................................................................................. 247,791
260,000 5.60%, 07/01/01................................................................................. 263,554
275,000 5.70%, 07/01/02................................................................................. 279,345
290,000 5.80%, 07/01/03................................................................................. 295,159
400,000 Solano County COP, Refunding, Justice Facility and Public Building Project, 5.875%, 10/01/05..... 406,940
100,000 Southern California Rapid Transit District Revenue, Special Benefit AD A2, Series 92A, 6.00%, 09/01/02 106,279
Susanville Public Financing Authority Revenue, Water Facilities, Series A, AMBAC Insured,
25,000 5.90%, 09/01/02................................................................................. 26,818
100,000 6.00%, 09/01/03................................................................................. 107,672
500,000 Tahoe City, Public Utilities District COP, Capital Facilities Project, Series B, 6.05%, 06/01/01. 519,220
100,000 Tuolumne County COP, Multiple Facilities Project, 6.00%, 06/01/99................................ 102,257
------------
16,927,228
------------
Colorado 6.3%
Denver City and County Airport System Revenue,
$ 3,000,000 Series A, 7.00%, 11/15/99....................................................................... $ 3,188,370
335,000 Series C, 6.25%, 11/15/00....................................................................... 350,018
1,500,000 Montrose County COP, 6.20%, 06/15/03............................................................. 1,584,195
255,000 Summit County Recreational Facilities Revenue, Refunding, Copper Mountain, Mandatory Put 10/01/99,
5.90%, 04/01/17................................................................................. 267,936
------------
5,390,519
------------
Delaware 1.2%
1,000,000 Delaware State Solid Waste Authority, Solid Waste Systems Revenue, MBIA Insured, 5.00%, 07/01/06. 1,001,520
------------
District of Columbia.8%
700,000 District of Columbia GO, Refunding, Series A, 5.875%, 06/01/05................................... 684,096
------------
Florida 11.4%
225,000 Alachua County, HFA, Refunding, Santa Fe Health Care Facilities Project, 6.875%, 11/15/02........ 254,086
2,950,000 Gateway Service District Revenue, Transportation/Roadway Service Charges, 8.50%, 05/01/04........ 3,156,736
1,000,000 Hillsborough County Capital Improvement Program Revenue, County Center Project, Refunding,
Series B, MBIA Insured, 4.80%, 07/01/07......................................................... 976,880
1,000,000 Hillsborough County, IDA, University Community Hospital, MBIA Insured, 5.375%, 08/15/04.......... 1,048,700
Northern Palm Beach County Water Control District, Unit Development Number 31,
405,000 Program 1, 6.60%, 11/01/03...................................................................... 429,377
320,000 Program 2, 6.60%, 11/01/03...................................................................... 339,261
795,000 Palm Bay Lease Revenue, Refunding, Florida Education and Research Foundation, Project A,
6.10%, 09/01/03................................................................................. 820,066
2,700,000 Palm Beach County Solid Waste IDR, Okeelanta Power Project, Series A, 6.375%, 02/15/07........... 2,748,573
------------
9,773,679
------------
Georgia .1%
100,000 Fulton County Development Authority, Special Facilities Revenue, Delta Air Lines, Inc. Project,
6.85%, 11/01/07................................................................................. 105,870
------------
Guam 1.2%
1,000,000 Guam Government GO, Series 1995-A, 5.90%, 09/01/05............................................... 1,003,240
------------
Illinois 2.6%
850,000 Illinois Educational Facilities Authority Revenue, Columbia College, 5.875%, 12/01/03............ 857,523
360,000 Illinois Housing Development Authority Revenue, Homeowner Mortgage, Sub-Series A-1,
6.10%, 02/01/05................................................................................. 378,648
1,000,000 b Metropolitan Pier and Exposition Authority Hospital, Facilities Revenue, McCormick Place Convention,
5.75%, 07/01/06.................................................................................. 1,000,000
------------
2,236,171
------------
Indiana 2.6%
2,000,000 Franklin City, EDR, Refunding, Hoover Universal, Inc. Project, Johnson Controls, 6.10%, 12/01/04. 2,120,600
100,000 Indianapolis Local Public Improvement Bond, Series D, 6.10%, 02/01/02............................ 107,141
------------
2,227,741
------------
Iowa .2%
200,000 Iowa State Financial Authority Hospital, Facilities Revenue, Refunding, Trinity Regional Hospital Project,
6.50%, 07/01/00................................................................................. 209,850
------------
Kentucky .7%
100,000 Kenton County Airport Board Revenue, Special Facilities, Delta Airlines, Inc. Project A, 6.75%, 02/01/02 106,068
500,000 Mt. Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 5.625%, 03/01/03........... 520,930
------------
626,998
------------
Louisiana .7%
$ 55,000 Calcasieu Parish, Public Transportation Authority Mortgage Revenue, Refunding, Series B,
6.375%, 11/01/02................................................................................ $ 57,771
300,000 Louisiana State Correctional Facilities Corp. Lease Revenue, Refunding, FSA Insured, 5.25%, 12/15/00 311,250
100,000 Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Refunding, First Stage
Loop, Inc., Series B, 6.20%, 09/01/03........................................................... 106,073
100,000 Louisiana State Public Facility Authority Revenue, Student Loan, Series A-1, 6.20%, 03/01/01..... 105,691
------------
580,785
------------
Maryland .3%
235,000 Baltimore EDR, Lease, Refunding, Armistead Partnership, Series A, 6.75%, 08/01/02................ 256,618
------------
Massachusetts 1.5%
200,000 Massachusetts State Industrial Finance Agency, Resource Recovery Revenue, Refunding,
Refusetech, Inc. Project, Series A, 5.45%, 07/01/01............................................. 209,370
New England Educational Loan Corp., Massachusetts Student Loan Revenue, Refunding, Series B,
600,000 5.00%, 06/01/98................................................................................. 610,758
415,000 5.60%, 06/01/02................................................................................. 434,273
------------
1,254,401
------------
Michigan 1.2%
1,000,000 Detroit GO, Refunding, Series B, 6.375%, 04/01/06................................................ 1,051,910
------------
Minnesota 1.4%
200,000 Minneapolis CDA, Supported Development Revenue, Series 91-5A, 7.20%, 12/01/04.................... 219,238
1,000,000 Minnesota State HFA, Rental Housing, Refunding, MBIA Insured, Series D, 5.35%, 02/01/06.......... 1,002,230
------------
1,221,468
------------
Mississippi 1.5%
1,250,000 Mississippi State Higher Education Assistant Corp., Student Loan Revenue, Series A, 4.80%, 09/01/99 1,264,788
------------
Missouri 1.2%
1,000,000 St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding, Series A, 5.375%, 07/15/03...... 1,002,630
------------
Nebraska .4%
300,000 Nebraska Higher Education Loan Program, Inc. Revenue, Subject Lien, Series A-6, 6.70%, 12/01/02.. 323,157
------------
New Jersey 1.4%
110,000 New Jersey EDA, Economic Growth, 2nd Revenue, Series F-1, 6.00%, 12/01/02........................ 115,192
1,000,000 New Jersey Health Care Facilities Financing Authority Revenue, Refunding, Monmouth Medical Center,
Series C, CGIC Insured, 5.80%, 07/01/04.......................................................... 1,074,960
------------
1,190,152
------------
New Mexico .9%
750,000 b Grant County, New Mexico Hospital Facility, Revenue, Refunding, Gila Regional Medical Center Project,
Asset Guaranty, 5.125%, 08/01/07................................................................ 740,093
------------
New York 6.3%
New York City GO,
515,000 Refunding, Series C, 6.50%, 08/01/04............................................................ 545,617
800,000 Refunding, Series D, 5.75%, 08/01/03............................................................ 813,928
100,000 Series B, 6.25%, 10/01/01....................................................................... 104,233
1,000,000 Series D, 5.50%, 02/15/04....................................................................... 994,880
250,000 Series H, 7.00%, 02/01/05....................................................................... 267,995
2,500,000 New York City Health and Hospital Authority, Local Government Revenue, Refunding, Series A,
6.00%, 02/15/06................................................................................. 2,468,625
90,000 New York City IDA, Civic Facilities Revenue, New York Blood Center, Inc. Project, 6.80%, 05/01/02 96,418
100,000 Oneida-Herkimer Solid Waste Management Authority, Solid Waste Systems Revenue, Refunding,
6.20%, 04/01/00................................................................................. 104,218
------------
5,395,914
------------
Ohio 1.1%
$ 1,000,000 b Akron Waterworks Revenue, Mortgage Improvement, Refunding, MBIA, 4.80%, 03/01/07................. $ 982,410
------------
Oklahoma 3.6%
2,020,000 Jackson County Memorial Hospital Authority Revenue, Refunding, Memorial Hospital Project,
6.75%, 08/01/04.................................................................................. 2,035,251
100,000 Tulsa Public Facilities Authority, Lease Payment Revenue, Refunding, Assembly Center, 5.80%, 07/01/01 104,449
1,000,000 Valley View Hospital Authority, Revenue, Refunding, Valley View Regional Medical Center,
5.75%, 08/15/06................................................................................. 975,470
------------
3,115,170
------------
Pennsylvania 3.8%
100,000 Cambria County Hospital Development Authority, Revenue, Refunding & Improvement, Conemaugh
Valley Hospital, Series B, Connie Lee Insured, 5.90%, 07/01/03.................................. 105,767
Lebanon County Good Samaritan Hospital Authority Revenue, Refunding, Good Samaritan Hospital Project,
535,000 5.25%, 11/15/01................................................................................. 530,549
615,000 5.35%, 11/15/02................................................................................. 609,158
575,000 5.50%, 11/15/03................................................................................. 570,682
Northeastern Hospital and Educational Authority Revenue, Kings College,
390,000 5.50%, 07/15/02................................................................................. 396,240
410,000 5.60%, 07/15/03................................................................................. 417,384
Philadelphia Gas Works Revenue, Refunding, Series A,
300,000 5.70%, 07/01/00................................................................................. 309,339
300,000 5.80%, 07/01/01................................................................................. 310,503
------------
3,249,622
------------
Puerto Rico 1.9%
Puerto Rico Electric Power Authority Revenue,
100,000 Series Q, 5.90%, 07/01/01....................................................................... 104,817
1,345,000 Series T, 6.00%, 07/01/04....................................................................... 1,452,640
100,000 Puerto Rico Municipal Finance Agency, Series A, 5.30%, 07/01/00.................................. 103,024
------------
1,660,481
------------
South Dakota 3.6%
1,000,000 South Dakota HDA, Homeownership Mortgage, Series B, 6.05%, 05/01/04.............................. 1,063,340
2,000,000 South Dakota State Student Loan Finance Corp., 6.35%, 08/01/05................................... 2,049,600
------------
3,112,940
------------
Tennessee .9%
750,000 Metropolitan Government, Nashville & Davidson County IDBR, Refunding & Improvement,
Osco Treatment, Inc., 6.00%, 05/01/03............................................................ 764,760
------------
Texas 1.4%
785,000 Abilene Higher Education Facilities Corp., Higher Education Revenue, Refunding & Improvement,
Abilene Christian Facility, 5.90%, 10/01/05..................................................... 823,567
390,000 Houston HFC, SFMR, Refunding, Series A, FSA Insured, 5.45%, 06/01/03............................. 399,801
------------
1,223,368
------------
Utah 2.3%
2,000,000 Davis County Solid Waste Management and Energy Recovery Revenue, Refunding, Special Service
District, 5.50%, 06/15/00....................................................................... 2,011,140
------------
Virginia 8.6%
2,800,000 Covington-Alleghany County, Refunding, Westvaco Corp. Project, 5.85%, 09/01/04................... 3,035,448
1,000,000 Virginia College Building Authority, Educational Facilities Revenue, Hampton University Project,
5.375%, 04/01/03................................................................................. 1,040,170
Virginia State HDA, Commonwealth Mortgage, Series C, Sub-Series 7,
$ 1,695,000 5.60%, 01/01/03................................................................................. $ 1,773,970
1,475,000 5.70%, 01/01/04................................................................................. 1,551,774
------------
7,401,362
------------
Washington 1.2%
600,000 Marysville Water and Sewer Revenue, Refunding, MBIA Insured, 5.75%, 12/01/05..................... 635,238
390,000 Washington State Health Care Facilities Authority Revenue, Spokane Heart Institute, Series A,
5.25%, 08/15/04................................................................................. 393,159
------------
1,028,397
------------
Total Long Term Investments (Cost $81,350,515)................................................... 84,111,324
------------
c Short Term Investments 3.8%
300,000 California Statewide Community Development Authority Revenue, CTFS Partner Sutter Health
Obligation Group, AMBAC Insured, Daily VRDN and Put, 3.20%, 07/01/15............................ 300,000
500,000 Duluth, Minnesota, Tax Increment Revenue, Lake Superior Paper, Weekly VRDN and Put,
3.45%, 09/01/10................................................................................. 500,000
200,000 Grand Rapids, Michigan, Water Supply System Revenue, Refunding, FGIC Insured, Daily VRDN
and Put, 3.35%, 01/01/20........................................................................ 200,000
1,500,000 Massachusetts State GO, Updates, Series B, Weekly VRDN and Put, 3.35%, 12/01/97.................. 1,500,000
300,000 New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue, Series G,
FGIC Insured, Daily VRDN and Put, 3.35%, 06/15/24............................................... 300,000
500,000 Washington State Health Care Facilities Authority Revenue, Sisters Providence, Series B, Daily VRDN
and Put, 3.35%, 10/01/05........................................................................ 500,000
------------
Total Short Term Investments (Cost $3,300,000)................................................... 3,300,000
------------
Total Investments (Cost $84,650,515) 101.7%...................................................... 87,411,324
Liabilities in Excess of Other Assets, Net (1.7%)................................................ (1,443,839)
------------
Net Assets 100.0%............................................................................... $85,967,485
============
At February 29, 1996, the net unrealized appreciation based on
the cost of investments for income tax purposes of $84,650,515 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................................... $ 2,873,347
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................................... (112,538)
------------
Net unrealized appreciation...................................................................... $ 2,760,809
============
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
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
SFMR - Single Family Mortgage Revenue
USD - Unified School District
bSee Note 1(g) regarding securities purchased on a when-issued basis
cVariable 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, February 29, 1996
Face Value
Amount Franklin High Yield Tax-Free Income Fund (Note 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 97.9%
Bonds 95.4%
Alabama .5%
$ 6,490,000 Homewood Special Care Facilities Financing Authority, Hospital Revenue, Lakeshore Hospital
Project, Series B, Pre-Refunded, 8.25%, 02/01/04.......................................... $ 7,018,351
Marshall County Health Care Authority, Hospital Revenue,
5,000,000 Guntersville, Arab Medical Center, Pre-Refunded, 10.25%, 10/01/13......................... 5,713,350
3,300,000 Refunding, Boaz-Albertville Medical Center, 6.20%, 01/01/08............................... 3,330,855
500,000 Marshall County Hospital Board Revenue, Refunding, Boaz-Albertville Medical Center,
Pre-Refunded, 8.875%, 01/01/05............................................................. 530,845
2,500,000 Prichard Water Works and Sewer Board Revenue, Pre-Refunded, 9.50%, 11/15/14................ 2,915,050
------------
19,508,451
------------
Alaska .8%
Alaska Industrial Development and Export Revenue,
4,000,000 American President Lines Project, 8.00%, 11/01/09......................................... 4,379,680
965,000 Revolving Fund, Series A, 6.20%, 04/01/10................................................. 1,011,986
Alaska State HFC,
5,760,000 Mortgage Program, First Series, 5.90%, 12/01/33........................................... 5,673,658
10,000,000 Refunding, Series A, 5.40%, 12/01/13...................................................... 9,677,700
4,670,000 Refunding, MBIA Insured, Series A, 5.85%, 12/01/15........................................ 4,677,332
5,000,000 Refunding, MBIA Insured, Series A, 5.875%, 12/01/24....................................... 4,961,700
1,705,000 Palmer Golf Course Lease, COP, 10.25%, 07/01/08............................................ 1,829,721
------------
32,211,777
------------
Arizona 1.1%
950,000 Gila County IDA, PCR, Refunding, ASARCO, Inc. Project, 8.90%, 07/01/06..................... 1,024,699
8,500,000 Maricopa County PCR, Refunding, Public Services, Palo Verde, Series A, 6.375%, 08/15/23.... 8,461,325
4,000,000 Maricopa County Rural Road ID, Pre-Refunded, 8.625%, 07/01/07.............................. 4,438,320
16,785,000 Red Hawk Canyon Community Facility, 7.625%, 06/01/05....................................... 16,853,483
7,900,000 Salt River Project, Agricultural Improvement and Power District Electric System Revenue,
Series A, 6.00%, 01/01/31................................................................. 7,984,688
2,285,000 Tempe IDA, Residential Care Facilities Revenue, Volunteers of America Care Facilities,
9.00%, 06/01/18........................................................................... 2,415,953
------------
41,178,468
------------
Arkansas .4%
2,400,000 Baxter County IDR, Refunding, Aeroquip/Trinova Corp. Project, 5.80%, 10/01/13.............. 2,386,800
1,000,000 Conway Hospital Revenue, Refunding, Series 1990, 8.375%, 07/01/11.......................... 1,082,720
Independence County PCR,
4,275,000 Mississippi Power and Light Co. Project, Series A, 9.00%, 07/01/13........................ 4,776,671
1,185,000 Mississippi Power and Light Co. Project, Series B, 9.00%, 07/01/13........................ 1,324,060
200,000 Mississippi Power and Light Co. Project, Series C, 9.50%, 07/01/14........................ 226,424
5,000,000 Refunding, Arkansas Power and Light Co. Project, 6.25%, 01/01/21.......................... 5,062,800
750,000 Litte Rock Sewer Revenue, Refunding, 5.40%, 08/01/10....................................... 757,268
------------
15,616,743
------------
California 13.0%
21,330,000 Adelanto California Water Authority Revenue, Water Systems Acquisition Project, Series A,
7.50%, 09/01/28 .......................................................................... 21,226,550
7,500,000 Alameda County COP, Refunding, Santa Rita Jail Project, MBIA Insured, 5.70%, 12/01/14...... 7,473,600
13,400,000 Alameda County MFHR, Refunding, Claremont House Project, Series A, 8.00%, 12/01/23......... 13,928,362
Antioch 1915 Act, AD No. 27, Lone Tree,
11,080,000 Series C, 7.70%, 09/02/17................................................................. 11,434,671
4,470,000 Series D, 7.30%, 09/02/13................................................................. 4,599,451
$ 2,500,000 b Arroyo Grande California COP, Vista Hospital Systems, Series A, 8.375%, 07/01/06........... $ 2,482,850
22,515,000 Arroyo Grande Hospital System COP, Vista Hospital Systems, Refunding, Series A,
9.50%, 07/01/20........................................................................... 23,916,334
2,850,000 Azusa RDA, Tax Allocation, Refunding, Merged Area Project, Series A, 6.75%, 08/01/23....... 2,950,634
4,575,000 Beaumont Public Financing Authority Revenue, Sewer Enterprise Project, Series A,
6.90%, 09/01/23........................................................................... 4,519,414
Benicia 1915 Act, Refunding, Fleetside Industrial Park Assessment,
205,000 4.50%, 09/02/96........................................................................... 204,820
215,000 4.80%, 09/02/97........................................................................... 214,447
225,000 5.00%, 09/02/98........................................................................... 224,062
235,000 5.25%, 09/02/99........................................................................... 233,668
250,000 5.50%, 09/02/00........................................................................... 248,918
265,000 5.65%, 09/02/01........................................................................... 263,641
275,000 5.80%, 09/02/02........................................................................... 273,386
290,000 5.90%, 09/02/03........................................................................... 288,095
310,000 6.00%, 09/02/04........................................................................... 307,762
325,000 6.10%, 09/02/05........................................................................... 322,462
345,000 6.20%, 09/02/06........................................................................... 342,116
370,000 6.30%, 09/02/07........................................................................... 366,722
390,000 6.40%, 09/02/08........................................................................... 386,365
415,000 6.50%, 09/02/09........................................................................... 410,962
440,000 6.60%, 09/02/10........................................................................... 435,552
470,000 6.70%, 09/02/11........................................................................... 465,093
305,000 6.80%, 09/02/12........................................................................... 304,695
3,000,000 California Educational Facilities Authority Revenue, Pooled College and University Financing,
Series B, 6.125%, 06/01/09................................................................ 3,070,800
1,125,000 California Special Districts, Association Financial Corp. COP, Santa Cruz Port Authority, Series B,
7.50%, 05/01/13........................................................................... 1,174,984
California State Health Facilities Hospital Revenue, Summit Medical Center, Refunding,
5,070,000 Series A, 7.50%, 05/01/09................................................................. 5,199,386
2,155,000 Series A, 7.60%, 05/01/15................................................................. 2,209,845
6,095,000 Series B, 7.50%, 05/01/09................................................................. 6,250,544
3,500,000 California State Higher Education Loan Authority, Inc., Student Loan Revenue, Refunding,
Junior Lien, Series B, 9.00%, 07/03/97.................................................... 3,580,290
7,320,000 California State Variable Purpose, 5.75, 03/01/19.......................................... 7,361,358
Capistrano USD, CFD, Special Tax No. 92-1,
285,000 6.60%, 09/01/05........................................................................... 278,149
280,000 6.70%, 09/01/06........................................................................... 272,815
325,000 6.80%, 09/01/07........................................................................... 316,183
260,000 6.90%, 09/01/08........................................................................... 252,600
1,000,000 7.00%, 09/01/18........................................................................... 940,890
3,740,000 Colton Community Facilities District, Special Tax No. 90-1, 9.00%, 09/01/20................ 3,465,858
Contra Costa County Public Financing Authority Revenue, Refunding,
2,505,000 6.625%, 09/02/10.......................................................................... 2,487,716
2,960,000 6.875%, 09/02/16.......................................................................... 2,984,302
Corona COP,
9,655,000 Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/06......................... 12,035,923
8,820,000 Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/20......................... 12,246,394
7,600,000 Vista Hospital Systems, Series B, Refunding, 9.00%, 01/01/01.............................. 7,904,000
11,100,000 bVista Hospital Systems, Series B, Refunding, 8.375%, 07/01/06............................. 11,071,251
10,885,000 Vista Hospital Systems, Series B, Refunding, 9.50%, 07/01/20.............................. 11,562,482
$ 4,845,000 Eden Township Hospital District Health Facilities Revenue, COP, Refunding, Insured Eden
Hospital Health Services Corp., 5.85%, 07/01/18........................................... $ 4,755,755
Emeryville RDA, MFHR, Emerybay Apartments, Series 1991,
230,000 8.75%, 12/01/02........................................................................... 236,997
3,770,000 8.75%, 12/01/21........................................................................... 3,843,138
37,675,000 Foothill Eastern Transportation Corridor Agency, California Toll Road Revenue, Series A,
6.50%, 01/01/32........................................................................... 38,255,195
4,500,000 Gateway Improvement Authority, Marin City Community Facilities District,
Series A, 7.75%, 09/01/25................................................................. 4,561,335
4,175,000 Hawthorne CRDA, Refunding, Hawthorne Plaza Project, 8.50%, 07/01/20........................ 4,316,157
8,900,000 Hesperia Public Financing Authority Revenue, Series B, 7.375%, 10/01/23.................... 9,071,592
6,000,000 Lake Elsinore, 1915 Act, AD No. 93-1, Series A, 7.90%, 09/02/24............................ 6,061,560
3,065,000 Long Beach Special Tax, CFD No. 2, West Long Beach, 7.50%, 09/01/11........................ 3,092,861
30,400,000 Los Angeles County, CFD No. 4, Special Tax Improvement, Calabassas Area B, Series A,
9.25%, 09/01/22........................................................................... 29,965,280
Los Angeles MFR, Refunding,
250,000 Series J-1A, 7.125%, 01/01/24............................................................. 250,068
675,000 Series J-1B, 7.125%, 01/01/24............................................................. 675,182
1,435,000 Series J-1C, 7.125%, 01/01/24............................................................. 1,435,387
1,345,000 Series J-2A, 8.50%, 01/01/24.............................................................. 1,323,601
3,345,000 Series J-2B, 8.50%, 01/01/24.............................................................. 3,291,781
7,120,000 Series J-2C, 8.50%, 01/01/24.............................................................. 7,006,721
Los Angeles Regional Airports Improvement Corp., Lease Revenue,
9,500,000 Refunding, United Airlines, Inc., 6.875%, 11/15/12........................................ 9,885,985
2,100,000 Sub-Lease Revenue, Continental Airlines, Inc., Terminal Facilities, 9.00%, 08/01/08....... 2,257,878
7,775,000 Sub-Lease Revenue, Continental Airlines, Inc., Terminal Facilities, 9.00%, 08/01/17....... 8,359,525
4,420,000 Needles Public Financing Authority, Local Agency Revenue, Series A, 10.00%, 10/01/24....... 4,398,651
2,975,000 Orinda, 1915 Act, AD No. 94-1, Oak Springs, 8.25%, 09/02/19................................ 3,070,557
Palmdale California Special Tax Community Facility, Ritter Ranch, Series A,
23,500,000 8.50%, 09/01/24........................................................................... 23,745,575
4,500,000 8.50%, 09/01/25........................................................................... 4,547,025
Perris Public Financing Authority, Local Agency Revenue, Series B,
2,035,000 7.125%, 08/15/15.......................................................................... 1,998,187
4,095,000 7.25%, 08/15/23........................................................................... 4,046,679
5,425,000 Richmond Joint Power Finance Authority Improvement Bond, 1915 Act, Improvement Districts
Nos. 851 and 853, Series B, 8.50%, 09/02/19............................................... 5,601,909
Riverside County COP, Airforce Village Project, Series 1992,
7,160,000 8.125%, 06/15/07.......................................................................... 7,507,332
5,290,000 8.125%, 06/15/12.......................................................................... 5,513,344
12,000,000 Roseville Special Tax, North Center Community Facility District, 8.60%, 11/01/17........... 12,487,440
Sacramento County, 1915 Act, Refunding, Sunrise/US Corridor Assessment,
1,020,000 6.10%, 09/02/01........................................................................... 1,023,754
1,125,000 6.30%, 09/02/02........................................................................... 1,132,718
1,515,000 6.50%, 09/02/03........................................................................... 1,535,559
1,620,000 6.60%, 09/02/04........................................................................... 1,638,841
1,725,000 6.70%, 09/02/05........................................................................... 1,746,701
1,840,000 6.80%, 09/02/06........................................................................... 1,864,748
1,970,000 6.90%, 09/02/07........................................................................... 1,998,053
2,100,000 7.00%, 09/02/08........................................................................... 2,131,416
2,165,000 7.00%, 09/02/09........................................................................... 2,180,003
San Bernardino County Finance Authority Revenue, Refunding, Public Improvement, AD, Series A,
$ 1,460,000 6.00%, 09/02/01........................................................................... $ 1,465,387
1,285,000 6.50%, 09/02/04........................................................................... 1,317,857
2,720,000 7.00%, 09/02/17........................................................................... 2,740,400
15,000,000 San Francisco City and County RDA, Pre-Refunded, 7.75%, 09/01/06........................... 15,986,250
San Francisco Downtown Parking Corp. Revenue, Series 1993,
1,800,000 6.55%, 04/01/12........................................................................... 1,878,606
2,150,000 6.65%, 04/01/18........................................................................... 2,243,482
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue, Sr. Lien,
10,850,000 6.75%, 01/01/32........................................................................... 11,249,497
5,930,000 5.00%, 01/01/33........................................................................... 5,053,190
1,500,000 San Jose MFHR, Timberwood Apartments, Series B, 9.25%, 02/01/10............................ 1,559,610
San Ramon, 1915 Act, Fostoria Parkway Reassessment District No. 93-1,
1,005,000 6.30%, 09/02/03........................................................................... 999,081
2,585,000 6.80%, 09/02/15........................................................................... 2,543,899
3,000,000 Santa Margarita, Dana Point Authority, California Revenue, Refunding, Improvement Districts,
Series B, MBIA Insured, 5.75%, 08/01/20................................................... 3,011,460
Santa Rosa, 1915 Act, Fountaingrove Parkway, Extension,
3,340,000 7.40%, 09/02/13........................................................................... 3,422,565
3,450,000 7.625%, 09/02/19.......................................................................... 3,545,565
2,000,000 South San Francisco RDA, Tax Allocation, Gateway Redevelopment Project, 7.60%, 09/01/18.... 2,092,700
Vallejo Special Tax,
7,500,000 CFD No. 1988-1, 8.90%, 08/01/21........................................................... 7,857,375
12,000,000 CFD No. 1991-1, 8.80%, 10/01/21........................................................... 12,745,200
------------
499,017,016
------------
Colorado 4.7%
2,485,000 Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 06/01/11.................... 2,841,697
3,000,000 Arvada MFHR, Springwood Community, Project A, 6.45%, 02/20/26.............................. 3,091,890
Auraria Higher Educational Center, Parking Facilities Revenue, Refunding, Pre-Refunded,
3,450,000 7.75%, 04/01/09.......................................................................... 3,890,117
1,600,000 7.875%, 04/01/12......................................................................... 1,811,520
12,700,000 Colorado Health Facilities Authority, Beneficial Living System, Inc., Series A, 10.125%, 10/01/20 13,697,204
Colorado HFA,
600,000 SF Program, Issue A-2, 9.375%, 08/01/02.................................................. 631,764
470,000 SF Program, Series A-2, 9.25%, 08/01/01.................................................. 493,430
630,000 SF Program, Series B-1, 8.70%, 08/01/01.................................................. 657,348
650,000 SFMR, Series B-3, 9.75%, 08/01/02........................................................ 664,112
1,060,000 SFMR, Series C, 9.20%, 08/01/02.......................................................... 1,109,184
1,195,000 Colorado HFA, SFMR, Series 1991-C, 9.075%, 08/01/03........................................ 1,252,695
Denver City and County Airport System Revenue,
5,830,000 Series A, 7.50%, 11/15/12................................................................ 6,769,971
5,840,000 Series A, 8.25%, 11/15/12................................................................ 6,797,526
11,065,000 Series A, 8.00%, 11/15/17................................................................ 11,989,038
31,800,000 Series A, 8.50%, 11/15/23................................................................ 37,345,284
30,950,000 Series A, 7.25%, 11/15/25................................................................ 35,503,055
145,000 Series A, 8.00%, 11/15/25................................................................ 167,263
500,000 Series D, 7.75%, 11/15/13................................................................ 607,540
4,190,000 Series D, 7.75%, 11/15/21................................................................ 4,862,998
Eagle County Sports Facilities Revenue, Refunding,
19,600,000 Beaver Creek Association Project, 8.00%, 08/01/09........................................ 21,435,932
21,600,000 Vail Association Project, 8.00%, 08/01/09................................................ 23,623,272
$ 300,000 Fort Collins IDR, Vipont Pharmaceutical, Inc. Project, Pre-Refunded, 9.25%, 08/01/13....... $ 340,470
3,000,000 g Village Castle Rock Metropolitan District No. 4, 8.50%, 06/01/31........................... 780,000
------------
180,363,310
------------
Connecticut .2%
2,905,000 Connecticut Development Authority, First Mortgage Revenue, East Hill Gladeview Health
Project 86, 9.75%, 12/15/16............................................................... 3,219,321
3,500,000 Connecticut State HFA Housing Mortgage Finance Program, Subseries F-1, 6.00%, 05/15/17..... 3,531,815
------------
6,751,136
------------
District of Columbia 1.4%
District of Columbia Hospital Revenue, Washington Hospital Center, Series A,
2,000,000 7.00%, 08/15/05.......................................................................... 2,115,960
4,500,000 7.125%, 08/15/19......................................................................... 4,549,365
14,770,000 Pre-Refunded, 9.00%, 01/01/08............................................................ 17,787,511
3,750,000 Pre-Refunded, 8.75%, 01/01/15............................................................ 4,467,000
1,500,000 District of Columbia Redevelopment Agency, Washington D. C. Sports Arena Special Tax
Revenue, 5.625%, 11/01/10................................................................. 1,464,075
Washington DC, GO,
7,800,000 Series A, 5.875%, 06/01/05............................................................... 7,622,784
11,775,000 Series A, 6.00%, 06/01/07................................................................ 11,492,047
5,000,000 Series E, 6.00%, 06/01/11................................................................ 5,160,400
------------
54,659,142
------------
Florida 9.7%
1,075,000 Bay County Resource Recovery Revenue, Series 1984, Pre-Refunded, 8.00%, 07/01/12........... 1,132,781
19,910,000 Broward County Resource Recovery Revenue, Broward Waste Energy Co., L. P., North Project,
Series 1984, 7.95%, 12/01/08.............................................................. 22,166,998
12,400,000 Cape Coral Health Facilities Authority, Revenue, Refunding, First Mortgage, Gulf Care, Inc.
Project, Pre-Refunded, 11.00%, 10/01/17................................................... 15,679,676
Capron Trails Community Development District, Series 1990,
1,940,000 9.375%, 12/01/01......................................................................... 2,051,298
5,795,000 9.50%, 12/01/10.......................................................................... 6,187,264
12,000,000 Dade County, Florida Water and Sewer System Revenue, FGIC Insured, 5.50%, 10/01/25......... 11,809,920
East County Water Control District, Lee County Drain, Series 1991,
3,200,000 Pre-Refunded, 8.75%, 09/01/01............................................................ 3,613,824
10,565,000 Pre-Refunded, 8.625%, 09/01/11........................................................... 12,610,701
1,640,000 Escambia County Health Facilities Authority Revenue, Refunding, Pre-Refunded, Baptist
Hospital, Inc., Series A, 8.70%, 10/01/14................................................. 1,806,427
2,945,000 Flagler County IDA, First Mortgage Revenue, RHA, South Florida Properties, Inc. Projects,
10.50%, 12/01/18.......................................................................... 2,959,725
Florida Board of Education, Outlay Public Education, Series B,
5,000,000 5.875%, 06/01/23......................................................................... 5,062,900
5,000,000 5.875%, 06/01/24......................................................................... 5,074,400
Florida State, Mid Bay Bridge Authority, Series 1991-B, Pre-Refunded,
3,200,000 8.50%, 10/01/08.......................................................................... 3,684,256
15,400,000 8.50%, 10/01/22.......................................................................... 17,730,482
4,030,000 Gateway Services District, Florida Water Management Benefit Tax Revenue, Second
Assessment Area Phase One, 8.00%, 05/01/20................................................. 4,032,257
11,000,000 Indian Trace Community Development District, Florida Water and Sewer Revenue, Expansion,
6.875%, 04/01/10.......................................................................... 10,887,030
Indian Trace Community Development District, Refunding, Water Management Special Benefit,
Sub-Series B,
$ 13,225,000 8.25%, 05/01/05.......................................................................... $ 13,685,627
12,760,000 8.25%, 05/01/11.......................................................................... 13,228,547
10,000,000 Kissimmee Florida Utility Authority, Electric Systems Revenue, Refunding, FGIC Insured,
5.50%, 10/01/15........................................................................... 9,952,100
1,765,000 Lake Clarke Shores Utility System Revenue, Pre-Refunded, 8.75%, 10/01/18................... 2,004,440
12,000,000 Lakeland Retirement Community First Mortgage Revenue, Carpenters Home Estates Project,
9.75%, 09/01/18........................................................................... 12,614,280
Lakewood Ranch Community Development District 2, Benefit Special Assessment,
10,495,000 Series A, 8.125%, 05/01/17................................................................ 10,496,994
9,760,000 Series B, 8.125%, 05/01/17................................................................ 9,761,854
6,500,000 Manatee County IDR, Manetee Hospital and Health Systems, Inc., Pre-Refunded,
9.25%, 03/01/21........................................................................... 8,002,930
Meadow Pointe Community Development District, Capital Improvement Revenue,
4,100,000 6.25%, 07/01/98........................................................................... 4,129,397
7,870,000 6.875%, 07/01/99.......................................................................... 8,003,947
Mount Dora County Club Community Development District, Special Assessment Revenue,
4,375,000 6.75%, 05/01/03........................................................................... 4,296,863
4,110,000 7.125%, 05/01/05.......................................................................... 4,097,177
3,460,000 7.75%, 05/01/13........................................................................... 3,427,130
North Springs ID, Water Management,
2,000,000 Series A, 8.20%, 05/01/24................................................................. 2,151,280
1,755,000 Series B, 8.30%, 05/01/24................................................................. 1,887,134
Northwood Community Development District, Special Assessment Revenue,
2,520,000 Series A, 7.125%, 05/01/00................................................................ 2,514,733
1,620,000 Series B, 7.60%, 05/01/17................................................................. 1,625,038
6,000,000 Palm Beach County Health Facility Authority Revenue, Refunding, Abbey del Ray Project,
Series 1992, 8.25%, 10/01/15.............................................................. 6,501,840
Pelican Marsh Community Development District, Special Assessment Revenue,
8,540,000 Series A, 8.25%, 05/01/16................................................................. 9,109,533
6,180,000 Series B, 8.25%, 05/01/16................................................................. 6,592,144
1,225,000 Pembroke Pines Florida, Capital Improvement Revenue, AMBAC Insured, 5.95%, 10/01/20........ 1,266,699
2,425,000 Port Orange Lease Finance Corp., Recreation Facilities Lease Revenue, Pre-Refunded,
8.75%, 10/01/12........................................................................... 2,833,564
Riverwood Community Development, Special AD, Series A,
4,480,000 6.75%, 05/01/04........................................................................... 4,504,506
3,165,000 7.75%, 05/01/14........................................................................... 3,186,775
5,000,000 St. Lucie County Reserve, Storm Water Management, 8.25%, 05/01/14.......................... 5,229,800
5,000,000 St. Lucie West Services District, Florida Water Management Benefit Tax, 7.70%, 05/01/25.... 4,993,400
St. Lucie West Services District Revenue, Refunding, Port St. Lucie,
20,720,000 7.875%, 05/01/20.......................................................................... 21,564,340
23,480,000 8.25%, 12/01/23........................................................................... 24,882,930
Santa Rosa County Health Facilities Authority Revenue, Gulf Breeze Hospital, Inc.,
300,000 8.60%, 10/01/02........................................................................... 323,394
835,000 Pre-Refunded, 8.70%, 10/01/14............................................................. 945,061
Tampa Capital Improvement Program Revenue,
3,085,000 Series A, 8.25%, 10/01/18................................................................. 3,331,738
8,900,000 Series B, 8.375%, 10/01/18................................................................ 9,516,325
10,000,000 Tampa Revenue, Aquarium, Inc. Project, 7.55%, 05/01/12..................................... 10,487,800
Village Community Development, District No. 1, Capital Improvement Revenue,
$ 5,450,000 6.75%, 05/01/02........................................................................... $ 5,634,592
3,795,000 8.40%, 05/01/12........................................................................... 4,070,669
4,215,000 8.00%, 05/01/15........................................................................... 4,424,907
4,155,000 West Volusia Hospital Authority Revenue, Series 1986-B, Pre-Refunded, 9.375%, 09/01/16..... 4,403,261
------------
372,172,688
------------
Georgia .1%
735,000 Burke County Development Authority, PCR, Georgia Power Co., Plant Vogtle Project,
8.375%, 07/01/17.......................................................................... 783,863
40,000 Fulton County Residential Care Facilities, Elderly Authority Revenue, Refunding, Lenbrook
Square Foundation, Inc. Project, Series 1987, 9.75%, 01/01/17............................. 40,889
1,405,000 Tift County IDAR, Beverly Enterprises, 10.125%, 09/01/10................................... 1,589,772
------------
2,414,524
------------
Hawaii .4%
6,500,000 Hawaii Department of Transportation Special Revenue, Continental Airlines, Inc., 9.70%, 06/01/20 7,048,405
5,125,000 Hawaii State Special AD No. 17, AMBAC Insured, 9.50%, 08/01/11............................. 5,459,355
1,315,000 Hawaiian Home Lands Department Revenue, 7.60%, 07/01/08.................................... 1,439,399
------------
13,947,159
------------
Illinois 4.0%
9,150,000 Alton Hospital Facilities Revenue, Refunding, St. Anthony's Health Center Project,
8.375%, 09/01/14.......................................................................... 9,838,995
5,635,000 Aurora MFMR, Fox Valley Two-Oxford, 8.50%, 12/01/08........................................ 5,739,078
Chicago O'Hare Airport Special Facility,
7,830,000 Refunding, American Airlines, Inc. Project, 8.20%, 12/01/24............................... 9,186,156
3,755,000 United Airlines, Inc. Revenue, 8.85%, 05/01/18............................................ 4,259,259
15,725,000 United Airlines, Inc., Series 1984-A, 8.85%, 05/01/18..................................... 17,836,710
Chicago Wastewater Transmission Revenue,
2,810,000 FGIC Insured, Pre-Refunded, 6.35%, 01/01/22............................................... 3,153,719
4,780,000 MBIA Insured, 6.375%, 01/01/24............................................................ 5,002,031
7,000,000 Illinois Development Financial Authority PCR, Refunding, Commonwealth Edison Co. Project,
7.25%, 06/01/11........................................................................... 7,545,930
Illinois Educational Facilities Authority Revenues, Osteopathic Health Systems,
2,330,000 ETM 05/15/03, 7.125%, 05/15/11............................................................ 2,625,048
7,000,000 Pre-Refunded, 7.25%, 05/15/22............................................................. 7,932,540
Illinois Health Facilities Authority Revenue,
3,000,000 Bensenville Home Society, Series B, 8.20%, 02/15/19....................................... 3,220,920
6,500,000 Northwestern Medical Center, 6.625%, 11/15/25............................................. 6,922,175
3,000,000 Refunding, Westlake Community Hospital, 7.875%, 01/01/13.................................. 3,192,000
2,000,000 Sarah Bush Lincoln Health Center, 7.25%, 05/15/12......................................... 2,096,440
3,000,000 Servantcor, Series 1989-B, Pre-Refunded, 7.875%, 08/15/19................................. 3,412,410
19,120,000 Illinois Health Facilities Authority Revenue, Revolving Fund, Pooled Financing, Thorek Hospital
and Medical Center, Series H, 9.50%, 08/01/15.............................................. 20,656,292
6,500,000 Lombard, Village of, Revenue, Refunding, Beacon Hill Project, 9.30%, 02/15/18.............. 6,761,560
b Metropolitan Pier and Exposition Authority, Illinois Hospitality Facilities Revenue, McCormick
Place Convention,
1,650,000 5.75%, 07/01/06......................................................................... 1,650,000
7,500,000 6.25%, 07/01/17......................................................................... 7,429,425
7,500,000 7.00%, 07/01/26......................................................................... 8,053,125
17,500,000 Robbins Resources Recovery Revenue, Series B, 9.25%, 10/15/16.............................. 16,937,200
1,365,000 Sterling First Mortgage Revenue, Hoosier Care Project, Series A, 9.75%, 08/01/19........... 1,455,609
------------
154,906,622
------------
Indiana .8%
$ 5,000,000 Crawfordsville Industrial EDR, Refunding, Kroger Co., 7.70%, 11/01/12...................... $ 5,359,450
3,000,000 Indiana Health Facility Financing Authority, Hancock Memorial Hospital Project, Series 1990,
8.30%, 08/15/20........................................................................... 3,256,560
1,000,000 Indiana State Educational Facilities Authority Revenue, Anderson University Project,
8.40%, 10/01/08........................................................................... 1,102,500
12,500,000 Indianapolis Local Public Improvement Bond, Series C, 6.00%, 01/10/18...................... 12,695,875
2,500,000 Jefferson County Hospital Authority Facility Revenue, Refunding, King's Daughters' Hospital,
8.50%, 08/15/13........................................................................... 2,670,300
Kokomo Hospital Authority Revenue, Refunding, St. Joseph's Hospital and Health Center of Kokomo,
2,475,000 Series A, Pre-Refunded, 8.75%, 02/15/13................................................... 2,794,127
3,700,000 Series B, Pre-Refunded, 8.75%, 02/15/13................................................... 4,177,078
------------
32,055,890
------------
Iowa .3%
500,000 Clinton Hospital Facilities Revenue, Jane Lamb Health Center Project, Pre-Refunded,
8.75%, 08/01/03........................................................................... 564,870
9,135,000 Des Moines General Hospital, 10.125%, 12/01/11............................................. 9,177,935
------------
9,742,805
------------
Kansas .2%
5,730,000 Prairie Village Revenue, Claridge Court Project, Series A, 8.75%, 08/15/23................. 6,026,069
------------
Kentucky 1.3%
900,000 Danville Multi-City Lease Revenue, Sewer and Drain System, Series G, MBIA Insured,
Pre-Refunded, 6.75%, 03/01/11............................................................. 1,021,599
960,000 Florence Housing Facilities Revenue, Bluegrass Retirement Housing Foundation Project,
9.50%, 07/01/17........................................................................... 961,555
3,300,000 Jefferson County, Health Facilities Revenue, Beverly Project, 10.125%, 08/01/07............ 3,591,258
Kenton County Airport Revenue, Special Facilities, Delta Airlines, Inc. Project,
11,000,000 8.10%, 12/01/15.......................................................................... 11,907,390
11,230,000 Series A, 7.50%, 02/01/20................................................................ 12,086,849
3,595,000 Series B, 7.25%, 02/01/22................................................................ 3,823,175
1,040,000 Powderly IDR, First Mortgage Revenue, Kroger Co., Refunding, 7.375%, 09/01/06.............. 1,125,998
Russell County, Franciscan Health System Revenue, Series B,
2,000,000 8.10%, 07/01/01........................................................................... 2,217,440
7,500,000 8.10%, 07/01/15........................................................................... 8,616,000
1,000,000 Stanford Health Facilities Revenue, Refunding, Beverly Project, 10.375%, 11/01/09.......... 1,144,250
3,350,000 Winchester Hospital Revenue, Refunding, Clark County Hospital Project, 7.75%, 04/01/13..... 3,445,944
------------
49,941,458
------------
Louisiana 3.1%
3,030,000 Calcasieu Parish, SFMR, Series 1991-A, 7.75%, 06/01/12..................................... 3,226,496
705,000 Iberville Parish Consolidated School District No. 5, GO, Unlimited Tax, Pre-Refunded,
8.00%, 10/01/06 785,983
35,000,000 Lake Charles Harbor and Terminal District Port Facilities Revenue, Refunding, Trunkline Co.
Project, 7.75%, 08/15/22.................................................................. 39,594,450
4,850,000 Pointe Coupee Parish, PCR, Refunding, Gulf States Utilities Co. Project, 6.70%, 03/01/13... 4,966,012
St. Charles Parish PCR, Louisiana Power and Light Co. Project,
25,500,000 8.25%, 06/01/14........................................................................... 28,200,960
13,525,000 8.00%, 12/01/14........................................................................... 14,939,445
West Feliciana PCR,
17,200,000 Refunding, Gulf States Utilities Co. Project, 8.00%, 12/01/24............................. 18,532,140
8,740,000 Series A, 7.50%, 05/01/15................................................................. 9,441,560
------------
119,687,046
------------
Maine .3%
$ 5,000,000 Maine State Finance Authority Solid Waste Disposal Revenue, Boise Cascade Corp. Project,
7.90%, 06/01/15........................................................................... $ 5,381,300
4,800,000 Rumford PCR, Boise Cascade Corp. Project, Refunding, 6.625%, 07/01/20...................... 4,983,408
------------
10,364,708
------------
Maryland 1.0%
Gaithersberg Hospital Facilities Revenue, Refunding, Shady Grove Adventist Hospital,
2,080,000 Nursing Home, Series 1992-A, Pre-Refunded, 9.00%, 09/01/22................................ 2,178,987
3,675,000 Nursing Home, Series 1992-B, Pre-Refunded, 8.50%, 09/01/22................................ 4,537,596
6,755,000 Series 1992-B, 8.50%, 09/01/03............................................................ 6,862,472
5,340,000 Series 1992-B, 8.50%, 09/01/07............................................................ 5,826,581
5,000,000 Series C, 6.00%, 09/01/21................................................................. 5,159,150
Takoma Park, Hospital Facilities Revenue, Washington Adventist Hospital Project, Series B,
7,020,000 8.50%, 09/01/03........................................................................... 7,221,334
6,975,000 8.50%, 09/01/07........................................................................... 7,610,562
-------------
39,396,682
-------------
Massachusetts 1.7%
2,000,000 Bay Transit Authority, General Transportation System, Series A, 7.00%, 03/01/21............ 2,329,300
4,500,000 Cape Cod Health Systems, Massachusetts Industry Finance Authority, BIG Insured,
Pre-Refunded, 8.50%, 11/15/20............................................................. 5,379,570
Massachusetts Municipal Wholesale, Electric Co. Power Supply System Revenue,
4,435,000 Series A, 6.75%, 07/01/11................................................................. 4,785,188
3,170,000 Series B, 6.75%, 07/01/17................................................................. 3,389,966
2,000,000 Massachusetts State Health and Educational Facility Revenue, Framingham, Union Hospital,
Pre-Refunded, 8.50%, 07/01/10............................................................. 2,361,200
Massachusetts State Industrial Finance Agency, Semass Project,
15,490,000 Series 1991-A, 9.00%, 07/01/15............................................................ 17,320,918
20,590,000 Series 1991-B, 9.25%, 07/01/15............................................................ 23,102,598
Massachusetts State Industrial Finance Agency, First Mortgage Revenue,
3,000,000 Berkshire Retirement Community, Lenox, Pre-Refunded, 9.875%, 07/01/18..................... 3,182,610
2,000,000 Brookhaven at Lexington Retirement Project, Pre-Refunded, 10.25%, 01/01/18................ 2,278,920
Massachusetts State Water Resources Authority,
1,000,000 Series A, 6.00%, 04/01/20................................................................. 1,016,510
------------
65,146,780
------------
Michigan 2.0%
6,240,000 City of Cadillac, Local Development Financial Authority, Tax Increment Revenue, Refunding,
8.50%, 03/01/10........................................................................... 6,731,525
Detroit GO,
5,160,000 Series A, 6.80%, 04/01/15................................................................. 5,479,146
7,535,000 Series B, Refunding, 6.375%, 04/01/07..................................................... 7,914,387
3,000,000 Series B, Refunding, 6.25%, 04/01/08...................................................... 3,111,480
2,750,000 Dickinson County, Memorial Hospital System Revenue, 8.125%, 11/01/24....................... 3,012,075
6,605,000 Michigan State Hospital, Finance Authority Revenue, Refunding, Detroit Osteopathic Hospital,
Pre-Refunded, Series A, 7.50%, 11/01/10................................................... 7,133,862
7,825,000 Michigan State Strategic Funding Obligation, 6.20%, 08/15/25............................... 8,203,965
12,000,000 Midland County EDC, PCR, Refunding, 9.50%, 07/23/09........................................ 13,259,640
3,500,000 Muskegon, Hospital Finance Authority, Muskegon General Hospital, 8.25%, 02/15/11........... 3,787,140
2,085,000 Tawas City HFA, Hospital Revenue, Tawas St. Joseph's Hospital Project, Series A,
8.50%, 03/15/12........................................................................... 2,182,641
1,900,000 Wayne County, Downriver Systems Sewer Disposal, Series A, 7.00%, 11/01/13.................. 1,983,752
$ 4,500,000 Wayne County, Michigan Building Authority IDA, Pre-Refunded, 8.00%, 03/01/17............... $ 5,387,715
5,000,000 Wayne County, South Huron Valley Wastewater Control, Refunding, 7.875%, 05/01/02........... 5,659,800
Wyandotte Tax Increment Finance Authority, Central Development Area Project, Pre-Refunded,
500,000 7.875%, 06/01/08.......................................................................... 533,120
500,000 7.875%, 06/01/09.......................................................................... 561,850
500,000 7.875%, 06/01/10.......................................................................... 561,850
------------
75,503,948
------------
Minnesota 3.4%
Burnsville Solid Waste Revenue, Freeway Transfer, Inc. Project,
575,000 9.00%, 10/01/00.......................................................................... 637,002
1,500,000 9.00%, 04/01/10.......................................................................... 1,657,890
5,000,000 Duluth Minnesota, Commercial Development Revenue, Refunding, Duluth Radisson Hotel Project,
8.00%, 12/01/15.......................................................................... 5,036,800
6,675,000 Edina MFR, Refunding Mortgage, Vernon Terrace Project, 5.00%, 07/01/22..................... 6,684,078
Minneapolis CDA, Limited Tax, Supported Development Revenue,
3,075,000 Series 2, 8.40%, 12/01/12................................................................ 3,311,498
600,000 Series 3-A, 8.375%, 12/01/19............................................................. 667,842
290,000 Minneapolis CDR, Selwyn/Lavin Project, 9.00%, 12/01/11..................................... 292,865
4,000,000 Minnesota State HFA, Rental Housing, Refunding, MBIA Insured, Series D, 5.95%, 02/01/18.... 4,009,240
1,255,000 Northfield First Mortgage Nursing Home Revenue, Minnesota Odd Fellows Home Project,
8.75%, 10/01/03.......................................................................... 1,327,401
5,165,000 Northwest Multi-County RDA, Governmental Housing Revenue Pooled Housing Project,
7.40%, 07/01/26.......................................................................... 5,018,624
4,110,000 Robbinsdale, MFHR, Refunding, Copperfield Phase II Apartments, 9.00%, 03/01/25............. 4,172,431
10,000,000 South Central Multi-County Housing and RDA, Pooled Housing, 8.00%, 02/01/25................ 9,357,200
5,995,000 St. Cloud, IDR, Nahan Printing, 9.75%, 06/01/20............................................ 6,404,279
St. Paul Housing and RDA, Hospital Facility Revenue, Healtheast Project,
4,475,000 Series A, Pre-Refunded, 9.75%, 11/01/17.................................................. 4,879,361
410,000 Series B, Pre-Refunded, 9.75%, 11/01/17.................................................. 443,768
660,000 Series C, Pre-Refunded, 9.75%, 11/01/17.................................................. 719,638
3,320,000 Series D, 9.75%, 11/01/17................................................................ 3,619,995
1,610,000 St. Paul Housing and RDA, Housing Tax, 8.625%, 09/01/07.................................... 1,828,429
590,000 St. Paul Port Authority Commercial Development, Theole Printing Project, 9.00%, 10/01/21... 615,830
4,690,000 St. Paul Port Authority Energy Park, Tax Increment Revenue, Refunding, Pre-Refunded,
8.00%, 12/01/07.......................................................................... 5,268,840
St. Paul Port Authority GO, Mears Park Center Building Project, Series 1989-1,
6,060,000 8.25%, 09/01/09.......................................................................... 6,620,065
9,510,000 8.50%, 09/01/18.......................................................................... 10,447,211
St. Paul Port Authority, IDR,
1,565,000 SDA Enterprises, Series K, 10.25%, 10/01/10............................................... 1,428,063
40,000 Series 1979-2, 7.50%, 10/01/09............................................................ 38,872
1,300,000 Series 1982-N, 10.75%, 10/01/02........................................................... 1,235,000
4,505,000 Series 1983-C, 10.00%, 12/01/06........................................................... 4,093,919
3,100,000 Series 1983-C, 9.875%, 12/01/08........................................................... 2,766,750
2,805,000 Series 1983-U, 10.75%, 12/01/13........................................................... 2,647,219
485,000 Series 1984-I, 10.75%, 12/01/13........................................................... 457,719
1,585,000 Series 1984-L, 9.75%, 12/01/14............................................................ 1,373,006
1,535,000 Series 1984-N, 10.00%, 12/01/14........................................................... 1,358,475
1,500,000 Series 1985-J, 9.50%, 12/01/11............................................................ 1,290,000
1,110,000 Series 1985-L, 9.50%, 12/01/14............................................................ 940,725
St. Paul Port Authority, IDR, (cont.)
$ 1,395,000 Series 1985-S, 9.625%, 12/01/14........................................................... $ 1,194,469
975,000 Series 1985-T, 9.625%, 12/01/14........................................................... 834,844
1,100,000 Series 1989-F, 8.00%, 09/01/19............................................................ 825,000
1,185,000 Series 1991 A-I, 8.50%, 12/01/01.......................................................... 1,125,750
4,560,000 Series 1991 A-I, 9.00%, 12/01/12.......................................................... 3,830,400
1,160,000 Series 1991 A-II, 8.50%, 12/01/01......................................................... 1,102,000
4,490,000 Series 1991 A-II, 9.00%, 12/01/12......................................................... 3,659,350
1,220,000 Series 1991 A-III, 8.50%, 12/01/01........................................................ 1,159,000
4,695,000 Series 1991 A-III, 9.00%, 12/01/12........................................................ 3,826,425
930,000 Series 1991 A-IV, 8.50% 12/01/01.......................................................... 883,500
3,580,000 Series 1991 A-IV, 9.00%, 12/01/12......................................................... 2,917,700
9,280,000 Washington County Housing and RDA, MFHR, Season Villas, 9.00%, 12/01/22.................... 9,445,926
------------
131,454,399
------------
Mississippi 2.2%
Claiborne County PCR, Middle South Energy, Inc. Project,
10,680,000 Series A, 9.50%, 12/01/13................................................................. 12,147,646
9,750,000 Series B, 8.25%, 06/01/14................................................................. 10,748,888
10,000,000 Series C, 9.875%, 12/01/14................................................................ 11,466,100
19,975,000 Series E, 9.50%, 04/01/16................................................................. 20,661,541
22,795,000 System Energy Residential Income Project. 6.20%, 02/01/26................................. 22,427,773
2,500,000 Claiborne County PCR, System Energy Resources Inc., 7.30%, 05/01/25........................ 2,626,925
4,250,000 Lowndes County, Golden Triangle Medical Center, 8.50%, 02/01/10............................ 4,666,543
720,000 Mississippi Hospital Equipment and Facilities Authority Revenue, Refunding, Mississippi
Methodist Hospital and Rehabilitation Center, Pre-Refunded, 9.375%, 05/01/12.............. 820,548
------------
85,565,964
------------
Missouri 1.5%
8,900,000 Missouri Health and Educational Facilities Authority, Health Facility Marshall, IDA, John
Fitzgibbons Hospital, Series 1990, 10.00%, 05/01/20....................................... 9,932,756
7,300,000 Missouri State Revenue, Refunding and Improvement, Heartland Health Systems Project,
8.125%, 10/01/10........................................................................... 8,200,601
200,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc. Project,
Pre-Refunded, 8.75%, 03/01/16............................................................. 222,671
1,515,000 Newton County IDA, Health Facilities Revenue, Beverly Enterprises, 10.375%, 11/01/08....... 1,700,966
1,900,000 Perry Co., Perry Memorial Hospital, Series 1990, 9.125%, 06/01/11.......................... 2,034,197
1,000,000 St. Louis County IDA, Health Facilities Revenue, Refunding and Improvement, First Mortgage,
Normandy Osteopathic Hospitals Project, 9.125%, 08/01/13.................................. 1,054,200
St. Louis County IDA, Refunding, Kiel Center,
8,000,000 7.625%, 12/01/09......................................................................... 8,601,200
5,175,000 7.75%, 12/01/13.......................................................................... 5,584,032
6,000,000 7.875%, 12/01/24......................................................................... 6,463,500
14,250,000 St. Louis Municipal Financial Corp. Leasehold Revenue, Refunding, Series A, 6.00%, 07/15/13 14,052,353
------------
57,846,476
------------
Montana 1.0%
520,000 Montana State Board of Housing, SFM, Senior Bonds, Series B-2, 8.90%, 10/01/00............. 539,136
2,500,000 Montana State Board of Investments EDR, Refunding, Bozeman Holiday Inn Project,
11.00%, 12/01/07........................................................................... 2,649,950
$ 35,000,000 Montana State Board of Investments, Resource Recovery Revenue, Yellowstone Energy Project,
7.00%, 12/31/19........................................................................... $ 34,319,950
765,000 Montana State SFMR, Series 1991-A, 8.275%, 10/01/03........................................ 805,568
------------
38,314,604
------------
Nebraska .1%
3,500,000 Douglas County, Nebraska Hospital Authority Revenue, Health Facilities, Catholic Health, MBIA
Insured, Series C, 5.375%, 11/15/15....................................................... 3,382,155
2,100,000 Scotts Bluff County, Hospital No. 1, Hospital Revenue, 6.375%, 12/15/08.................... 2,206,953
------------
5,589,108
------------
Nevada 2.6%
Henderson Local Improvement,
6,980,000 District No. 2, 9.50%, 08/01/11........................................................... 7,345,054
45,970,000 District No. T-1, Series A, 8.50%, 08/01/13............................................... 46,820,445
10,930,000 District No. T-4, Series A, 8.50%, 11/01/12............................................... 11,405,127
5,195,000 District No. T-4, Series B, 7.30%, 11/01/12............................................... 5,223,780
7,350,000 District No. T-10, 7.50%, 08/01/15........................................................ 7,289,951
2,000,000 Las Vegas Downtown RDA, Tax Increment Revenue, Fremont Street Project, Series A,
6.10%, 06/15/14........................................................................... 1,988,880
8,430,000 Las Vegas Special ID No. 505, Elkhorn Springs, 8.00%, 09/15/13............................. 8,558,473
Nevada Housing Division, SF Program, Subordinated, FI/GML,
330,000 Series A, 9.30%, 10/01/00................................................................. 342,431
315,000 Series A-1, 8.75%, 10/01/04............................................................... 330,218
380,000 Series A-2, 9.375%, 10/01/00.............................................................. 395,382
610,000 Series A-2, 8.65%, 10/01/01............................................................... 632,863
365,000 Series A-3, 9.20%, 10/01/00............................................................... 377,384
500,000 Series B, 9.50%, 10/01/01................................................................. 521,745
745,000 Series B-1, 7.90%, 10/01/05............................................................... 766,046
960,000 Series C-1, 7.55%, 10/01/05............................................................... 999,706
Nevada Housing Finance Division Subordinate,
360,000 Series 1989 B-2, 9.65%, 10/01/02.......................................................... 377,734
405,000 Series 1990 C-1, 9.60%, 10/01/02.......................................................... 413,379
6,310,000 White Pine County, School District Building, 6.75%, 06/01/18............................... 6,549,717
------------
100,338,315
------------
New Hampshire 1.6%
New Hampshire Higher Education and Health Facility Authority Revenue,
18,950,000 Hillcrest Terrace, 7.50%, 07/01/24........................................................ 17,151,266
9,730,000 Kendal at Hanover Project, 8.00%, 10/01/19................................................ 9,900,762
New Hampshire IDA, PCR,
8,835,000 Public Service Co., Project A, 7.65%, 05/01/21............................................ 9,304,580
21,930,000 Public Service Co., Project C, 7.65%, 05/01/21............................................ 23,095,580
500,000 United Illuminating Co., 10.75%, 10/01/12................................................. 556,550
3,000,000 New Hampshire State Business Financial Authority, PCR, Refunding, Illuminating Co., Series A,
5.875%, 10/01/33.......................................................................... 2,808,960
------------
62,817,698
------------
New Jersey .5%
4,000,000 New Jersey EDA, EDR, Refunding, Stolt Terminals, Series 1988-A, 10.50%, 01/15/18........... 4,442,760
2,100,000 New Jersey Health Care Facilities Financing Authority Revenue, Lutheran Home, Series A,
8.40%, 07/01/19........................................................................... 2,209,956
$ 2,500,000 New Jersey State Educational Facilities Authority, Refunding, Fairleigh Dickinson University,
Series C, 6.625%, 07/01/23................................................................ $ 2,345,850
New Jersey State Housing and Mortgage Finance Agency, MFHR, Refunding, Series A,
3,000,000 6.00%, 11/01/14........................................................................... 3,055,890
5,500,000 6.05%, 11/01/20........................................................................... 5,602,190
------------
17,656,646
------------
New Mexico 1.3%
Farmington PCR, Refunding, Public Service of New Mexico Co., San Juan Project,
37,350,000 Series A, 6.40%, 08/15/23................................................................. 36,825,606
2,900,000 Series X, 5.90%, 04/01/07................................................................. 2,849,047
New Mexico Mortgage Finance Authority, SFM Program,
1,880,000 Refunding Series A-1, 7.90%, 07/01/04..................................................... 1,966,160
535,000 Series A, FHA Insured, 8.80%, 09/01/01.................................................... 558,995
605,000 Series 1988-A, 9.50%, 09/01/00............................................................ 617,735
420,000 Series 1988-B, 9.30%, 09/01/00............................................................ 428,723
1,095,000 Series 1991-A, 9.10%, 09/01/03............................................................ 1,152,312
1,050,000 Sub-Series 1990-A, 9.55%, 09/01/02........................................................ 1,071,725
3,620,000 Rio Rancho Water and Wastewater Revenue, Series A, 5.90%, 05/15/15......................... 3,691,857
------------
49,162,160
------------
New York 11.2%
8,440,000 d Babylon IDA, Recycling Facilities Revenue, Babylon Recycling Center, Inc., Series A,
8.875%, 03/01/11........................................................................... 4,220,000
Babylon IDA, Resource Recovery Revenue, Inc., Ogden Martin System, Babylon, Inc.,
3,920,000 Pre-Refunded, 8.50%, 01/01/19............................................................. 4,428,502
1,000,000 Series B, Pre-Refunded, 8.50%, 01/01/19................................................... 1,129,720
Metropolitan Transportation Authority, Service Contract, Refunding,
4,000,000 Commuter Facilities, Series 1, 5.70%, 07/01/24............................................ 3,966,280
3,860,000 Commuter Facilities, Series 5, 6.50%, 07/01/16............................................ 3,993,363
3,330,000 Commuter Facilities, Series N, 6.80%, 07/01/04............................................ 3,624,106
3,050,000 Commuter Facilities, Series N, 6.90%, 07/01/05............................................ 3,318,400
2,330,000 Transportation Facilities, Series N, 6.80%, 07/01/04...................................... 2,535,786
2,470,000 Transportation Facilities, Series N, 6.90%, 07/01/05...................................... 2,687,360
7,830,000 Transportation Facilities, Series N, 7.125%, 07/01/09..................................... 8,616,445
New York City GO,
10,190,000 Refunding, Series A, 6.125%, 08/01/06..................................................... 10,421,313
10,000,000 Refunding, Series A, 6.25%, 08/01/08...................................................... 10,245,100
1,795,000 Refunding, Series G, 5.75%, 08/01/10...................................................... 1,733,557
10,000,000 Series A, Pre-Refunded, 7.25%, 03/15/20................................................... 10,854,300
1,200,000 Series A, 6.25%, 08/01/21................................................................. 1,195,368
17,070,000 Series B, 7.00%, 08/15/16................................................................. 18,337,618
4,090,000 Series B, 7.00%, 02/01/18................................................................. 4,363,253
5,000,000 Series B, 7.50%, 02/01/18................................................................. 5,457,300
5,000,000 Series B, 7.00%, 02/01/19................................................................. 5,334,050
5,745,000 Series B, 7.00%, 02/01/20................................................................. 6,128,823
5,000,000 Series B, Sub Series B-1, 7.25%, 08/15/19................................................. 5,453,300
4,250,000 Series C, 6.75%, 10/01/15................................................................. 4,389,103
4,800,000 Series C, 7.00%, 08/01/17................................................................. 5,138,112
11,050,000 Series C, 7.25%, 08/15/24................................................................. 11,783,057
1,000,000 Series C, Sub Series C-1, 7.00%, 08/01/16................................................. 1,070,440
4,875,000 Series C, Sub Series C-1, 7.50%, 08/01/21................................................. 5,346,998
$ 11,600,000 Series D, 6.00%, 02/15/10................................................................. $ 11,480,868
3,500,000 Series D, 7.70%, 02/01/11................................................................. 3,841,775
5,000,000 Series D, 7.625%, 02/01/13................................................................ 5,469,750
9,000,000 Series D, 7.625%, 02/01/14................................................................ 9,878,580
5,000,000 Series D, 7.50%, 02/01/19................................................................. 5,457,300
525,000 Series E, 7.50%, 02/01/18................................................................. 573,017
4,500,000 Series F, 7.625%, 02/01/13................................................................ 4,922,775
4,500,000 Series F, 7.625%, 02/01/14................................................................ 4,939,290
400,000 Series F, 7.625%, 02/01/15................................................................ 440,100
8,545,000 Series F, 7.50%, 02/01/21................................................................. 9,326,526
8,625,000 Series F, 6.625%, 02/15/25................................................................ 8,843,816
840,000 Series G, 7.50%, 02/01/22................................................................. 916,826
5,000,000 Series H, 7.20%, 02/01/14................................................................. 5,383,350
12,600,000 Series H, 7.20%, 02/01/15................................................................. 13,598,802
12,000,000 Series H, 7.00%, 02/01/19................................................................. 12,801,720
2,925,000 Series H, 7.00%, 02/01/20................................................................. 3,120,419
350,000 Series H, 7.00%, 02/01/22................................................................. 373,384
6,970,000 New York City IDA, Civic Facility Revenue, Amboy Corp. Project, Series 1990, 9.625%, 06/01/15 7,843,480
New York City Municipal Water Financing Authority, Water and Sewer System Revenue,
Refunding, Series A,
10,075,000 FGIC Insured, 5.75%, 06/15/18.............................................................. 10,113,386
5,900,000 6.00%, 06/15/17........................................................................... 5,972,216
New York State Dormitory Authority Revenue, City University System,
1,000,000 Series B, Pre-Refunded, 7.20%, 07/01/21................................................... 1,155,100
1,000,000 Series F, Pre-Refunded, 7.875%, 07/01/07.................................................. 1,164,830
8,500,000 Series F, Pre-Refunded, 7.875%, 07/01/17.................................................. 9,901,055
730,000 New York State Dormitory Authority Revenue, State University Educational Facilities, Series A,
Pre-Refunded, 7.125%, 05/15/17............................................................ 812,913
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................................. 12,071,014
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.......................................................................... 5,145,200
1,000,000 Water Facility Revenue, Long Island Water Corp. Project, Series 1987-A, 10.00%, 10/01/17 1,074,170
New York State HFA, Service Contract Obligation Revenue,
9,715,000 Series A, Pre-Refunded, 7.80%, 09/15/20................................................. 11,348,189
10,000,000 Series A, 6.50%, 03/15/25............................................................... 10,377,700
New York State Local Government Assistance Corp.,
15,000,000 Series B, 7.25%, 04/01/05................................................................. 17,098,050
10,000,000 Series B, 7.25%, 04/01/06................................................................. 11,398,700
6,850,000 Series D, Pre-Refunded, HFA, 7.80%, 09/15/10.............................................. 8,001,554
3,500,000 Series D, Pre-Refunded, 7.00%, 04/01/18................................................... 4,054,225
New York State Medical Care Facilities Finance Agency Revenue,
4,000,000 St. Luke's Nursing Home Mortgage Insured, Series B, 6.95%, 02/15/32..................... 4,270,680
2,500,000 Security Hospital, Series A, 7.35%, 08/15/11............................................ 2,703,025
Port Authority of New York and New Jersey, Special Obligation Revenue,
5,000,000 Second Series, MBIA Insured, 5.75%, 10/15/23.............................................. 5,026,600
10,000,000 Continental Airlines, Inc., Eastern Project, La Guardia, 9.00%, 12/01/10.................. 11,213,000
27,650,000 Continental Airport Project, Eastern Project, La Guardia, 9.125%, 12/01/15................ 31,143,301
Troy IDA, Lease Revenue, City of Troy,
$ 5,000,000 8.00%, 03/15/12........................................................................... $ 5,064,850
5,500,000 8.00%, 03/15/22........................................................................... 5,571,335
1,500,000 Warren and Wash Counties IDAR, Refunding, Resource Recovery, Series A, 7.90%, 12/15/07..... 1,553,550
------------
431,218,075
------------
North Dakota .2%
7,500,000 Mercer County, PCR, Refunding, Basin Electric Power, Second Series, AMBAC Insured,
6.05%, 01/01/19........................................................................... 7,745,775
------------
Ohio 4.9%
2,670,000 Allen County Nursing Home, First Mortgage Revenue, Volunteers of America Care Facilities
Project, 9.00%, 03/01/18................................................................... 2,813,059
21,235,000 Cleveland Airport Special Revenue, Continental Airlines, Inc. Project, 9.00%, 12/01/19..... 22,355,783
Montgomery County Health Systems Revenue, Franciscan,
1,400,000 Series B, 8.10%, 07/01/01................................................................. 1,551,536
9,600,000 Series B, 8.10%, 07/01/18................................................................. 10,824,288
1,300,000 Series B-1, 8.10%, 07/01/01............................................................... 1,440,712
6,300,000 Series B-1, 8.10%, 07/01/18............................................................... 7,103,439
6,500,000 Series B-2, 8.10%, 07/01/18............................................................... 7,328,945
1,200,000 Muskingum County, Ohio Hospital Facilities Revenue, Refunding, Franciscan Sisters Connie Lee,
5.375%, 02/15/12.......................................................................... 1,153,380
Ohio State Air Quality Authority,
17,900,000 Dayton Power and Light Company Project, Refunding, 6.10%, 09/01/30........................ 18,255,315
5,265,000 Toledo Edison, Series B, 8.00%, 05/15/19.................................................. 5,574,898
10,300,000 Ohio State HFA, Chagrin Fall, Retirement Rental Housing Revenue, 10.375%, 04/01/09......... 11,428,571
Ohio State Water Development Authority,
27,700,000 PCR, Refunding, Cleveland Electric, Series A, 8.00%, 10/01/23............................. 29,465,875
6,200,000 Toledo Edison, Series A, 8.00%, 05/15/19.................................................. 6,564,932
4,750,000 Ohio State Water Development Authority Revenue, Refunding and Improvement, Pure Water,
AMBAC Insured, 5.50%, 12/01/18............................................................ 4,670,865
500,000 Pike County Hospital Facilities Revenue, National Church Residences, Series 1987,
Pre-Refunded, 9.875%, 07/01/17............................................................ 566,940
3,775,000 Seneca County Nursing HMR, Refunding and Improvement, Volunteers of America Care Facilities,
9.00%, 01/01/13........................................................................... 3,966,695
Toledo-Lucas County Port Authority Airport Revenue, Burlington Air Express,
7,540,000 Project 1, 7.00%, 04/01/04................................................................ 7,947,386
1,295,000 Series 1991-1, 9.125%, 09/15/01........................................................... 1,400,322
5,875,000 Series 1991-1, 9.125%, 09/15/13........................................................... 6,305,990
5,385,000 Series 1994-1, 7.25%, 04/01/09............................................................ 5,704,169
8,200,000 Series 1994-1, 7.375%, 04/01/14........................................................... 8,698,724
14,365,000 Series 1994-1, 7.50%, 04/01/19............................................................ 15,260,801
Toledo-Lucas County Port Authority Development Revenue, Northwest Ohio Bond Fund,
2,070,000 Series 1989-B, 9.00%, 11/15/08............................................................ 2,228,707
1,285,000 Series 1990-A, 8.625%, 05/15/10........................................................... 1,385,230
3,045,000 Series 1990-D, 8.25%, 05/15/20............................................................ 3,214,028
------------
187,210,590
------------
Oklahoma 1.0%
6,335,000 Jackson County Memorial Hospital Authority Revenue, Refunding, Jackson County Memorial
Hospital Project, Pre-Refunded, 9.00%, 08/01/15........................................... 6,924,472
Tulsa Municipal Airport Transportation Revenue,
12,845,000 American Airlines, Inc., 7.375%, 12/01/20................................................. 13,663,483
10,050,000 American Airlines Project, Refunding, 6.25%, 06/01/20..................................... 10,048,794
$ 4,000,000 Valley View Hospital Authority, Oklahoma Revenue, Refunding, Valley View Regional Medical
Center, 6.00%, 08/15/14................................................................... $ 3,807,280
2,500,000 Washington County Medical Authority Revenue, Bartlesville, Refunding, Jane Phillips Hospital,
Series A, 8.50%, 11/01/10................................................................. 2,687,025
------------
37,131,054
------------
Oregon .6%
2,500,000 Northern Wasco County, Peoples' Utility District, Oregon Electric Revenue, FGIC Insured,
5.625%, 12/01/22.......................................................................... 2,514,775
21,650,000 Oregon State Department Administrative Services, COP, Series A, MBIA Insured,
5.50%, 11/01/20........................................................................... 21,332,178
------------
23,846,953
------------
Pennsylvania 6.9%
Chartiers Valley Industrial and Commercial Development Authority Revenue, Refunding,
4,750,000 Asbury Health Center Project, 7.40%, 12/01/15............................................. 4,880,198
6,000,000 First Mortgage, United Methodist Health Center, Series A, Pre-Refunded, 9.50% 12/01/15.... 6,955,020
2,000,000 Friendship Village of South Hills Project, 9.25%, 08/15/08................................ 2,083,220
4,000,000 Friendship Village of South Hills Project, 9.50%, 08/15/18................................ 4,170,760
5,000,000 Delaware County IDAR, Refunding, Resource Recovery Project, Series A, 8.10%, 12/01/13...... 5,218,500
20,750,000 Delaware River Port Authority, Pennsylvania and New Jersey Revenue, FGIC Insured,
5.50%, 01/01/26........................................................................... 20,360,523
980,000 Fayette County Hospital Authority Revenue, Refunding, Uniontown Hospital Project,
7.625%, 07/01/15.......................................................................... 1,010,615
Franklin County IDA, Health Facilities Revenue, Encore Nursing Center,
650,000 10.375%, 07/01/11........................................................................ 745,992
3,100,000 10.375%, 07/01/11........................................................................ 3,546,834
3,300,000 Gettysburg IDA, Health Facilities Revenue, Refunding, Encore Nursing Center, 10.375%, 07/01/11 3,787,344
4,000,000 Lehigh County IDA, PCR, Refunding, Pennsylvania Power & Light Co. Project, Series A,
MBIA Insured, 6.15%, 08/01/29............................................................. 4,162,800
Montgomery County Higher Education and Health Authority Hospital Revenue, United Hospital,
200,000 Series A, 8.375%, 11/01/11................................................................ 215,572
3,560,000 Series A, 7.50%, 11/01/12................................................................. 3,622,905
750,000 Series A, 7.50%, 11/01/13................................................................. 763,253
600,000 Series A, 7.50%, 11/01/14................................................................. 610,602
3,940,000 Series B, 7.50%, 11/01/14................................................................. 4,009,620
1,600,000 Series B, 7.50%, 11/01/15................................................................. 1,628,272
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................... 2,017,631
3,500,000 First Mortgage, Holy Redeemer Long-Term Care, Series A, 8.00%, 06/01/22................... 3,583,895
5,000,000 St. Joseph's University, Series 1990, Pre-Refunded, 8.30%, 06/01/10....................... 5,839,800
10,000,000 Montgomery County IDA, PCR, Series 1991, 7.50%, 01/01/12................................... 10,875,000
Pennsylvania Convention Center Authority Revenue, Refunding, Series A,
6,430,000 5.75%, 09/01/99........................................................................... 6,568,116
5,000,000 6.25%, 09/01/04........................................................................... 5,307,250
16,000,000 6.60%, 09/01/09........................................................................... 17,203,520
20,760,000 6.70%, 09/01/14........................................................................... 22,229,393
15,800,000 6.75%, 09/01/19........................................................................... 16,851,806
1,200,000 Pennsylvania State Higher Educational Facilities Authority, College and University Revenue,
Medical College of Pennsylvania, Series A, 8.375%, 03/01/11............................... 1,315,680
1,825,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09............................................................. 1,934,299
$ 10,000,000 Philadelphia Financing EDA, Resource Recovery Revenue, Colver Project, Series D,
7.125%, 12/01/15.......................................................................... $ 10,748,600
2,850,000 Philadelphia Gas Works Revenue, Series A, 6.375%, 07/01/26................................. 2,902,754
3,080,000 Philadelphia GO, Refunding, Series A, 6.00%, 05/15/05...................................... 3,158,386
Philadelphia Municipal Authority Revenue, Justice Lease,
4,000,000 Sub-Series C, 8.625%, 11/15/16........................................................... 4,415,880
25,500,000 Sub-Series C, Pre-Refunded, 8.625%, 11/15/16............................................. 31,270,140
3,000,000 Sub-Series D, 6.25%, 07/15/13............................................................ 3,063,600
3,500,000 Sub-Series D, 6.30%, 07/15/17............................................................ 3,574,025
Philadelphia Water and Sewer Revenue,
14,485,000 10th Series, ETM 09/01/92, 7.35%, 09/01/04.............................................. 16,632,546
9,750,000 16th Series, Pre-Refunded, 7.00%, 08/01/18.............................................. 10,982,108
9,100,000 South Wayne County, Water and Sewer Authority Revenue, Refunding, 8.20%, 04/15/13.......... 9,391,564
100,000 Washington County Hospital Authority Revenue, Washington Hospital, Series 1987,
Pre-Refunded, 9.50%, 07/01/17............................................................. 108,428
5,025,000 Washington County IDA, PCR, West Pennsylvania Power Company, 6.05%, 04/01/14............... 5,159,369
------------
262,905,820
------------
Puerto Rico .1%
1,875,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
Series 1988-A, 7.75%, 07/01/08............................................................ 2,028,131
------------
Rhode Island .4%
5,000,000 Rhode Island HFC, Homeownership Opportunity, Series 17-A, 6.25%, 04/01/17.................. 5,075,500
6,000,000 Rhode Island State Health and Educational Building Corp., Hospital Financing Revenue, Landmark
Medical Center Assessment, 5.875%, 10/01/19................................................ 5,995,860
West Warwick GO, Series A,
2,505,000 6.80%, 07/15/98........................................................................... 2,575,942
190,000 7.00%, 08/15/02........................................................................... 198,548
915,000 7.30%, 07/15/08........................................................................... 979,160
------------
14,825,010
------------
South Carolina .1%
3,805,000 Charleston County Hospital Facilities, First Mortgage Revenue, Sandpiper Village, Inc.,
7.00%, 11/01/13........................................................................... 3,515,249
------------
South Dakota .2%
3,500,000 South Dakota State Health and Educational Facilities Authority Revenue, Refunding, Prairie
Lakes Health Care, 7.25%, 04/01/22........................................................ 3,629,010
3,000,000 Watertown Hospital Facilities Revenue, Prairie Lakes Health Care System Project, Pre-Refunded,
9.125%, 04/01/13.......................................................................... 3,361,170
------------
6,990,180
------------
Tennessee .5%
3,120,000 Knox County Health, Educational and Housing Facilities Board, MFHR, GNMA Insured,
Eastown Village Project, 8.20%, 07/01/28.................................................. 3,263,395
Memphis-Shelby County Airport Authority, Special Facilities and Project Revenue,
Federal Express Corp.,
3,250,000 Series 1982-B, 8.30%, 09/01/12............................................................ 3,364,725
6,000,000 Series 1984, 7.875%, 09/01/09............................................................. 6,691,500
1,710,000 Scott County IDB, IDR, Fruehauf Corp. Project, 10.75%, 01/01/09............................ 1,849,810
2,900,000 Shelby County, Health and Education Housing Facility Revenue, Beverly Enterprise,
10.125%, 12/01/11......................................................................... 3,266,734
200,000 Tennessee HDA, Financial Mortgage, Series A, 6.90%, 07/01/25............................... 210,688
------------
18,646,852
------------
Texas 3.0%
$ 10,000,000 Alliance Airport Authority, Special Facilities Revenue, Series 1990, 7.50%, 12/01/29....... $ 10,666,600
8,750,000 Bexar County, Texas, Health Facilities Development Corporation Revenue, Refunding,
6.00%, 11/15/15........................................................................... 9,016,175
Brazos River Authority, PCR,
16,000,000 Houston Power & Light Co., 8.25%, 05/01/19................................................ 17,428,960
1,675,000 Texas Utilities Electric Co. Project, Collateralized, Series 1988-A, 9.25%, 03/01/18...... 1,828,514
4,650,000 Coppell Special Assessment Gateway Project, 8.70%, 03/01/12................................ 4,794,243
5,561,000 Copperas Cove Health Facilities Development Corp., Hospital Revenue, First Mortgage,
Metroplex Health, Series B, Pre-Refunded, 9.125%, 12/01/19................................ 6,519,994
6,605,000 El Paso County, SFMR, Series 1991-A, 8.75%, 10/01/11....................................... 7,203,875
500,000 Harris County Hospital District Mortgage Revenue, Refunding, Pre-Refunded, 8.50%, 04/01/15. 511,860
7,700,000 b Houston Texas, Water and Sewer Systems Revenue, Refunding, Jr Lien, Series A, FGIC Insured,
5.25%, 12/01/25........................................................................... 7,258,328
4,550,000 Matagorda County Navigation District No. 1, PCR, Collateralized, Refunding, Houston Lighting
and Power Co., Series B, 7.70%, 02/01/19.................................................. 4,867,772
Metropolitan Health Facilities Development Corp., Hospital Revenue, Refunding & Improvement,
Wilson N. Jones Memorial Hospital Project, Pre-Refunded,
2,770,000 7.75%, 01/01/05.......................................................................... 2,918,223
7,500,000 7.875%, 01/01/14......................................................................... 7,908,825
2,000,000 Midland County Hospital District Revenue, Series 1989, Pre-Refunded, 8.375%, 06/01/02...... 2,205,980
5,300,000 National Research Laboratory Commission Financing Corp. Lease Revenue, Pre-Refunded,
7.10%, 12/01/21........................................................................... 6,115,511
250,000 Port of Corpus Christi IDC Revenue, Refunding, Valero Refining, Series A, 10.25%, 06/01/17. 272,913
6,000,000 San Antonio Texas Electric and Gas Revenue, Series 95, MBIA Insured, 5.375%, 02/01/18...... 5,793,780
3,000,000 Tarrant County, Texas Health Facilities Development Corporation, Health Systems Revenue,
Refunding, Harris Methodist Health, AMBAC Insured, 5.125%, 09/01/12....................... 2,863,380
7,430,000 Texas State Refunding, VHA, Series A, 6.15%, 12/01/25...................................... 7,497,167
6,180,000 Texas State Turnpike Authority, Dallas North Throughway Revenue, President George Bush
Turnpike, FGIC Insured, 5.40%, 01/01/15................................................... 5,987,864
4,000,000 Texas State Water Development Board Revenue, 6.00%, 07/15/13............................... 4,184,080
------------
115,844,044
------------
United States Territories .6%
2,505,000 American Samoa EDA, Executive Office Building Revenue, 10.125%, 09/01/08................... 2,696,532
14,000,000 Virgin Island Public Finance Authority Revenue, Refunding, Matching Fund Loan Notes,
Series A, 7.25%, 10/01/18................................................................. 14,831,600
Virgin Island Water and Power Authority,
400,000 Electric Services, Series A, 7.40%, 07/01/11............................................. 424,720
4,000,000 Water Power Revenue, Series B, 7.60%, 01/01/12........................................... 4,314,720
------------
22,267,572
------------
Utah 1.4%
2,000,000 Box Elder County PCR, Nucor Corp. Project, 6.90%, 05/15/17................................. 2,165,980
11,800,000 Davis County Solid Waste Management Energy Recovery Revenue, Refunding, Special Services
District, 6.125%, 06/15/09................................................................ 11,860,770
Intermountain Power Agency, Utah Power Supply Revenue, Refunding,
10,000,000 Series A, AMBAC Insured, 5.50%, 07/01/20.................................................. 9,815,000
4,700,000 Series D, 5.00%, 07/01/21................................................................. 4,273,146
11,000,000 Series D, 5.00%, 07/01/23................................................................. 9,967,210
11,000,000 Utah Assessed Municipal Power Systems Revenue, San Juan Project, 6.375%, 06/01/22.......... 11,577,390
Utah State HFA, SFM,
125,000 Series 1988-A, 9.625%, 07/01/00........................................................... 130,748
145,000 Series 1988-B, 9.50%, 07/01/00............................................................ 151,020
Utah State HFA, SFM, (cont.)
$ 90,000 Series 1988-B, 9.60%, 07/01/00............................................................ $ 92,664
285,000 Series 1988-C-1, 9.375%, 07/01/00......................................................... 295,565
110,000 Series 1988-E, 9.50%, 07/01/00............................................................ 114,567
90,000 Series 1988-F, 9.60%, 07/01/00............................................................ 94,058
100,000 Series 1988-G-2, 9.30%, 07/01/00.......................................................... 101,461
140,000 Series 1989-B, 9.25%, 07/01/01............................................................ 144,210
110,000 Series 1990-A-2, 9.625%, 07/01/02......................................................... 113,505
160,000 Series 1990-B-2, 9.50%, 07/01/02.......................................................... 164,760
365,000 Series 1991-A-2, 9.45%, 07/01/03.......................................................... 378,969
395,000 Series 1991-B-2, 9.45%, 07/01/03.......................................................... 410,859
400,000 Series 1991-C-2, 9.05%, 07/01/03.......................................................... 420,824
770,000 Series 1991-D-2, 9.00%, 07/01/03.......................................................... 809,986
600,000 Series 1991-E-1, 8.70%, 07/01/03.......................................................... 631,284
740,000 Sub-Series B-2, 8.70%, 07/01/04........................................................... 777,762
570,000 Sub-Series D, 8.45%, 07/01/04............................................................. 588,924
------------
55,080,662
------------
Virginia .4%
9,725,000 Hanover County, Virginia IDA Hospital Revenue, Memorial Regional Medical Center Project,
MBIA Insured, 5.50%, 08/15/25............................................................. 9,381,416
2,855,000 Norfolk Virginia Water Revenue, AMBAC Insured, 5.375%, 11/01/23............................ 2,745,568
3,000,000 Upper Occoquan Sewer Authority, VA Regional Sewer Revenue, Series A, MBIA Insured,
5.15%, 07/01/20........................................................................... 2,894,940
------------
15,021,924
------------
Washington .9%
2,370,000 Chelan County PUD No. 1, Columbia River Rock, First Hydro Electric System Revenue,
6.375%, 06/01/29.......................................................................... 2,407,849
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............................ 2,811,612
Washington State Public Power Supply System Revenue,
5,000,000 Nuclear Project No. 1, Refunding, Series C, Pre-Refunded, 8.00%, 07/01/17............... 5,805,350
Nuclear Project No. 2, Refunding, Series A,
20,300,000 6.00%, 07/01/12......................................................................... 20,435,401
3,000,000 6.50%, 07/01/15......................................................................... 3,142,800
1,000,000 Yakima-Tieton Irrigation District Revenue, Refunding, Pre-Refunded, 8.40%, 06/01/18........ 1,095,480
------------
35,698,492
------------
West Virginia.5%
1,415,000 Beckley First Mortgage Revenue, Refunding, Pine Lodge Health Care Center, 10.25%, 08/01/12. 1,465,685
10,000,000 West Virginia State Hospital Finance Authority, Hospital Revenue, 7.25%, 07/01/20.......... 10,137,200
West Virginia State Water Development Authority Revenue,
1,550,000 Loan Program II, Series A, Pre-Refunded, 8.625%, 11/01/28................................. 1,758,785
2,790,000 Loan Program II, Series A, Pre-Refunded, 8.125%, 11/01/29................................. 3,130,994
2,540,000 Solid Waste Management, Series C, 8.125%, 08/01/15........................................ 2,795,549
------------
19,288,213
------------
Wisconsin 1.2%
12,840,000 Wisconsin Central District, Wisconsin Tax Revenue, JR Dedicated, Series B, 5.75%, 12/15/27. 12,527,603
2,500,000 Wisconsin Housing EDA, Home Ownership Revenue, Series C, 6.15%, 09/01/17................... 2,539,875
Wisconsin State Health and Educational Facilities Authority Revenue,
$ 1,000,000 Bethany Lutheran Home of La Crosse, 8.75%, 12/01/06....................................... $ 1,043,300
6,000,000 Franciscan Health System, Inc. Project, Pre-Refunded, 8.375%, 03/01/05.................... 6,976,680
6,000,000 Franciscan Health System, Inc. Project, Pre-Refunded 8.50%, 03/01/20...................... 7,003,860
9,510,000 Franciscan Health System, Inc. Project, 6.25%, 11/15/20................................... 9,803,479
5,000,000 Refunding, Felician Health Care, Series A, AMBAC Insured, 7.00%, 01/01/15................. 5,393,600
1,670,000 Wisconsin State Health Facilities Authority Revenue, Refunding, Franciscan Health Advisory,
Pre-Refunded, 7.80%, 03/01/14............................................................. 1,771,453
------------
47,059,850
------------
Wyoming .1%
1,575,000 Natrona County Health Care Facility Revenue, Luthercare, Inc. Project, 9.25%, 07/15/08..... 1,633,354
1,000,000 Wyoming CDA Revenue, Series 1, 6.15%, 06/01/17............................................. 1,015,264
------------
2,648,618
------------
Total Bonds (Cost $3,443,619,706).......................................................... 3,658,330,856
------------
a Zero Coupon Bonds 2.5%
San Francisco City and County RDA, Lease Revenue, George Moscone Center,
3,750,000 (original accretion rate 7.00%), 07/01/09................................................. 1,746,225
4,500,000 (original accretion rate 7.00%), 07/01/10................................................. 1,964,925
4,500,000 (original accretion rate 7.05%), 07/01/12................................................. 1,695,600
4,250,000 (original accretion rate 7.05%), 07/01/13................................................. 1,495,830
2,250,000 (original accretion rate 7.05%), 07/01/14................................................. 738,990
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue, Jr. Lien,
7,400,000 (original accretion rate 8.50%), 01/01/04................................................. 4,320,120
8,000,000 (original accretion rate 8.75%), 01/01/05................................................. 4,359,840
9,000,000 (original accretion rate 8.60%), 01/01/06................................................. 4,535,460
9,400,000 (original accretion rate 8.60%), 01/01/07................................................. 4,417,812
10,400,000 (original accretion rate 8.60%), 01/01/08................................................. 4,558,424
21,900,000 (original accretion rate 8.75%), 01/01/09................................................. 8,952,063
15,000,000 (original accretion rate 8.75%), 01/01/10................................................. 5,718,300
30,100,000 (original accretion rate 8.50%), 01/01/12................................................. 9,980,257
52,700,000 (original accretion rate 9.00%), 01/01/24................................................. 7,073,394
45,200,000 (original accretion rate 9.00%), 01/01/25................................................. 5,644,124
131,900,000 (original accretion rate 9.00%), 01/01/26................................................. 15,322,823
139,100,000 (original accretion rate 9.00%), 01/01/27................................................. 15,033,928
------------
Total Zero Coupon Bonds (Cost $72,622,640)................................................. 97,558,115
------------
Total Long Term Investments (Cost $3,516,242,346).......................................... 3,755,888,971
------------
c Short Term Investments 1.3%
100,000 Alabama HFA, Heatherbrooke Weekly VRDN and Put, 3.20%, 10/01/13............................ 100,000
500,000 Alabama Special Care Facilities, Financing Authority, Montgomery Hospital Revenue,
Weekly VRDN and Put, 3.30%, 04/01/15...................................................... 500,000
100,000 Arkansas Hospital Equipment Finance Authority, Hospital Equipment Revenue, Jefferson
Hospital Association, Weekly VRDN and Put, 3.35%, 12/01/99................................ 100,000
100,000 Arkansas State Development Finance Authority Higher Education Capital Asset, Series A,
Weekly VRDN and Put, 3.25%, 12/1/15....................................................... 100,000
100,000 Ashland Kentucky PCR, Ashland Oil Inc., Project, Weekly VRDN and Put, 3.20%, 04/01/09...... 100,000
2,100,000 Calcasieu Parish Inc., Louisiana IDR, Refunding, Daily VRDN and Put, 3.40%, 02/01/16....... 2,100,000
5,000,000 California Statewide Communities Development Authority Revenue, COP, Sutter Health,
AMBAC Insured, Daily VRDN and Put, 3.20%, 07/01/15........................................ 5,000,000
$ 400,000 Colorado Health Facilities Authority Revenue, Sisters Charity Health, Series A, Weekly VRDN
and Put, 3.25%, 05/15/22.................................................................. $ 400,000
400,000 Colorado Health Facilities Authority Revenue, Boulder Community Hospital Project, Series C,
MBIA Insured, Weekly VRDN and Put, 3.25%, 10/01/14........................................ 400,000
400,000 Connecticut State Development Authority PCR, Refunding, Connecticut Light and Power
Company Project, Series A, Weekly VRDN and Put, 3.15%, 09/01/28........................... 400,000
400,000 Crossett Arkansas PCR, Georgia Pacific Corp., Weekly VRDN and Put, 3.25%, 10/01/07......... 400,000
2,300,000 Dade County Florida IDA PCR, Refunding, Florida Power and Light Company Project,
Daily VRDN and Put, 3.35%, 04/01/20....................................................... 2,300,000
200,000 Fayetteville Arkansas IDR, Amcast Industrial Corp., Weekly VRDN and Put, 3.35%, 12/01/04... 200,000
200,000 Frederick Maryland, Weekly VRDN and Put, 3.4472%, 08/01/11................................. 200,000
1,000,000 Grapevine Texas IDC, Revenue, Multiple Mode, Daily VRDN and Put, 3.50%, 12/01/24........... 1,000,000
2,200,000 Gulf Coast Waste Disposal Authority, Texas PCR, Refunding, Daily VRDN and Put,
3.35%, 06/01/20........................................................................... 2,200,000
100,000 Harris County Texas Health Facilities Development Corp., Revenue, Greater Houston Pooled
Health, Series A, Weekly VRDN and Put, 3.25%, 11/01/25.................................... 100,000
400,000 Hawaii State Housing Finance and Development Corporation Revenue, Rental Housing System,
Series B, Weekly VRDN and Put, 3.55%, 07/01/25............................................ 400,000
1,000,000 Huntsville Alabama Health Care Authority, Health Care Facilities Revenue, Series B,
MBIA Insured, Weekly VRDN and Put, 3.05%, 06/01/24........................................ 1,000,000
300,000 Indiana Secondary Market Educational Loans, Student Loan Revenue, Series B,
AMBAC Insured, Weekly VRDN and Put, 3.40%, 12/01/13....................................... 300,000
400,000 Kansas City Missouri, IDA, Hospital Revenue, Research Health Services, MBIA Insured,
Weekly VRDN and Put, 3.55%, 10/15/15...................................................... 400,000
300,000 Kentucky Development Finance Authority, Pooled Loan Program, Series A, FGIC Insured,
Weekly VRDN and Put, 3.20%, 12/01/15...................................................... 300,000
2,100,000 Lone Star Texas Airport Improvement Authority Revenue, Weekly VRDN and Put,
3.50%, 12/01/14........................................................................... 2,100,000
700,000 Massachusetts State Updates, Series B, Weekly VRDN and Put, 3.35%, 12/01/97................ 700,000
Montgomery Alabama Special Care Facility, Finance Authority Revenue, Weekly VRDN and Put,
300,000 Series A, 3.25%, 12/01/30............................................................... 300,000
900,000 Series B, 3.25%, 12/01/30............................................................... 900,000
200,000 Series E, 3.25%, 12/01/30............................................................... 200,000
575,000 Series G, 3.25%, 12/01/30............................................................... 575,000
900,000 New Jersey Sports and Exposition Authority, State Contract, Series C, MBIA Insured,
Weekly VRDN and Put, 3.10%, 09/01/24...................................................... 900,000
100,000 New Jersey State Turnpike Authority, Turnpike Revenue Refunding, Series D, Weekly VRDN
and Put, 2.80%, 01/01/18.................................................................. 100,000
New York City Municipal Water Finance Authority, Water and Sewer System Revenue,
FGIC Insured, Daily VRDN and Put,
1,400,000 Series C, 3.35%, 06/15/23............................................................... 1,400,000
8,000,000 Series G, 3.35%, 06/15/24............................................................... 8,000,000
1,500,000 North Carolina Medical Care Common Hospital Revenue, Series A, Daily VRDN and Put,
3.45%, 10/01/20........................................................................... 1,500,000
100,000 Oregon State Veteran Welfare Bond, Series 73E, Weekly VRDN and Put, 3.35%, 12/01/16........ 100,000
2,800,000 Peninsula Ports Authority Virginia Revenue, Refunding Port Facility Shell Oil Co., Daily VRDN
and Put, 3.40%, 12/01/05.................................................................. 2,800,000
1,100,000 Phoenix Arizona Series 95-2, Daily VRDN and Put, 3.25%, 06/01/20........................... 1,100,000
4,400,000 Puerto Rico Government Development Bank, Refunding, Weekly VRDN and Put, 2.80%, 12/01/15... 4,400,000
300,000 Tennessee State Bond, Series A, Weekly VRDN and Put, 3.25%, 05/01/96....................... 300,000
100,000 Tennessee State School Board Authority, Higher Education Bond, Weekly VRDN and Put,
3.30%, 03/01/98........................................................................... 100,000
Washington State Health Care Facilities Authority Revenue,
$ 1,800,000 Sisters Providence Series B, Daily VRDN and Put 3.35%, 10/01/05......................... $ 1,800,000
4,200,000 Sisters Providence Series E, Daily VRDN and Put 3.35%, 10/01/05......................... 4,200,000
Total Short Term Investments (Cost $49,475,000)............................................ 49,475,000
------------
Total Investments (Cost $3,565,717,346)99.2%............................................... 3,805,363,971
Other Assets and Liabilities, Net.8%....................................................... 29,945,978
------------
Net Assets 100.0%......................................................................... $3,835,309,949
============
At February 29, 1996, the net unrealized appreciation based
on the cost of investments for income tax purposes of $3,565,725,221 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost............................................................. $ 259,204,668
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................. (19,565,918)
------------
Net unrealized appreciation................................................................ $ 239,638,750
============
PORTFOLIO ABBREVIATIONS:
1915 ACT - Improvement Bond Act of 1915
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Agency
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
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
aZero coupon bonds. The current effective yield may vary. The original accretion
rate by securities will remain constant.
bSee Note 1(g) regarding securities purchased on a when-issued basis.
cVariable 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 rate
or U.S. Treasury bills rate).
dSee Note 6 regarding defaulted securities.
gThe bond pays interest based upon the issuer's ability to pay, which may be
less than the stated interest rate.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
February 29, 1996
Franklin Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost..................................... $700,991,283 $202,414,010 $153,637,992 $45,072,281 $528,254,849
========== ========== ========== ========= ==========
At value............................................... 747,273,045 217,741,997 165,083,180 48,375,303 563,481,415
Cash.................................................. 39,965 355,441 1,002,084 61,434 199,878
Receivables:
Interest............................................... 9,190,056 3,553,577 2,733,134 631,841 9,150,086
Investment securities sold............................. 80,000 100,000 -- 561,000 --
Capital shares sold.................................... 580,287 382,734 260,750 170,570 334,248
---------- ---------- ---------- --------- ----------
Total assets........................................... 757,163,353 222,133,749 169,079,148 49,800,148 573,165,627
---------- ---------- ---------- --------- ----------
Liabilities:
Payables:
Investment securities purchased (Note 1)............... 2,846,536 4,412,261 -- 754,454 2,682,580
Distributions payable to shareholders.................. 1,108,454 311,512 220,260 62,882 711,234
Capital shares repurchased............................. 47,503 -- 39,784 -- 6,714
Management fees........................................ 303,061 100,885 80,615 25,467 234,349
Distribution fees...................................... 98,971 26,435 19,942 3,000 71,335
Shareholder servicing costs............................ 14,400 5,486 3,955 1,000 16,020
Accrued expenses and other liabilities................ 54,728 12,185 13,815 4,069 37,998
---------- ---------- ---------- --------- ----------
Total liabilities...................................... 4,473,653 4,868,764 378,371 850,872 3,760,230
---------- ---------- ---------- --------- ----------
Net assets, at value................................... $752,689,700 $217,264,985 $168,700,777 $48,949,276 $569,405,397
========== ========== ========== ========= ==========
Net assets consist of:
Undistributed net investment income................... $ 892,152 $ 419,983 $ 234,517 $ 105,591 $ 1,200,415
Net unrealized appreciation on investments............ 46,281,762 15,327,987 11,445,188 3,303,022 35,226,566
Undistributed net realized gain (loss)................ 1,722,517 (1,886,432) (6,152,243) (872,264) (5,678,908)
Class l capital shares................................ 701,894,463 201,758,288 161,518,623 46,412,927 534,126,768
Class ll capital shares............................... 1,898,806 1,645,159 1,654,692 -- 4,530,556
---------- ---------- ---------- --------- ----------
Net assets, at value................................... $752,689,700 $217,264,985 $168,700,777 $48,949,276 $569,405,397
========== ========== ========== ========= ==========
Class I shares:
Net assets, at value.................................. $750,797,245 $215,608,761 $167,044,503 $48,949,276 $564,863,746
========== ========== ========== ========= ==========
Shares outstanding.................................... 66,223,810 18,210,137 15,247,577 4,164,111 48,364,863
========== ========== ========== ========= ==========
Net asset value per share*............................ $11.34 $11.84 $10.96 $11.76 $11.68
========== ========== ========== ========= ==========
Maximum offering price per share (100/95.75 of
net asset value per share)............................ $11.84 $12.37 $11.45 $12.28 $12.20
========== ========== ========== ========= ==========
Class II shares:
Net assets, at value.................................. $ 1,892,455 $ 1,656,224 $ 1,656,274 -- $ 4,541,651
========== ========== ========== ========= ==========
Shares outstanding.................................... 166,263 139,523 150,925 -- 387,446
========== ========== ========== ========= ==========
Net asset value per share*............................ $11.38 $11.87 $10.97 -- $11.72
========== ========== ========== ========= ==========
Maximum offering price per share (100/99 of
net asset value per share)............................ $11.49 $11.99 $11.08 -- $11.84
========== ========== ========== ========= ==========
*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.)
February 29, 1996
Franklin Franklin Franklin Franklin Federal Franklin
Oregon Pennsylvania Puerto Rico Intermediate- High Yield
Tax-Free Tax-Free Tax-Free Term Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost................................... $347,554,059 $592,562,825 $175,461,236 $84,650,515 $3,565,717,346
========== ========== ========== ========= ===========
At value............................................. 371,294,097 635,358,067 185,744,529 87,411,324 3,805,363,971
Cash................................................ 399,338 2,263,638 33,151 178,850 3,160,747
Receivables:
Interest............................................. 5,881,136 11,682,132 3,134,594 1,308,771 72,683,116
Investment securities sold........................... -- 100,000 2,421,213 -- 1,025,900
Capital shares sold.................................. 596,693 474,154 215,286 117,648 7,764,413
---------- ---------- ---------- --------- -----------
Total assets......................................... 378,171,264 649,877,991 191,548,773 89,016,593 3,889,998,147
---------- ---------- ---------- --------- -----------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery.................................... -- 3,502,909 -- -- 7,643,535
When-issued basis (Note 1).......................... -- 1,863,531 -- 2,752,737 38,207,761
Distributions payable to shareholders................ 465,410 991,971 280,917 111,665 5,749,938
Capital shares repurchased........................... 600 154,613 4,229 124,006 850,322
Management fees...................................... 162,247 261,913 90,044 40,595 1,458,563
Distribution fees.................................... 46,276 76,980 22,859 7,189 488,979
Shareholder servicing costs.......................... 8,660 18,040 6,370 2,080 90,465
Accrued expenses and other liabilities.............. 29,167 51,523 34,449 10,836 198,635
---------- ---------- ---------- --------- -----------
Total liabilities.................................... 712,360 6,921,480 438,868 3,049,108 54,688,198
---------- ---------- ---------- --------- -----------
Net assets, at value................................. $377,458,904 $642,956,511 $191,109,905 $85,967,485 $3,835,309,949
========== ========== ========== ========= ===========
Net assets consist of:
Undistributed net investment income................. $ 1,180,384 $ 532,306 $-- $ 199,901 $ 3,892,763
Accumulated distributions in excess of
net investment income (Note 1)...................... -- -- (15,174) -- --
Net unrealized appreciation on investments.......... 23,740,038 42,795,242 10,283,293 2,760,809 239,646,625
Net realized loss................................... (5,204,341) (3,055,149) (73,370) (1,066,621) (46,396,255)
Class l capital shares.............................. 355,711,354 599,581,201 180,380,482 84,073,396 3,590,294,860
Class ll capital shares............................. 2,031,469 3,102,911 534,674 -- 47,871,956
---------- ---------- ---------- --------- -----------
Net assets, at value................................. $377,458,904 $642,956,511 $191,109,905 $85,967,485 $3,835,309,949
========== ========== ========== ========= ===========
Class I Shares:
Net assets, at value................................ $375,414,515 $639,846,932 $190,576,693 $85,967,485 $3,787,147,276
========== ========== ========== ========= ===========
Shares outstanding.................................. 32,356,619 61,279,368 16,446,495 7,848,594 338,524,063
========== ========== ========== ========= ===========
Net asset value per share*.......................... $11.60 $10.44 $11.59 $10.95 $11.19
========== ========== ========== ========= ===========
Maximum offering price per share+ (100/95.75 of
net asset value per share).......................... $12.11 $10.90 $12.10 $11.20 $11.69
========== ========== ========== ========= ===========
Class II Shares:
Net assets, at value................................ $ 2,044,389 $ 3,109,579 $ 533,212 -- $ 48,162,673
========== ========== ========== ========= ===========
Shares outstanding.................................. 175,549 296,975 45,905 -- 4,286,570
========== ========== ========== ========= ===========
Net asset value per share*.......................... $11.65 $10.47 $11.62 -- $11.24
========== ========== ========== ========= ===========
Maximum offering price per share (100/99 of
net asset value per share).......................... $11.77 $10.58 $11.74 -- $11.35
========== ========== ========== ========= ===========
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
+The maximum offering price for Franklin Federal Intermediate-Term Tax-Free Income Fund is calculated at 100/97.75 of $10.95.
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 year ended February 29, 1996
Franklin Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest (Note 1)........................................ $46,462,498 $13,226,373 $10,452,715 $3,142,928 $34,947,459
---------- --------- --------- --------- ----------
Expenses:
Management fees (Note 5)................................. 3,578,992 1,156,138 941,489 298,107 2,755,151
Distribution fees - Class I (Note 5)..................... 549,633 154,836 122,434 32,137 433,649
Distribution fees - Class II (Note 5).................... 5,239 3,647 3,370 -- 8,984
Shareholder servicing costs (Note 5)..................... 160,502 58,833 42,722 17,046 172,549
Reports to shareholders.................................. 123,606 38,384 29,596 10,779 136,212
Custodian fees........................................... 61,696 17,074 13,679 3,493 46,470
Professional fees........................................ 21,159 6,454 6,408 2,323 15,598
Trustees' fees and expenses.............................. 11,221 3,107 2,468 727 8,421
Registration and filing fees............................. 9,019 3,270 3,800 1,140 2,700
Other.................................................... 48,830 26,581 16,749 13,713 10,362
---------- --------- --------- --------- ----------
Total expenses............................................ 4,569,897 1,468,324 1,182,715 379,465 3,590,096
---------- --------- --------- --------- ----------
Net investment income..................................... 41,892,601 11,758,049 9,270,000 2,763,463 31,357,363
---------- --------- --------- --------- ----------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)................................. 11,019,710 1,875,938 (46,957) 354,703 4,841,385
Net unrealized appreciation.............................. 12,069,384 6,034,367 4,696,045 1,058,994 13,508,714
---------- --------- --------- --------- ----------
Net realized and unrealized gain on investments........... 23,089,094 7,910,305 4,649,088 1,413,697 18,350,099
---------- --------- --------- --------- ----------
Net increase in net assets resulting from operations...... $64,981,695 $19,668,354 $13,919,088 $4,177,160 $49,707,462
========== ========= ========= ========= ==========
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 year ended February 29, 1996
Franklin Franklin Franklin Franklin Federal Franklin
Oregon Pennsylvania Puerto Rico Intermediate- High Yield
Tax-Free Tax-Free Tax-Free Term Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest (Note 1)...................................... $22,390,204 $40,615,531 $11,951,638 $4,515,730 $257,750,687
---------- ---------- --------- --------- -----------
Expenses:
Management fees (Note 5)............................... 1,887,234 3,029,579 1,054,668 491,681 16,252,138
Distribution fees - Class I (Note 5)................... 263,972 463,337 141,195 78,553 2,751,097
Distribution fees - Class II (Note 5).................. 4,978 6,577 989 -- 105,429
Shareholder servicing costs (Note 5)................... 92,726 194,581 69,615 22,373 964,506
Reports to shareholders................................ 64,167 144,124 43,756 17,549 700,778
Custodian fees......................................... 30,098 51,508 15,494 6,510 284,689
Professional fees...................................... 10,805 17,243 15,911 3,050 149,779
Trustees' fees and expenses............................ 5,499 9,327 2,810 1,075 53,365
Registration and filing fees........................... 2,810 2,550 21,588 19,682 166,839
Other.................................................. 37,600 46,605 3,026 21,637 160,739
Expenses waived by Manager (Note 5).................... -- -- -- (155,864) --
---------- ---------- --------- --------- -----------
Total expenses.......................................... 2,399,889 3,965,431 1,369,052 506,246 21,589,359
---------- ---------- --------- --------- -----------
Net investment income................................... 19,990,315 36,650,100 10,582,586 4,009,484 236,161,328
---------- ---------- --------- --------- -----------
Realized and unrealized gain on investments:
Net realized gain ..................................... 212,997 1,771,090 874,797 28,851 10,004,172
Net unrealized appreciation............................ 11,590,457 15,569,248 3,863,282 3,289,690 127,528,753
---------- ---------- --------- --------- -----------
Net realized and unrealized gain on investments......... 11,803,454 17,340,338 4,738,079 3,318,541 137,532,925
---------- ---------- --------- --------- -----------
Net increase in net assets resulting from operations.... $31,793,769 $53,990,438 $15,320,665 $7,328,025 $373,694,253
========== ========== ========= ========= ===========
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 years ended February 29, 1996 and February 28, 1995
Franklin Arizona Franklin Colorado
Tax-Free Income Fund Tax-Free Income Fund
--------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.............................................. $ 41,892,601 $ 43,542,081 $ 11,758,049 $ 11,401,755
Net realized gain (loss) from security transactions................ 11,019,710 (958,178) 1,875,938 (3,447,577)
Net unrealized appreciation (depreciation) on investments.......... 12,069,384 (33,237,886) 6,034,367 (6,337,878)
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations................ 64,981,695 9,346,017 19,668,354 1,616,300
Distributions to shareholders from:
Undistributed net investment income (Note 7):
Class I........................................................... (42,358,865) (43,002,825) (11,642,273) (11,268,015)
Class II.......................................................... (39,644) -- (27,047) --
Accumulated net realized gain:
Class I........................................................... (7,829,470) -- -- --
Class II.......................................................... (17,168) -- -- --
Increase (decrease) in net assets from capital share
transactions (Note 2).............................................. 17,152,083 (42,380,232) 14,702,000 2,057,974
---------- ---------- ---------- ----------
Net increase (decrease) in net assets............................... 31,888,631 (76,037,040) 22,701,034 (7,593,741)
Net assets:
Beginning of year.................................................. 720,801,069 796,838,109 194,563,951 202,157,692
---------- ---------- ---------- ----------
End of year........................................................ $752,689,700 $720,801,069 $217,264,985 $194,563,951
========== ========== ========== ==========
Undistributed net investment income included in net assets:
Beginning of year.................................................. $ 1,398,060 $ 858,804 $ 331,254 $ 197,514
========== ========== ========== ==========
End of year........................................................ $ 892,152 $ 1,398,060 $ 419,983 $ 331,254
========== ========== ========== ==========
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 years ended February 29, 1996 and February 28, 1995
Franklin Connecticut Franklin Indiana
Tax-Free Income Fund Tax-Free Income Fund
--------------------- --------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................................. $ 9,270,000 $ 8,985,952 $ 2,763,463 $ 2,671,679
Net realized gain (loss) from security transactions................... (46,957) (5,843,688) 354,703 (1,083,250)
Net unrealized appreciation (depreciation) on investments............. 4,696,045 (2,866,190) 1,058,994 (1,368,046)
---------- ---------- --------- ----------
Net increase in net assets resulting from operations........... 13,919,088 276,074 4,177,160 220,383
Distributions to shareholders from undistributed
net investment income (Note 7):
Class I.............................................................. (9,244,580) (8,897,480) (2,714,978) (2,657,277)
Class II............................................................. (25,612) -- -- --
Increase in net assets from capital share transactions (Note 2)....... 8,428,442 1,194,454 903,637 1,150,812
---------- ---------- --------- ----------
Net increase (decrease) in net assets.......................... 13,077,338 (7,426,952) 2,365,819 (1,286,082)
Net assets:
Beginning of year..................................................... 155,623,439 163,050,391 46,583,457 47,869,539
---------- ---------- --------- ----------
End of year........................................................... $168,700,777 $155,623,439 $48,949,276 $46,583,457
========== ========== ========= ==========
Undistributed net investment income included in net assets:
Beginning of year..................................................... $ 234,709 $ 146,237 $ 57,106 $ 42,704
========== ========== ========= ==========
End of year........................................................... $ 234,517 $ 234,709 $ 105,591 $ 57,106
========== ========== ========= ==========
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 years ended February 29, 1996 and February 28, 1995
Franklin New Jersey Franklin Oregon Franklin Pennsylvania
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
--------------------- --------------------- ---------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................. $ 31,357,363 $ 31,257,817 $ 19,990,315 $ 20,160,822 $ 36,650,100 $ 36,064,964
Net realized gain (loss) from
security transactions................. 4,841,385 (9,684,159) 212,997 (5,072,515) 1,771,090 (4,262,862)
Net unrealized appreciation
(depreciation) on investments......... 13,508,714 (17,099,995) 11,590,457 (11,526,013) 15,569,248 (20,108,962)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations............. 49,707,462 4,473,663 31,793,769 3,562,294 53,990,438 11,693,140
Distributions to shareholders from
undistributed net investment
income (Note 7):
Class I................................ (30,636,840) (30,972,890) (19,773,493) (19,631,598) (37,185,584) (35,690,544)
Class II............................... (64,859) -- (35,195) -- (53,292) --
Increase (decrease) in net assets from
capital share transactions (Note 2)... 16,462,806 (693,692) 16,015,941 (10,156,638) 38,838,955 (4,182,136)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net assets......................... 35,468,569 (27,192,919) 28,001,022 (26,225,942) 55,590,517 (28,179,540)
Net assets:
Beginning of year..................... 533,936,828 561,129,747 349,457,882 375,683,824 587,365,994 615,545,534
---------- ---------- ---------- ---------- ---------- ----------
End of year........................... $569,405,397 $533,936,828 $377,458,904 $349,457,882 $642,956,511 $587,365,994
========== ========== ========== ========== ========== ==========
Undistributed net investment income
included in net assets:
Beginning of year.................... $ 544,751 $ 259,824 $ 998,757 $ 469,533 $ 1,121,082 $ 746,662
========== ========== ========== ========== ========== ==========
End of year.......................... $ 1,200,415 $ 544,751 $ 1,180,384 $ 998,757 $ 532,306 $ 1,121,082
========== ========== ========== ========== ========== ==========
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 years ended February 29, 1996 and February 28, 1995
Franklin
Franklin Puerto Rico Federal Intermediate-Term Franklin High Yield
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
--------------------- ------------------- ------------------------
1996 1995 1996 1995 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................ $ 10,582,586 $ 10,269,086 $ 4,009,484 $ 3,802,962 $ 236,161,328 $ 225,321,624
Net realized gain (loss) from
security transactions................ 874,797 (429,424) 28,851 (1,082,205) 10,004,172 (23,498,580)
Net unrealized appreciation
(depreciation) on investments........ 3,863,282 (7,065,161) 3,289,690 (1,170,078) 127,528,753 (130,650,901)
---------- ---------- --------- --------- ----------- -----------
Net increase in net assets
resulting from operations............ 15,320,665 2,774,501 7,328,025 1,550,679 373,694,253 71,172,143
Distributions to shareholders:
From undistributed net
investment income (Note 7):
Class I.............................. (10,726,805) (10,528,194) (3,973,970) (3,704,591) (233,856,809) (225,313,301)
Class II............................. (7,485) -- -- -- (937,218) --
In excess of net investment income
(Note 1):
Class I............................ (15,174) -- -- -- -- --
From net realized gain:
Class I.............................. (154,421) -- -- -- -- --
Class II............................. (176) -- -- -- -- --
Increase in net assets from capital
share transactions (Note 2).......... 9,805,800 9,605,221 8,636,138 8,528,230 409,140,087 68,877,600
---------- ---------- --------- --------- ----------- -----------
Net increase (decrease)
in net assets........................ 14,222,404 1,851,528 11,990,193 6,374,318 548,040,313 (85,263,558)
Net assets:
Beginning of year..................... 176,887,501 175,035,973 73,977,292 67,602,974 3,287,269,636 3,372,533,194
---------- ---------- --------- --------- ----------- -----------
End of year........................... $191,109,905 $176,887,501 $85,967,485 $73,977,292 $3,835,309,949 $3,287,269,636
========== ========== ========= ========= =========== ===========
Undistributed net investment income
(accumulated distributions in excess
of net investment income) included
in net assets:
Beginning of year..................... $ 151,704 $ 410,812 $ 164,387 $ 66,016 $ 2,525,462 $ 2,517,139
========== ========== ========= ========= =========== ===========
End of year........................... $ (15,174) $ 151,704 $ 199,901 $ 164,387 $ 3,892,763 $ 2,525,462
========== ========== ========= ========= =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
FRANKLIN TAX-FREE TRUST
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Tax-Free Trust (the Trust) is an open-end management investment company
(mutual fund), registered under the Investment Company Act of 1940 as amended.
The Trust currently consists of twenty-seven separate funds. This report
pertains only to the ten 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 taxes 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. The
Trust's Franklin Connecticut Tax-Free Income Fund and the Franklin Federal
Intermediate-Term Tax-Free Income Fund are non-diversified, although all other
Funds included in this report are diversified.
All of the Funds within this report, except for Franklin Indiana Tax-Free Income
Fund and 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. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security 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 of the
bonds or notes). Such a right to resell is commonly known as a "put".
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. Bond 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. Monthly dividends are reinvested
in additional shares of the Funds, or paid in cash as requested by the
shareholders.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale transactions. Net
investment income differs for financial statement and tax purposes primarily due
to differing treatments of defaulted securities - see Note 6.
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. 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.
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.
<TABLE>
<CAPTION>
2. TRUST SHARES
At February 29, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Funds' shares for the years
ended February 29, 1996 and February 28, 1995 were as follows:
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
-------- -------- -------- -------- -------- --------
1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................... 6,441,448 $ 73,144,315 2,209,706 $25,780,834 1,961,544 $21,308,888
Shares issued in reinvestment of distributions 1,757,603 19,931,360 476,428 5,551,957 388,517 4,213,410
Shares redeemed............................... (6,543,459) (74,190,874) (1,779,737) (20,701,187) (1,649,004) (17,916,342)
Changes from exercise of exchange privilege:
Shares sold.................................. 1,298,653 14,699,999 581,776 6,770,179 449,421 4,873,914
Shares redeemed.............................. (1,616,126) (18,331,523) (373,482) (4,344,942) (524,133) (5,706,120)
--------- ----------- -------- ---------- -------- ----------
Net increase................................... 1,338,119 $ 15,253,277 1,114,691 $13,056,841 626,345 $ 6,773,750
========= =========== ======== ========== ======== ==========
1995
Shares sold................................... 5,646,769 $ 62,441,554 1,955,372 $22,063,990 1,666,535 $17,694,383
Shares issued in reinvestment of distributions 1,384,253 15,228,881 455,423 5,103,940 375,978 3,969,521
Shares redeemed............................... (9,414,765) $(103,131,385) (2,107,989) (23,560,686) (1,845,431) (19,542,325)
Changes from exercise of exchange privilege:
Shares sold.................................. 2,264,505 24,916,493 657,508 7,362,556 557,731 5,870,205
Shares redeemed.............................. (3,821,650) (41,835,775) (799,379) (8,911,826) (648,275) (6,797,330)
--------- ----------- -------- ---------- -------- ----------
Net increase (decrease)........................ (3,940,888) $ (42,380,232) 160,935 $ 2,057,974 106,538 $ 1,194,454
========= =========== ======== ========== ======== ==========
Class II shares:
1996*
Shares sold................................... 174,311 $ 1,990,083 141,313 $ 1,666,604 152,190 $ 1,668,825
Shares issued in reinvestment of distributions 2,660 30,423 1,733 20,489 1,584 17,430
Shares redeemed............................... (7,329) (84,241) (3,674) (43,689) (2,849) (31,563)
Changes from exercise of exchange privilege:
Shares sold.................................. 3,512 40,132 151 1,755 -- --
Shares redeemed.............................. (6,891) (77,591) -- -- -- --
--------- ----------- -------- ---------- -------- ----------
Net increase................................... 166,263 $ 1,898,806 139,523 $ 1,645,159 150,925 $ 1,654,692
========= =========== ======== ========== ======== ==========
2. TRUST SHARES (cont.)
Franklin Indiana Franklin New Jersey Franklin Oregon Franklin Pennsylvania
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
----------------- ------------------- ------------------- -------------------
Class I shares: Shares Amount Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- -------- -------- --------
1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold............. 368,082 $4,290,205 5,117,785 $59,104,402 3,032,742 $34,842,617 7,115,284 $73,694,735
Shares issued in
reinvestment of
distributions........... 126,481 1,469,667 1,344,993 15,524,726 954,645 10,942,187 1,487,883 15,404,590
Shares redeemed......... (359,616) (4,188,696) (5,237,889) (60,507,805) (2,956,963) (33,899,407) (5,046,858) (52,246,492)
Changes from exercise
of exchange privilege:
Shares sold............. 111,299 1,292,823 1,072,597 12,387,744 863,292 9,907,624 907,886 9,409,689
Shares redeemed......... (169,693) (1,960,362) (1,259,447) (14,576,817) (679,853) (7,808,549) (1,015,520) (10,526,478)
------- --------- -------- ---------- -------- ---------- -------- ---------
Net increase ............ 76,553 903,637 1,038,039 $ 11,932,250 1,213,863 $13,984,472 3,448,675 $35,736,044
======= ========= ======== ========== ======== ========== ======== =========
1995
Shares sold............. 479,238 $ 5,481,873 5,599,603 $ 62,811,165 2,739,651 $30,534,821 5,893,160 $59,562,177
Shares issued in
reinvestment of
distributions........... 123,848 1,403,344 1,350,479 15,038,104 958,138 10,573,320 1,390,042 13,969,534
Shares redeemed......... (381,926) (4,328,500) (6,523,437) (72,511,291) (4,406,311) (48,518,404) (7,598,699) (76,334,718)
Changes from exercise
of exchange privilege:
Shares sold............. 240,554 2,738,742 1,372,794 15,366,322 1,036,928 11,489,741 1,148,739 11,498,117
Shares redeemed......... (361,248) (4,144,647) (1,930,232) (21,397,992) (1,297,824) (14,236,116) (1,274,014) (12,877,246)
------- --------- -------- ---------- -------- ---------- -------- ---------
Net increase (decrease).. 100,466 $ 1,150,812 (130,793) $ (693,692) (969,418) $(10,156,638) (440,772) $ (4,182,136)
======= ========= ======== ========== ======== ========== ======== =========
Class II shares:
1996*
Shares sold............. -- -- 401,608 $ 4,698,269 192,124 $ 2,224,478 300,229 $ 3,136,929
Shares issued in
reinvestment of
distributions........... -- -- 3,829 44,861 2,129 24,744 2,993 31,318
Shares redeemed......... -- -- (17,228) (203,758) (16,986) (197,470) (6,964) (72,945)
Changes from exercise
of exchange privilege:
Shares sold............. -- -- 2,634 31,185 -- -- 958 10,109
Shares redeemed......... -- -- (3,397) (40,001) (1,718) (20,283) (241) (2,500)
------- --------- -------- ---------- -------- ---------- -------- ---------
Net increase ............ -- -- 387,446 $ 4,530,556 175,549 $ 2,031,469 296,975 $ 3,102,911
======= ========= ======== ========== ======== ========== ======== =========
*For the period May 1, 1995 to February 29, 1996.
Franklin Federal
Franklin Puerto Rico Intermediate-Term Franklin High Yield
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------- ------------------- ----------------------
Class I shares: Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- --------
1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 1,830,778 $21,085,653 1,559,018 $16,885,371 52,078,122 $576,705,268
Shares issued in reinvestment of distributions 448,570 5,163,882 204,492 2,206,996 7,940,979 87,687,277
Shares redeemed.............................. (1,388,812) (15,980,860) (1,171,756) (12,646,519) (28,753,286) (317,461,998)
Changes from exercise of exchange privilege:
Shares sold................................... 322,607 3,694,777 1,027,049 11,162,631 10,102,816 111,850,763
Shares redeemed............................... (407,986) (4,692,327) (830,386) (8,972,341) (8,816,065) (97,513,179)
-------- ---------- -------- ---------- --------- -----------
Net increase.................................. 805,157 $ 9,271,125 788,417 $ 8,636,138 32,552,566 $361,268,131
======== ========== ======== ========== ========= ===========
2. TRUST SHARES (cont.)
Franklin Federal
Franklin Puerto Rico Intermediate-Term Franklin High Yield
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------- ------------------- ----------------------
Class I shares: (cont.) Shares Amount Shares Amount Shares Amount
-------- -------- -------- -------- -------- --------
1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................................. 1,906,311 $21,445,195 2,003,138 $20,888,755 36,186,846 $387,896,565
Shares issued in reinvestment of distributions 430,325 4,807,107 194,246 2,014,030 7,406,651 78,941,613
Shares redeemed.............................. (1,389,460) (15,447,536) (1,474,415) (15,261,079) (35,286,473) (374,860,989)
Changes from exercise of exchange privilege:
Shares sold................................... 562,606 6,169,049 2,030,746 21,044,664 16,990,981 180,683,638
Shares redeemed............................... (670,010) (7,368,594) (1,953,247) (20,158,140) (19,190,861) (203,783,227)
-------- ---------- -------- ---------- --------- -----------
Net increase.................................. 839,772 $ 9,605,221 800,468 $ 8,528,230 6,107,144 $ 68,877,600
======== ========== ======== ========== ========= ===========
Class II shares:
1996*
Shares sold.................................. 46,373 $ 540,107 -- -- 4,367,907 $ 48,779,840
Shares issued in reinvestment of distributions 372 4,344 -- -- 40,544 454,078
Shares redeemed.............................. (840) (9,777) -- -- (40,673) (455,346)
Changes from exercise of exchange privilege:
Shares sold................................... -- -- -- -- 27,201 305,670
Shares redeemed............................... -- -- -- -- (108,409) (1,212,286)
-------- ---------- -------- ---------- --------- -----------
Net increase.................................. 45,905 $ 534,674 -- -- 4,286,570 $ 47,871,956
======== ========== ======== ========== ========= ===========
*For the period May 1, 1995 to February 29, 1996.
</TABLE>
<TABLE>
<CAPTION>
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 29, 1996, for tax purposes, the Funds had accumulated net 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
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Capital loss carryovers 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 Income Fund Income Fund Income Fund
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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>
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at February 29,
1996, by $12,910 in the Franklin Arizona Tax-Free Income Fund, $888 in the
Franklin Colorado Tax-Free Income Fund, $25,710 in the Franklin Connecticut
Tax-Free Income Fund, $33,124 in the Franklin Puerto Rico Tax-Free Income Fund,
and $7,875 in the Franklin High Yield Tax-Free Income Fund.
For 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.
The Franklin Puerto Rico Tax-Free Income Fund has a deferred loss of $40,246
deemed to be incurred on the first day of the following fiscal year for income
tax purposes.
<TABLE>
<CAPTION>
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended February 29, 1996 were as follows:
Franklin Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Purchases.............................................. $191,196,258 $53,432,962 $16,762,469 $6,986,826 $85,629,820
========== ========= ========= ======== =========
Sales.................................................. $183,203,707 $35,550,372 $ 6,168,676 $4,914,543 $65,943,907
========== ========= ========= ======== =========
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............................................ $37,572,279 $93,843,242 $57,940,501 $12,258,667 $721,867,675
========= ========= ========= ========= ==========
Sales................................................ $23,620,866 $58,740,811 $50,887,430 $ 2,541,213 $317,518,721
========= ========= ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
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
-----------------------------------------------------------------------------
<S> <C>
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% In excess of $250 million
</TABLE>
The terms of the management agreement provide that aggregate annual 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 year ended February 29,
1996, the Funds' expenses did not exceed these limitations. However, Advisers
agreed in advance to waive management fees for the Franklin Federal
Intermediate-Term Tax-Free Fund in the amount of $155,864, in an effort to
minimize the Fund's expenses.
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 year ended February 29, 1996, aggregated $1,795,453, of which $1,646,616 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 will 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 of 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 $5,130,056 for the year ended February 29, 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
shares of the Funds, and as such are not expenses of the Funds.
<TABLE>
<CAPTION>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Distribution Plans and Underwriting Agreement: (cont.)
Distributors may also make payments, out of its own resources, to dealers for
certain sales of the Funds' Class I and Class II shares. Commissions received by
Distributors, amounts paid to other dealers and any applicable contingent
deferred sales charges for the year ended February 29, 1996 were as follows:
Franklin Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
Class I --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total commissions received................................. $2,294,990 $915,960 $710,747 $156,127 $2,144,039
Paid to other dealers...................................... $2,210,926 $854,267 $686,982 $154,371 $2,072,336
Class II
Total commissions received................................. $ 20,372 $ 16,956 $ 16,740 -- $ 48,052
Paid to other dealers...................................... $ 42,244 $ 29,544 $ 31,656 -- $ 93,298
Contingent deferred sales charges.......................... $ 812 $ 436 $ 298 -- $ 1,903
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
Class I --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total commissions received................................ $1,223,550 $2,579,116 $752,158 $235,212 $18,655,891
Paid to other dealers..................................... $1,161,355 $2,461,782 $703,532 $230,375 $17,844,183
Contingent deferred sales charges......................... -- $ 12,423 -- $ 3,334 $ 19,365
Class II
Total commissions received................................ $ 22,571 $ 31,765 $ 5,538 -- $ 478,628
Paid to other dealers..................................... $ 45,886 $ 60,993 $ 8,452 -- $ 975,396
Contingent deferred sales charges......................... $ 1,888 $ 705 -- -- $ 3,706
</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
Although each of the Funds, except the Franklin Connecticut Tax-Free Income Fund
and the Franklin Federal Intermediate-Term Tax-Free Income Fund, has a
diversified investment portfolio, all of their investments are in the securities
of issuers within their respective states and U.S. territories and possessions,
except for the Franklin Federal Intermediate-Term Tax-Free Income Fund and the
Franklin High Yield Tax-Free Income Fund. The Franklin Federal Intermediate-Term
Tax-Free Income Fund has investments in excess of 10% of its total net assets in
the states of California and Florida. The Franklin High Yield Tax-Free Income
Fund has investments in excess of 10% of its total net assets in the states of
California and New York. Such concentration may subject the Funds more
significantly to economic changes occurring within those states and U.S.
territories and possessions.
Although the Franklin High Yield Tax-Free Income Fund has a diversified
portfolio, the Fund has 32.4% of its portfolio invested in lower rated and
comparable quality unrated high yield securities. Investments in higher yield
securities are accompanied by a greater degree of credit risk and such lower
quality securities tend to be more sensitive to economic conditions than higher
rated securities.
The risk of loss due to default by the issuer may be significantly greater for
the holders of high yielding securities, because such securities are generally
unsecured and are often subordinated to other creditors of the issuer. At
February 29, 1996, the Franklin High Yield Tax-Free Income Fund held one
defaulted security with a value of $4,220,000, representing 0.11% of the Fund's
net assets. For more information as to the specific security, see the
accompanying Statement of Investments in Securities and Net Assets.
For financial reporting purposes, it is the Fund's accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
<TABLE>
<CAPTION>
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period, by Fund, are as follows:
Per Share Operating Performance Ratios/Supplemental Data+++
----------------------------------------------------- ---------------------------
Total
Net Real- From Distri- Distri- Ratio of Net
Net Asset Net ized & Un- Invest- butions butions Net Asset Net Assets Ratio of Investment
Period Value at Invest-realized Gain ment From Net From Total value at at End Expenses Income to Portfolio
Ended Beginning ment (Loss) on Opera- Investment Capital Distri- End of Total of Period to Average Average Turnover
Feb.29,of Period Income Securities tions Income Gains butions 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> <C>
1992 $10.57 $.67 $.308 $.978 $(.728) $ -- $(.728) $10.82 9.45% $ 585,986 .56% 6.37% 1.56%
1993 10.82 .68 .733 1.413 (.663) -- (.663) 11.57 13.22 707,702 .55 6.11 5.67
1994 11.57 .66 .020 .680 (.670) -- (.670) 11.58 5.76 796,838 .54 5.65 14.17
1995 11.58 .65 (.481) .169 (.639) -- (.639) 11.11 1.63 720,801 .60 5.86 18.65
1996 11.11 .64 .362 1.002 (.651) (.121) (.772) 11.34 9.24 750,797 .62 5.67 25.12
Class II Shares:
19962 11.15 .49 .344 .834 (.483) (.121) (.604) 11.38 7.60 1,892 1.20 5.05 25.12
Franklin Colorado Tax-Free Income Fund:
Class I Shares:
1992 10.70 .68 .361 1.041 (.741) -- (.741) 11.00 9.93 110,085 .70 6.44 21.46
1993 11.00 .70 .845 1.545 (.695) -- (.695) 11.85 14.26 159,280 .67 6.20 5.66
1994 11.85 .68 .100 .780 (.690) -- (.690) 11.94 6.49 202,158 .64 5.69 10.85
1995 11.94 .67 (.568) .102 (.662) -- (.662) 11.38 1.05 194,564 .70 5.94 28.83
1996 11.38 .67 .453 1.123 (.663) -- (.663) 11.84 10.12 215,609 .71 5.73 17.58
Class II Shares:
19962 11.40 .50 .461 .961 (.491) -- (.491) 11.87 8.57 1,656 1.29 5.12 17.58
Franklin Connecticut Tax-Free Income Fund:
Class I Shares:
1992 10.34 .62 .211 .831 (.681) -- (.681) 10.49 8.16 88,184 .71 6.11 28.28
1993 10.49 .64 .664 1.304 (.634) -- (.634) 11.16 12.60 126,816 .69 5.97 28.52
1994 11.16 .62 .080 .700 (.630) -- (.630) 11.23 6.16 163,050 .65 5.54 5.54
1995 11.23 .62 (.597) .023 (.613) -- (.613) 10.64 .37 155,623 .71 5.83 75.72
1996 10.64 .62 .319 .939 (.619) -- (.619) 10.96 9.04 167,045 .73 5.70 3.88
Class II Shares:
19962 10.65 .47 .312 .782 (.462) -- (.462) 10.97 7.45 1,656 1.30 5.12 3.88
Franklin Indiana Tax-Free Income Fund:
Class I Shares:
1992 10.83 .69 .325 1.015 (.775) -- (.775) 11.07 9.53 23,914 .5 6.60 .03
1993 11.07 .71 .828 1.538 (.708) -- (.708) 11.90 14.10 37,367 .59 6.16 7.98
1994 11.90 .68 .108 .788 (.678) -- (.678) 12.01 6.53 47,870 .71 5.62 16.12
1995 12.01 .66 (.608) .052 (.662) -- (.662) 11.40 .58 46,583 .81 5.84 26.49
1996 11.40 .67 .350 1.020 (.660) -- (.660) 11.76 9.20 48,949 .80 5.80 10.56
Franklin New Jersey Tax-Free Income Fund:
Class I Shares:
1992 10.84 .68 .348 1.028 (.708) -- (.708) 11.16 9.65 332,536 .60 6.30 3.66
1993 11.16 .69 .694 1.384 (.688) (.006) (.694) 11.85 12.55 433,702 .59 6.06 14.12
1994 11.85 .67 (.016) .654 (.684) -- (.684) 11.82 5.39 561,130 .57 5.60 4.16
1995 11.82 .66 (.550) .110 (.650) -- (.650) 11.28 1.12 533,937 .63 5.86 31.05
1996 11.28 .65 .389 1.039 (.639) -- (.639) 11.68 9.43 564,864 .65 5.65 12.04
Class II Shares:
19962 11.30 .49 .403 .893 (.473) -- (.473) 11.72 8.02 4,542 1.23 5.15 12.04
Franklin Oregon Tax-Free Income Fund:
Class I Shares:
1992 10.71 .63 .384 1.014 (.704) -- (.704) 11.02 9.61 208,972 .65 6.09 4.65
1993 11.02 .66 .702 1.362 (.652) -- (.652) 11.73 12.52 303,719 .62 5.87 7.78
1994 11.73 .64 (.021) .619 (.649) -- (.649) 11.70 5.15 375,684 .58 5.47 9.42
1995 11.70 .63 (.493) .137 (.617) -- (.617) 11.22 1.36 349,458 .65 5.71 26.44
1996 11.22 .63 .377 1.007 (.627) -- (.627) 11.60 9.19 375,415 .66 5.51 6.52
Class II Shares:
19962 11.23 .47 .414 .884 (.464) -- (.464) 11.65 7.99 2,044 1.24 4.87 6.52
7. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data+++
----------------------------------------------------- ---------------------------
Total
Net Real- From Distri- Distri- Ratio of Net
Net Asset Net ized & Un- Invest- butions butions Net Asset Net Assets Ratio of Investment
Period Value at Invest-realized Gain ment From Net From Total value at at End Expenses Income to Portfolio
Ended Beginning ment (Loss) on Opera- Investment Capital Distri- End of Total of Period to Average Average Turnover
Feb.29,of Period Income Securities tions Income Gains butions Period Return++ (in 000's) Net Assets** Net Assets Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Pennsylvania Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $ 9.49 $.64 $.380 $1.020 $(.670) $ -- $(.670) $ 9.84 10.99% $ 391,301 .59% 6.71% 4.44%
1993 9.84 .64 .703 1.343 (.633) -- (.633) 10.55 13.84 505,845 .58 6.34 5.87
1994 10.55 .63 .014 .644 (.634) -- (.634) 10.56 5.99 615,546 .56 5.90 4.73
1995 10.56 .62 (.406) .214 (.614) -- (.614) 10.16 2.22 587,366 .63 6.15 12.91
1996 10.16 .62 .287 .907 (.627) -- (.627) 10.44 9.15 639,847 .64 5.96 9.71
Class II Shares:
19962 10.17 .47 .302 .772 (.472) -- (.472) 10.47 7.71 3,110 1.22 5.36 9.71
Franklin Puerto Rico Tax-Free Income Fund:
Class I Shares:
1992 10.84 .69 .301 .991 (.711) -- (.711) 11.12 9.31 112,714 .70 6.45 15.01
1993 11.12 .70 .673 1.373 (.683) -- (.683) 11.81 12.48 144,806 .69 6.18 10.37
1994 11.81 .68 .034 .714 (.694) -- (.694) 11.83 5.95 175,036 .66 5.77 5.10
1995 11.83 .67 (.504) .166 (.686) -- (.686) 11.31 1.60 176,888 .73 5.95 18.30
1996 11.31 .66 .299 .959 (.669)+ (0.010) (.679) 11.59 8.68 190,577 .74 5.71 27.99
Class II Shares:
19962 11.32 .50 .304 .804 (.494) (0.010) (.504) 11.62 7.21 533 1.32 5.16 27.99
Franklin Federal Intermediate-Term Tax-Free Income Fund:
Class I Shares:
19931 10.00 .14 .499 .639 (.099) -- (.099) 10.54 14.77* 9,192 -- 5.49* 22.54
1994 10.54 .52 .289 .809 (.549) -- (.549) 10.80 7.82 67,603 .30 4.93 28.76
1995 10.80 .54 (.331) .209 (.529) -- (.529) 10.48 (.20) 73,977 .56 5.25 38.46
1996 10.48 .55 .468 1.018 (.548) -- (.548) 10.95 9.93 85,967 .65 5.12 3.35
Franklin High Yield Tax-Free Income Fund:
Class I Shares:
1992 10.31 .78 .230 1.010 (.840) -- (.840) 10.48 9.97 2,110,055 .53 7.73 102.57
1993 10.48 .79 .624 1.414 (.784) (.010) (.794) 11.10 13.72 2,742,765 .54 7.45 33.46
1994 11.10 .76 .169 .929 (.779) -- (.779) 11.25 8.33 3,372,533 .53 6.79 16.09
1995 11.25 .74 (.509) .231 (.741) -- (.741) 10.74 2.28 3,287,270 .60 6.92 15.89
1996 10.74 .74 .446 1.186 (.736) -- (.736) 11.19 11.35 3,787,147 .61 6.68 9.23
Class II Shares:
19962 10.81 .56 .423 .983 (.553) -- (.553) 11.24 9.27 48,163 1.18 6.07 9.23
</TABLE>
*Annualized
1For the period September 21, 1992 (effective date of registration) to February
28, 1993.
2For the period May 1, 1995 to February 29, 1996.
**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:
Ratio of expenses to
average net assets
----------------------
Franklin Indiana Tax-Free Income Fund
1992....................................... 0.74%
1993....................................... 0.73
Ratio of expenses to
average net assets
----------------------
Franklin Federal Intermediate-Term Tax-Free Income Fund
19931...................................... 1.60%*
1994....................................... 0.89
1995....................................... 0.84
1996....................................... 0.85
+Includes distributions in excess of net investment income in the amount of
$.001.
++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 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. The
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.
During this fiscal year, each Fund paid distributions from undistributed net
investment income in the amounts shown in the Statement of Changes in Net
Assets. Each Fund hereby designates the total amount of these distributions as
exempt-interest dividends under Section 852(b)(5) of the Internal Revenue
Code.
FRANKLIN TAX-FREE TRUST
Report of Independent Auditors
To the Shareholders and Board of Trustees
of the Franklin Tax-Free Trust:
We have audited the accompanying statements of assets and liabilities of each of
the funds comprising the Franklin Tax-Free Trust, including each Fund's
statement of investments in securities and net assets, as of February 29, 1996
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated thereon. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 29, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the funds comprising the Franklin Tax-Free Trust as of February 29, 1996, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and financial
highlights for each of the periods indicated thereon, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 29, 1996
Franklin Tax-Free Trust #3 Annual Report
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.
<TABLE>
<CAPTION>
Period Ending Price
<S> <C>
11/30/94 88.69
12/31/94 92.76
1/31/95 96.16
2/28/95 99.01
3/31/95 99.45
4/30/95 98.50
5/31/95 101.13
6/30/95 98.19
7/31/95 96.02
8/31/95 96.09
9/30/95 96.72
10/31/95 98.26
11/30/95 99.96
12/31/95 98.10
</TABLE>
GRAPHIC MATERIAL (2)
This bar chart shows that 37% insured municipal bonds and 63% non-insured
municipal bonds were issued in 1994, compared to 44% insured municipal bonds and
56% non-insured municipal bonds issued in 1995.
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), and 1995 ($156 billion).
GRAPHIC MATERIAL (4)
This chart shows in pie chart format the income and capital appreciation of the
Lehman Brothers 20-Year Municipal Bond Index for the 15-year period ended
12/31/95.
<TABLE>
<CAPTION>
Income: An Important Component of Total Return
<S> <C>
Income 88.45%
Capital Appreciation 11.55%
</TABLE>
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.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 57. 8%
AA 18.8%
A 9.3%
BBB 14.1%
</TABLE>
GRAPHIC MATERIAL (6)
This bar chart shows the comparison between the fund's disribution rate of 5.47%
and the taxable equivalent distribution rate of 9.74%, for Class I shares.
GRAPHIC MATERIAL (7)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/1/87 9,573 10,000 10,000
9/30/87 8,947 9,631 10,052
10/31/87 8,994 9,665 10,078
11/30/87 9,364 9,917 10,087
12/31/87 9,545 10,061 10,087
1/31/88 9,928 10,419 10,113
2/29/88 10,053 10,529 10,140
3/31/88 9,851 10,407 10,183
4/30/88 9,880 10,486 10,236
5/31/88 9,919 10,456 10,271
6/30/88 10,107 10,609 10,315
7/31/88 10,107 10,678 10,359
8/31/88 10,151 10,687 10,402
9/30/88 10,365 10,881 10,472
10/31/88 10,602 11,072 10,506
11/30/88 10,506 10,970 10,515
12/31/88 10,653 11,082 10,533
1/31/89 10,874 11,311 10,585
2/28/89 10,774 11,183 10,629
3/31/89 10,748 11,156 10,690
4/30/89 10,993 11,420 10,760
5/31/89 11,229 11,658 10,821
6/30/89 11,371 11,816 10,847
7/31/89 11,471 11,977 10,873
8/31/89 11,389 11,859 10,891
9/30/89 11,329 11,824 10,925
10/31/89 11,431 11,968 10,978
11/30/89 11,599 12,178 11,004
12/31/89 11,692 12,277 11,022
1/31/90 11,607 12,220 11,135
2/28/90 11,745 12,329 11,188
3/31/90 11,750 12,332 11,249
4/30/90 11,686 12,243 11,267
5/31/90 11,929 12,510 11,293
6/30/90 12,047 12,620 11,354
7/31/90 12,247 12,807 11,397
8/31/90 11,929 12,622 11,502
9/30/90 11,921 12,629 11,599
10/31/90 12,102 12,858 11,668
11/30/90 12,365 13,116 11,694
12/31/90 12,370 13,174 11,694
1/31/91 12,589 13,350 11,764
2/28/91 12,713 13,466 11,782
3/31/91 12,742 13,472 11,799
4/30/91 12,916 13,652 11,817
5/31/91 13,007 13,774 11,853
6/30/91 12,983 13,760 11,887
7/31/91 13,180 13,928 11,905
8/31/91 13,317 14,112 11,939
9/30/91 13,504 14,295 11,992
10/31/91 13,579 14,424 12,010
11/30/91 13,630 14,464 12,045
12/31/91 13,884 14,775 12,053
1/31/92 13,934 14,809 12,071
2/29/92 13,929 14,814 12,115
3/31/92 13,937 14,820 12,176
4/30/92 14,048 14,952 12,193
5/31/92 14,225 15,128 12,211
6/30/92 14,403 15,382 12,254
7/31/92 14,924 15,844 12,280
8/31/92 14,760 15,688 12,315
9/30/92 14,875 15,790 12,349
10/31/92 14,709 15,636 12,392
11/30/92 15,052 15,915 12,410
12/31/92 15,249 16,078 12,401
1/31/93 15,447 16,264 12,462
2/28/93 15,823 16,853 12,505
3/31/93 15,735 16,674 12,549
4/30/93 15,825 16,843 12,584
5/31/93 15,917 16,937 12,602
6/30/93 16,175 17,220 12,620
7/31/93 16,169 17,242 12,620
8/31/93 16,486 17,601 12,655
9/30/93 16,662 17,802 12,681
10/31/93 16,711 17,836 12,733
11/30/93 16,633 17,679 12,742
12/31/93 16,954 18,052 12,742
1/31/94 17,120 18,257 12,777
2/28/94 16,766 17,785 12,820
3/31/94 16,222 17,061 12,864
4/30/94 16,299 17,206 12,882
5/31/94 16,377 17,355 12,891
6/30/94 16,336 17,250 12,935
7/31/94 16,592 17,565 12,970
8/31/94 16,656 17,627 13,021
9/30/94 16,496 17,368 13,057
10/31/94 16,260 17,058 13,066
11/30/94 15,965 16,750 13,083
12/31/94 16,271 17,118 13,083
1/31/95 16,626 17,608 13,135
2/28/95 17,043 18,120 13,188
3/31/95 17,218 18,328 13,231
4/30/95 17,270 18,350 13,275
5/31/95 17,695 18,936 13,301
6/30/95 17,576 18,771 13,328
7/31/95 17,692 18,949 13,328
8/31/95 17,872 19,190 13,363
9/30/95 17,957 19,311 13,389
10/31/95 18,201 19,591 13,433
11/30/95 18,479 19,916 13,424
12/31/95 18,649 20,107 13,415
1/31/96 18,737 20,260 13,494
2/29/96 18,612 20,122 13,519
Total Return 86.12% 101.22% 35.19%
</TABLE>
GRAPHIC MATERIAL (4)
This bar chart shows the comparison between the fund's disribution rate of 5.01%
and the taxable equivalent distribution rate of 8.92%, for Class II shares.
GRAPHIC MATERIAL (8)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9,902 10,000 10,000
5/31/95 10,155 10,319 10,020
6/30/95 10,082 10,229 10,040
7/31/95 10,142 10,326 10,040
8/31/95 10,249 10,458 10,066
9/30/95 10,301 10,523 10,086
10/30/95 10,426 10,676 10,120
11/30/95 10,588 10,853 10,112
12/31/95 10,671 10,957 10,105
1/31/96 10,724 11,041 10,165
2/29/96 10,539 10,966 10,184
Total 5.39% 9.66% 1.84%
Return
</TABLE>
GRAPHIC MATERIAL (9)
This chart shows in pie chart format the fund'securities breakdown by sector as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 58.8%
AA 9.8%
A 11.8%
BBB 19.6%
</TABLE>
GRAPHIC MATERIAL (10)
This bar chart shows the comparison between the fund's disribution rate of 5.34%
and the taxable equivalent distribution rate of 9.30%, for Class I shares.
GRAPHIC MATERIAL (11)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/1/87 9,574 10,000 10,000
9/30/87 8,931 9,631 10,052
10/31/87 8,950 9,665 10,078
11/30/87 9,347 9,917 10,087
12/31/87 9,527 10,061 10,087
1/31/88 9,965 10,419 10,113
2/29/88 10,012 10,529 10,140
3/31/88 9,828 10,407 10,183
4/30/88 9,876 10,486 10,236
5/31/88 9,924 10,456 10,271
6/30/88 10,109 10,609 10,315
7/31/88 10,168 10,678 10,359
8/31/88 10,221 10,687 10,402
9/30/88 10,433 10,881 10,472
10/31/88 10,657 11,072 10,506
11/30/88 10,590 10,970 10,515
12/31/88 10,725 11,082 10,533
1/31/89 10,964 11,311 10,585
2/28/89 10,885 11,183 10,629
3/31/89 10,847 11,156 10,690
4/30/89 11,058 11,420 10,760
5/31/89 11,302 11,658 10,821
6/30/89 11,453 11,816 10,847
7/31/89 11,552 11,977 10,873
8/31/89 11,491 11,859 10,891
9/30/89 11,430 11,824 10,925
10/31/89 11,530 11,968 10,978
11/30/89 11,685 12,178 11,004
12/31/89 11,787 12,277 11,022
1/31/90 11,713 12,220 11,135
2/28/90 11,871 12,329 11,188
3/31/90 11,863 12,332 11,249
4/30/90 11,777 12,243 11,267
5/31/90 12,027 12,510 11,293
6/30/90 12,167 12,620 11,354
7/31/90 12,364 12,807 11,397
8/31/90 12,058 12,622 11,502
9/30/90 12,050 12,629 11,599
10/31/90 12,204 12,858 11,668
11/30/90 12,487 13,116 11,694
12/31/90 12,467 13,174 11,694
1/31/91 12,636 13,350 11,764
2/28/91 12,746 13,466 11,782
3/31/91 12,797 13,472 11,799
4/30/91 12,981 13,652 11,817
5/31/91 13,093 13,774 11,853
6/30/91 13,098 13,760 11,887
7/31/91 13,297 13,928 11,905
8/31/91 13,411 14,112 11,939
9/30/91 13,588 14,295 11,992
10/31/91 13,654 14,424 12,010
11/30/91 13,720 14,464 12,045
12/31/91 14,007 14,775 12,053
1/31/92 14,004 14,809 12,071
2/29/92 14,027 14,814 12,115
3/31/92 14,063 14,820 12,176
4/30/92 14,188 14,952 12,193
5/31/92 14,392 15,128 12,211
6/30/92 14,585 15,382 12,254
7/31/92 15,132 15,844 12,280
8/31/92 14,973 15,688 12,315
9/30/92 15,011 15,790 12,349
10/31/92 14,758 15,636 12,392
11/30/92 15,155 15,915 12,410
12/31/92 15,382 16,078 12,401
1/31/93 15,555 16,264 12,462
2/28/93 16,081 16,853 12,505
3/31/93 15,984 16,674 12,549
4/30/93 16,105 16,843 12,584
5/31/93 16,186 16,937 12,602
6/30/93 16,433 17,220 12,620
7/31/93 16,470 17,242 12,620
8/31/93 16,800 17,601 12,655
9/30/93 17,006 17,802 12,681
10/31/93 17,071 17,836 12,733
11/30/93 17,025 17,679 12,742
12/31/93 17,344 18,052 12,742
1/31/94 17,523 18,257 12,777
2/28/94 17,157 17,785 12,820
3/31/94 16,473 17,061 12,864
4/30/94 16,509 17,206 12,882
5/31/94 16,618 17,355 12,891
6/30/94 16,508 17,250 12,935
7/31/94 16,823 17,565 12,970
8/31/94 16,860 17,627 13,021
9/30/94 16,646 17,368 13,057
10/31/94 16,369 17,058 13,066
11/30/94 16,064 16,750 13,083
12/31/94 16,402 17,118 13,083
1/31/95 16,908 17,608 13,135
2/28/95 17,341 18,120 13,188
3/31/95 17,486 18,328 13,231
4/30/95 17,539 18,350 13,275
5/31/95 17,993 18,936 13,301
6/30/95 17,877 18,771 13,328
7/31/95 17,978 18,949 13,328
8/31/95 18,237 19,190 13,363
9/30/95 18,323 19,311 13,389
10/31/95 18,567 19,591 13,433
11/30/95 18,860 19,916 13,424
12/31/95 19,044 20,107 13,415
1/31/96 19,132 20,260 13,494
2/29/96 19,091 20,122 13,519
Total Return 90.91% 101.22% 35.19%
</TABLE>
GRAPHIC MATERIAL (12)
This bar chart shows the comparison between the fund's disribution rate of 4.90%
and the taxable equivalent distribution rate of 8.54%, for Class II shares.
GRAPHIC MATERIAL (13)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9,896 10,000 10,000
5/31/95 10,143 10,319 10,020
6/30/95 10,082 10,229 10,040
7/31/95 10,133 10,326 10,040
8/31/95 10,273 10,458 10,066
9/30/95 10,316 10,523 10,086
10/30/95 10,457 10,676 10,120
11/30/95 10,617 10,853 10,112
12/31/95 10,714 10,957 10,105
1/31/96 10,758 11,041 10,165
2/29/96 10,631 10,966 10,184
Total 6.31% 9.66% 1.84%
Return
</TABLE>
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.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 36.4%
AA 27.3%
A 11.6%
BBB 24.7%
</TABLE>
GRAPHIC MATERIAL (15)
This bar chart shows the comparison between the fund's disribution rate of 5.45%
and the taxable equivalent distribution rate of 9.45%, for Class I shares.
GRAPHIC MATERIAL (16)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 10/3/88 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
10/3/88 9,579 10,000 10,000
10/31/88 9,607 10,176 10,033
11/30/88 9,540 10,082 10,041
12/31/88 9,646 10,185 10,058
1/31/89 9,837 10,396 10,108
2/28/89 9,786 10,278 10,150
3/31/89 9,764 10,253 10,209
4/30/89 9,994 10,496 10,275
5/31/89 10,196 10,714 10,334
6/30/89 10,311 10,860 10,358
7/31/89 10,407 11,008 10,383
8/31/89 10,334 10,900 10,400
9/30/89 10,282 10,867 10,433
10/31/89 10,349 11,000 10,483
11/30/89 10,507 11,192 10,508
12/31/89 10,605 11,284 10,525
1/31/90 10,531 11,231 10,634
2/28/90 10,661 11,331 10,684
3/31/90 10,637 11,334 10,742
4/30/90 10,561 11,253 10,760
5/31/90 10,798 11,498 10,784
6/30/90 10,899 11,599 10,843
7/31/90 11,065 11,771 10,884
8/31/90 10,786 11,600 10,984
9/30/90 10,751 11,607 11,076
10/31/90 10,887 11,817 11,143
11/30/90 11,142 12,055 11,167
12/31/90 11,128 12,108 11,167
1/31/91 11,310 12,270 11,234
2/28/91 11,373 12,377 11,251
3/31/91 11,413 12,382 11,268
4/30/91 11,554 12,548 11,285
5/31/91 11,640 12,659 11,319
6/30/91 11,492 12,647 11,351
7/31/91 11,657 12,801 11,368
8/31/91 11,801 12,970 11,401
9/30/91 11,968 13,138 11,452
10/31/91 12,045 13,257 11,469
11/30/91 12,099 13,294 11,502
12/31/91 12,327 13,580 11,510
1/31/92 12,335 13,611 11,527
2/29/92 12,317 13,615 11,569
3/31/92 12,333 13,620 11,628
4/30/92 12,420 13,742 11,644
5/31/92 12,603 13,904 11,660
6/30/92 12,751 14,137 11,702
7/31/92 13,164 14,561 11,727
8/31/92 13,000 14,419 11,760
9/30/92 13,028 14,512 11,793
10/31/92 12,825 14,370 11,834
11/30/92 13,122 14,627 11,851
12/31/92 13,334 14,777 11,842
1/31/93 13,511 14,948 11,900
2/28/93 13,912 15,489 11,942
3/31/93 13,841 15,325 11,984
4/30/93 13,944 15,480 12,017
5/31/93 13,999 15,566 12,034
6/30/93 14,243 15,826 12,051
7/31/93 14,247 15,847 12,051
8/31/93 14,557 16,177 12,085
9/30/93 14,728 16,361 12,110
10/31/93 14,767 16,392 12,160
11/30/93 14,704 16,248 12,168
12/31/93 14,978 16,591 12,168
1/31/94 15,111 16,780 12,201
2/28/94 14,797 16,345 12,243
3/31/94 14,270 15,680 12,284
4/30/94 14,258 15,813 12,301
5/31/94 14,392 15,951 12,310
6/30/94 14,299 15,854 12,352
7/31/94 14,556 16,144 12,385
8/31/94 14,585 16,200 12,435
9/30/94 14,410 15,962 12,468
10/31/94 14,138 15,678 12,477
11/30/94 13,784 15,394 12,493
12/31/94 14,171 15,733 12,493
1/31/95 14,533 16,183 12,543
2/28/95 14,854 16,654 12,593
3/31/95 14,953 16,845 12,635
4/30/95 15,010 16,865 12,677
5/31/95 15,364 17,403 12,702
6/30/95 15,237 17,252 12,727
7/31/95 15,324 17,416 12,727
8/31/95 15,527 17,637 12,761
9/30/95 15,657 17,748 12,786
10/31/95 15,847 18,006 12,828
11/30/95 16,053 18,304 12,819
12/31/95 16,202 18,480 12,810
1/31/96 16,278 18,621 12,886
2/29/96 16,192 18,494 12,910
Total Return 61.92% 84.94% 29.10%
</TABLE>
GRAPHIC MATERIAL (17)
This bar chart shows the comparison between the fund's disribution rate of 5.06%
and the taxable equivalent distribution rate of 8.77%, for Class II shares.
GRAPHIC MATERIAL (18)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9,898 10,000 10,000
5/31/95 10,125 10,319 10,020
6/30/95 10,045 10,229 10,040
7/31/95 10,097 10,326 10,040
8/31/95 10,234 10,458 10,066
9/30/95 10,323 10,523 10,086
10/30/95 10,442 10,676 10,120
11/30/95 10,572 10,853 10,112
12/31/95 10,644 10,957 10,105
1/31/96 10,689 11,041 10,165
2/29/96 10,519 10,966 10,184
Total 5.19% 9.66% 1.84%
Return
</TABLE>
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.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 46.2%
AA 9.2%
A 22.4%
BBB 21.8%
Below Investment Grade 0.4%
</TABLE>
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 9.21%.
GRAPHIC MATERIAL (21)
The following line graph hypothetically compares the performance of the fund
with the Consumer Price Index (CPI) and the Lehman Brothers Municipal Bond
Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/1/87 9,573 10,000 10,000
9/30/87 8,985 9,631 10,052
10/31/87 8,966 9,665 10,078
11/30/87 9,317 9,917 10,087
12/31/87 9,491 10,061 10,087
1/31/88 9,973 10,419 10,113
2/29/88 10,120 10,529 10,140
3/31/88 9,930 10,407 10,183
4/30/88 9,953 10,486 10,236
5/31/88 9,995 10,456 10,271
6/30/88 10,165 10,609 10,315
7/31/88 10,198 10,678 10,359
8/31/88 10,261 10,687 10,402
9/30/88 10,455 10,881 10,472
10/31/88 10,721 11,072 10,506
11/30/88 10,643 10,970 10,515
12/31/88 10,769 11,082 10,533
1/31/89 10,967 11,311 10,585
2/28/89 10,908 11,183 10,629
3/31/89 10,922 11,156 10,690
4/30/89 11,114 11,420 10,760
5/31/89 11,359 11,658 10,821
6/30/89 11,522 11,816 10,847
7/31/89 11,632 11,977 10,873
8/31/89 11,581 11,859 10,891
9/30/89 11,541 11,824 10,925
10/31/89 11,653 11,968 10,978
11/30/89 11,820 12,178 11,004
12/31/89 11,966 12,277 11,022
1/31/90 11,892 12,220 11,135
2/28/90 12,018 12,329 11,188
3/31/90 12,010 12,332 11,249
4/30/90 11,934 12,243 11,267
5/31/90 12,234 12,510 11,293
6/30/90 12,376 12,620 11,354
7/31/90 12,565 12,807 11,397
8/31/90 12,260 12,622 11,502
9/30/90 12,254 12,629 11,599
10/31/90 12,424 12,858 11,668
11/30/90 12,675 13,116 11,694
12/31/90 12,681 13,174 11,694
1/31/91 12,913 13,350 11,764
2/28/91 12,990 13,466 11,782
3/31/91 13,045 13,472 11,799
4/30/91 13,220 13,652 11,817
5/31/91 13,311 13,774 11,853
6/30/91 13,306 13,760 11,887
7/31/91 13,496 13,928 11,905
8/31/91 13,639 14,112 11,939
9/30/91 13,832 14,295 11,992
10/31/91 13,901 14,424 12,010
11/30/91 13,970 14,464 12,045
12/31/91 14,230 14,775 12,053
1/31/92 14,249 14,809 12,071
2/29/92 14,249 14,814 12,115
3/31/92 14,288 14,820 12,176
4/30/92 14,417 14,952 12,193
5/31/92 14,690 15,128 12,211
6/30/92 14,874 15,382 12,254
7/31/92 15,387 15,844 12,280
8/31/92 15,216 15,688 12,315
9/30/92 15,256 15,790 12,349
10/31/92 15,028 15,636 12,392
11/30/92 15,364 15,915 12,410
12/31/92 15,607 16,078 12,401
1/31/93 15,797 16,264 12,462
2/28/93 16,312 16,853 12,505
3/31/93 16,212 16,674 12,549
4/30/93 16,373 16,843 12,584
5/31/93 16,452 16,937 12,602
6/30/93 16,726 17,220 12,620
7/31/93 16,722 17,242 12,620
8/31/93 17,040 17,601 12,655
9/30/93 17,248 17,802 12,681
10/31/93 17,325 17,836 12,733
11/30/93 17,290 17,679 12,742
12/31/93 17,612 18,052 12,742
1/31/94 17,778 18,257 12,777
2/28/94 17,409 17,785 12,820
3/31/94 16,762 17,061 12,864
4/30/94 16,828 17,206 12,882
5/31/94 16,923 17,355 12,891
6/30/94 16,885 17,250 12,935
7/31/94 17,159 17,565 12,970
8/31/94 17,196 17,627 13,021
9/30/94 16,980 17,368 13,057
10/31/94 16,732 17,058 13,066
11/30/94 16,409 16,750 13,083
12/31/94 16,735 17,118 13,083
1/31/95 17,123 17,608 13,135
2/28/95 17,513 18,120 13,188
3/31/95 17,660 18,328 13,231
4/30/95 17,697 18,350 13,275
5/31/95 18,093 18,936 13,301
6/30/95 18,038 18,771 13,328
7/31/95 18,125 18,949 13,328
8/31/95 18,338 19,190 13,363
9/30/95 18,425 19,311 13,389
10/31/95 18,639 19,591 13,433
11/30/95 18,871 19,916 13,424
12/31/95 19,104 20,107 13,415
1/31/96 19,193 20,260 13,494
2/29/96 19,120 20,122 13,519
Total Return 91.20% 101.22% 35.19%
</TABLE>
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.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 58.8%
AA 12.3%
A 15.8%
BBB 10.6%
Below Investment Grade 2.5%
</TABLE>
GRAPHIC MATERIAL (23)
This bar chart shows the comparison between the fund's distribution rate of
5.21% and the taxable equivalent distribution rate of 9.24%, for Class I shares.
GRAPHIC MATERIAL (24)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/12/88 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/12/88 9,579 10,000 10,000
5/31/88 9,569 9,982 10,021
6/30/88 9,741 10,128 10,064
7/31/88 9,789 10,194 10,106
8/31/88 9,885 10,203 10,149
9/30/88 10,106 10,388 10,217
10/31/88 10,337 10,570 10,250
11/30/88 10,240 10,473 10,259
12/31/88 10,384 10,580 10,276
1/31/89 10,487 10,799 10,327
2/28/89 10,442 10,676 10,370
3/31/89 10,438 10,650 10,430
4/30/89 10,693 10,903 10,498
5/31/89 10,919 11,130 10,557
6/30/89 11,056 11,281 10,583
7/31/89 11,132 11,434 10,608
8/31/89 11,025 11,322 10,625
9/30/89 10,948 11,288 10,659
10/31/89 11,129 11,426 10,710
11/30/89 11,291 11,626 10,736
12/31/89 11,359 11,721 10,753
1/31/90 11,269 11,666 10,864
2/28/90 11,402 11,770 10,915
3/31/90 11,386 11,774 10,975
4/30/90 11,305 11,689 10,993
5/31/90 11,537 11,944 11,018
6/30/90 11,663 12,049 11,077
7/31/90 11,877 12,227 11,120
8/31/90 11,573 12,050 11,222
9/30/90 11,590 12,057 11,316
10/31/90 11,808 12,275 11,384
11/30/90 12,080 12,522 11,409
12/31/90 12,104 12,577 11,409
1/31/91 12,300 12,746 11,477
2/28/91 12,439 12,856 11,495
3/31/91 12,476 12,862 11,512
4/30/91 12,629 13,034 11,529
5/31/91 12,736 13,150 11,564
6/30/91 12,746 13,137 11,597
7/31/91 12,943 13,297 11,615
8/31/91 13,059 13,473 11,648
9/30/91 13,235 13,648 11,700
10/31/91 13,316 13,771 11,717
11/30/91 13,373 13,809 11,751
12/31/91 13,612 14,106 11,759
1/31/92 13,646 14,138 11,777
2/29/92 13,656 14,143 11,819
3/31/92 13,678 14,148 11,880
4/30/92 13,798 14,274 11,896
5/31/92 13,969 14,443 11,913
6/30/92 14,166 14,685 11,956
7/31/92 14,664 15,126 11,981
8/31/92 14,485 14,978 12,015
9/30/92 14,496 15,075 12,048
10/31/92 14,328 14,927 12,090
11/30/92 14,657 15,194 12,107
12/31/92 14,841 15,349 12,099
1/31/93 14,980 15,528 12,158
2/28/93 15,418 16,090 12,201
3/31/93 15,324 15,919 12,243
4/30/93 15,426 16,080 12,278
5/31/93 15,502 16,170 12,295
6/30/93 15,764 16,440 12,312
7/31/93 15,785 16,461 12,312
8/31/93 16,073 16,804 12,347
9/30/93 16,229 16,995 12,372
10/31/93 16,277 17,028 12,423
11/30/93 16,204 16,878 12,432
12/31/93 16,470 17,234 12,432
1/31/94 16,616 17,430 12,465
2/28/94 16,281 16,979 12,508
3/31/94 15,681 16,288 12,550
4/30/94 15,729 16,426 12,568
5/31/94 15,848 16,569 12,577
6/30/94 15,742 16,468 12,619
7/31/94 16,002 16,769 12,654
8/31/94 16,066 16,828 12,704
9/30/94 15,857 16,581 12,738
10/31/94 15,576 16,286 12,747
11/30/94 15,252 15,991 12,764
12/31/94 15,616 16,343 12,764
1/31/95 16,069 16,810 12,815
2/28/95 16,466 17,299 12,866
3/31/95 16,617 17,498 12,909
4/30/95 16,650 17,519 12,951
5/31/95 17,082 18,078 12,977
6/30/95 16,982 17,921 13,003
7/31/95 17,076 18,091 13,003
8/31/95 17,261 18,321 13,037
9/30/95 17,370 18,436 13,063
10/31/95 17,616 18,703 13,106
11/30/95 17,879 19,014 13,097
12/31/95 18,051 19,197 13,088
1/31/96 18,133 19,342 13,165
2/29/96 18,014 19,211 13,190
Total Return 80.14% 92.11% 31.90%
</TABLE>
GRAPHIC MATERIAL (25)
This bar chart shows the comparison between the fund's distribution rate of
4.76% and the taxable equivalent distribution rate of 8.44%, for Class II
shares.
GRAPHIC MATERIAL (26)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 10,000 10,000 9,904
5/31/95 10,162 10,319 10,020
6/30/95 10,098 10,229 10,040
7/31/95 10,157 10,326 10,040
8/31/95 10,261 10,458 10,066
9/30/95 10,330 10,523 10,086
10/30/95 10,470 10,676 10,120
11/30/95 10,620 10,853 10,112
12/31/95 10,717 10,957 10,105
1/31/96 10,769 11,041 10,165
2/29/96 10,585 10,966 10,184
Total 5.85% 9.66% 1.84%
Return
</TABLE>
GRAPHIC MATERIAL (27)
This chart shows in pie chart format the fund'securities breakdown by sector as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 44.7%
AA 22.7%
A 20.9%
BBB 10.6%
Below Investment Grade 1.1%
</TABLE>
GRAPHIC MATERIAL (28)
This bar chart shows the comparison between the fund's distribution rate of
5.15% and the taxable equivalent distribution rate of 9.36%, for Class I shares.
GRAPHIC MATERIAL (29)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 9/1/87 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/1/87 9,575 10,000 10,000
9/30/87 8,896 9,631 10,052
10/31/87 8,906 9,665 10,078
11/30/87 9,217 9,917 10,087
12/31/87 9,368 10,061 10,087
1/31/88 9,792 10,419 10,113
2/29/88 9,894 10,529 10,140
3/31/88 9,721 10,407 10,183
4/30/88 9,757 10,486 10,236
5/31/88 9,785 10,456 10,271
6/30/88 9,967 10,609 10,315
7/31/88 9,975 10,678 10,359
8/31/88 10,032 10,687 10,402
9/30/88 10,238 10,881 10,472
10/31/88 10,455 11,072 10,506
11/30/88 10,373 10,970 10,515
12/31/88 10,532 11,082 10,533
1/31/89 10,752 11,311 10,585
2/28/89 10,659 11,183 10,629
3/31/89 10,626 11,156 10,690
4/30/89 10,850 11,420 10,760
5/31/89 11,106 11,658 10,821
6/30/89 11,251 11,816 10,847
7/31/89 11,323 11,977 10,873
8/31/89 11,249 11,859 10,891
9/30/89 11,174 11,824 10,925
10/31/89 11,268 11,968 10,978
11/30/89 11,417 12,178 11,004
12/31/89 11,512 12,277 11,022
1/31/90 11,436 12,220 11,135
2/28/90 11,554 12,329 11,188
3/31/90 11,553 12,332 11,249
4/30/90 11,442 12,243 11,267
5/31/90 11,695 12,510 11,293
6/30/90 11,827 12,620 11,354
7/31/90 12,016 12,807 11,397
8/31/90 11,745 12,622 11,502
9/30/90 11,721 12,629 11,599
10/31/90 11,902 12,858 11,668
11/30/90 12,164 13,116 11,694
12/31/90 12,151 13,174 11,694
1/31/91 12,347 13,350 11,764
2/28/91 12,496 13,466 11,782
3/31/91 12,554 13,472 11,799
4/30/91 12,717 13,652 11,817
5/31/91 12,822 13,774 11,853
6/30/91 12,821 13,760 11,887
7/31/91 12,976 13,928 11,905
8/31/91 13,118 14,112 11,939
9/30/91 13,298 14,295 11,992
10/31/91 13,382 14,424 12,010
11/30/91 13,430 14,464 12,045
12/31/91 13,686 14,775 12,053
1/31/92 13,722 14,809 12,071
2/29/92 13,716 14,814 12,115
3/31/92 13,759 14,820 12,176
4/30/92 13,853 14,952 12,193
5/31/92 13,998 15,128 12,211
6/30/92 14,194 15,382 12,254
7/31/92 14,658 15,844 12,280
8/31/92 14,460 15,688 12,315
9/30/92 14,492 15,790 12,349
10/31/92 14,305 15,636 12,392
11/30/92 14,622 15,915 12,410
12/31/92 14,850 16,078 12,401
1/31/93 15,026 16,264 12,462
2/28/93 15,480 16,853 12,505
3/31/93 15,394 16,674 12,549
4/30/93 15,506 16,843 12,584
5/31/93 15,579 16,937 12,602
6/30/93 15,774 17,220 12,620
7/31/93 15,807 17,242 12,620
8/31/93 16,044 17,601 12,655
9/30/93 16,253 17,802 12,681
10/31/93 16,313 17,836 12,733
11/30/93 16,209 17,679 12,742
12/31/93 16,472 18,052 12,742
1/31/94 16,625 18,257 12,777
2/28/94 16,307 17,785 12,820
3/31/94 15,722 17,061 12,864
4/30/94 15,765 17,206 12,882
5/31/94 15,865 17,355 12,891
6/30/94 15,781 17,250 12,935
7/31/94 16,038 17,565 12,970
8/31/94 16,097 17,627 13,021
9/30/94 15,883 17,368 13,057
10/31/94 15,582 17,058 13,066
11/30/94 15,266 16,750 13,083
12/31/94 15,662 17,118 13,083
1/31/95 16,103 17,608 13,135
2/28/95 16,532 18,120 13,188
3/31/95 16,682 18,328 13,231
4/30/95 16,714 18,350 13,275
5/31/95 17,134 18,936 13,301
6/30/95 17,002 18,771 13,328
7/31/95 17,110 18,949 13,328
8/31/95 17,325 19,190 13,363
9/30/95 17,419 19,311 13,389
10/31/95 17,651 19,591 13,433
11/30/95 17,899 19,916 13,424
12/31/95 18,025 20,107 13,415
1/31/96 18,136 20,260 13,494
2/29/96 18,046 20,122 13,519
Total Return 80.46% 101.22% 35.19%
</TABLE>
GRAPHIC MATERIAL (30)
This bar chart shows the comparison between the fund's distribution rate of
4.69% and the taxable equivalent distribution rate of 8.53%, for Class II
shares.
GRAPHIC MATERIAL (31)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 10,000 10,000 9,903
5/31/95 10,162 10,319 10,020
6/30/95 10,079 10,229 10,040
7/31/95 10,138 10,326 10,040
8/31/95 10,268 10,458 10,066
9/30/95 10,318 10,523 10,086
10/30/95 10,450 10,676 10,120
11/30/95 10,590 10,853 10,112
12/31/95 10,668 10,957 10,105
1/31/96 10,729 11,041 10,165
2/29/96 10,571 10,966 10,184
Total 5.71% 9.66% 1.84%
Return
</TABLE>
GRAPHIC MATERIAL (32)
This chart shows in pie chart format the fund'securities breakdown by sector as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 56.2%
AA 10.2%
A 12.9%
BBB 20.7%
</TABLE>
GRAPHIC MATERIAL (33)
This bar chart shows the comparison between the fund's distribution rate of
5.72% and the taxable equivalent distribution rate of 9.74%, for Class I shares.
GRAPHIC MATERIAL (34)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 12/1/86 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
12/1/86 9,579 10,000 10,000
12/31/86 9,579 9,972 10,009
1/31/87 9,722 10,272 10,072
2/28/87 9,799 10,322 10,108
3/31/87 9,770 10,213 10,154
4/30/87 9,072 9,700 10,209
5/31/87 8,851 9,652 10,244
6/30/87 9,113 9,936 10,280
7/31/87 9,103 10,037 10,307
8/31/87 9,152 10,059 10,362
9/30/87 8,666 9,688 10,415
10/31/87 8,618 9,722 10,443
11/30/87 8,990 9,976 10,452
12/31/87 9,213 10,120 10,452
1/31/88 9,632 10,480 10,479
2/29/88 9,775 10,592 10,506
3/31/88 9,621 10,469 10,552
4/30/88 9,673 10,548 10,606
5/31/88 9,694 10,518 10,642
6/30/88 9,873 10,671 10,688
7/31/88 9,905 10,741 10,733
8/31/88 9,979 10,750 10,778
9/30/88 10,173 10,945 10,850
10/31/88 10,410 11,137 10,886
11/30/88 10,334 11,035 10,895
12/31/88 10,466 11,148 10,913
1/31/89 10,631 11,378 10,968
2/28/89 10,586 11,249 11,013
3/31/89 10,576 11,222 11,077
4/30/89 10,833 11,488 11,149
5/31/89 11,070 11,726 11,212
6/30/89 11,207 11,886 11,239
7/31/89 11,287 12,048 11,266
8/31/89 11,229 11,930 11,284
9/30/89 11,183 11,894 11,320
10/31/89 11,276 12,039 11,375
11/30/89 11,428 12,250 11,402
12/31/89 11,546 12,350 11,420
1/31/90 11,463 12,292 11,538
2/28/90 11,558 12,401 11,592
3/31/90 11,558 12,405 11,656
4/30/90 11,449 12,316 11,675
5/31/90 11,716 12,584 11,701
6/30/90 11,802 12,695 11,765
7/31/90 11,987 12,883 11,809
8/31/90 11,652 12,696 11,918
9/30/90 11,577 12,704 12,018
10/31/90 11,766 12,934 12,090
11/30/90 12,018 13,194 12,117
12/31/90 11,992 13,252 12,117
1/31/91 12,184 13,429 12,189
2/28/91 12,261 13,546 12,208
3/31/91 12,313 13,551 12,226
4/30/91 12,508 13,733 12,244
5/31/91 12,607 13,855 12,281
6/30/91 12,640 13,841 12,317
7/31/91 12,833 14,010 12,335
8/31/91 12,973 14,195 12,371
9/30/91 13,167 14,380 12,425
10/31/91 13,255 14,509 12,444
11/30/91 13,330 14,550 12,480
12/31/91 13,609 14,863 12,489
1/31/92 13,630 14,897 12,508
2/29/92 13,623 14,901 12,553
3/31/92 13,658 14,907 12,617
4/30/92 13,790 15,040 12,634
5/31/92 13,951 15,217 12,652
6/30/92 14,180 15,473 12,698
7/31/92 14,667 15,937 12,724
8/31/92 14,528 15,781 12,760
9/30/92 14,590 15,884 12,796
10/31/92 14,436 15,728 12,840
11/30/92 14,743 16,009 12,858
12/31/92 14,922 16,173 12,849
1/31/93 15,131 16,360 12,912
2/28/93 15,562 16,953 12,958
3/31/93 15,507 16,773 13,003
4/30/93 15,600 16,942 13,039
5/31/93 15,694 17,037 13,058
6/30/93 15,938 17,322 13,076
7/31/93 15,928 17,344 13,076
8/31/93 16,235 17,705 13,112
9/30/93 16,422 17,907 13,140
10/31/93 16,472 17,941 13,194
11/30/93 16,415 17,783 13,203
12/31/93 16,664 18,158 13,203
1/31/94 16,805 18,365 13,239
2/28/94 16,526 17,890 13,284
3/31/94 16,056 17,161 13,329
4/30/94 16,074 17,307 13,348
5/31/94 16,186 17,458 13,357
6/30/94 16,155 17,351 13,402
7/31/94 16,397 17,669 13,438
8/31/94 16,447 17,731 13,492
9/30/94 16,287 17,470 13,529
10/31/94 16,076 17,159 13,538
11/30/94 15,786 16,849 13,556
12/31/94 16,115 17,219 13,556
1/31/95 16,496 17,712 13,610
2/28/95 16,895 18,227 13,664
3/31/95 17,048 18,437 13,710
4/30/95 17,084 18,459 13,755
5/31/95 17,491 19,048 13,782
6/30/95 17,427 18,882 13,810
7/31/95 17,532 19,061 13,810
8/31/95 17,690 19,303 13,846
9/30/95 17,796 19,425 13,873
10/31/95 17,989 19,707 13,919
11/30/95 18,252 20,034 13,909
12/31/95 18,431 20,226 13,900
1/31/96 18,522 20,380 13,982
2/29/96 18,437 20,241 14,008
Total Return 84.37% 102.41% 40.08%
</TABLE>
GRAPHIC MATERIAL (35)
This bar chart shows the comparison between the fund's distribution rate of
5.33% and the taxable equivalent distribution rate of 9.08%, for Class II
shares.
GRAPHIC MATERIAL (36)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 10,000 10,000 9,903
5/31/95 10,140 10,319 10,020
6/30/95 10,098 10,229 10,040
7/31/95 10,154 10,326 10,040
8/31/95 10,241 10,458 10,066
9/30/95 10,307 10,523 10,086
10/30/95 10,413 10,676 10,120
11/30/95 10,550 10,853 10,112
12/31/95 10,658 10,957 10,105
1/31/96 10,705 11,041 10,165
2/29/96 10,552 10,966 10,184
Total 5.52% 9.66% 1.84%
Return
</TABLE>
GRAPHIC MATERIAL (37)
This chart shows in pie chart format the fund'securities breakdown by sector as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 37.1%
AA 1.2%
A 28.8%
BBB 32.9%
</TABLE>
GRAPHIC MATERIAL (38)
This bar chart shows the comparison between the fund's distribution rate of
5.45% and the taxable equivalent distribution rate of 9.02%, for Class I shares.
GRAPHIC MATERIAL (39)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 3/1/86 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/86 9,572 10,000 10,000
3/31/86 9,738 10,003 9,954
4/30/86 9,628 10,011 9,936
5/31/86 9,466 9,848 9,964
6/30/86 9,617 9,941 10,019
7/31/86 9,629 10,002 10,019
8/31/86 9,995 10,450 10,037
9/30/86 9,998 10,476 10,083
10/31/86 10,189 10,657 10,092
11/30/86 10,237 10,868 10,101
12/31/86 10,273 10,838 10,110
1/31/87 10,393 11,164 10,174
2/28/87 10,459 11,219 10,210
3/31/87 10,441 11,100 10,256
4/30/87 10,014 10,543 10,312
5/31/87 9,847 10,490 10,348
6/30/87 9,979 10,799 10,384
7/31/87 10,104 10,909 10,411
8/31/87 10,191 10,933 10,466
9/30/87 9,622 10,529 10,521
10/31/87 9,663 10,566 10,548
11/30/87 9,948 10,842 10,558
12/31/87 10,078 10,999 10,558
1/31/88 10,517 11,391 10,585
2/29/88 10,628 11,511 10,613
3/31/88 10,428 11,378 10,658
4/30/88 10,491 11,464 10,714
5/31/88 10,533 11,431 10,750
6/30/88 10,709 11,598 10,796
7/31/88 10,741 11,673 10,842
8/31/88 10,826 11,684 10,887
9/30/88 11,047 11,895 10,960
10/31/88 11,301 12,105 10,996
11/30/88 11,153 11,993 11,005
12/31/88 11,304 12,116 11,024
1/31/89 11,508 12,366 11,079
2/28/89 11,413 12,226 11,124
3/31/89 11,381 12,196 11,189
4/30/89 11,655 12,485 11,262
5/31/89 11,898 12,745 11,326
6/30/89 12,054 12,918 11,353
7/31/89 12,177 13,094 11,380
8/31/89 12,110 12,966 11,398
9/30/89 12,031 12,927 11,435
10/31/89 12,121 13,084 11,490
11/30/89 12,292 13,313 11,517
12/31/89 12,406 13,423 11,536
1/31/90 12,325 13,359 11,655
2/28/90 12,464 13,478 11,709
3/31/90 12,452 13,482 11,774
4/30/90 12,382 13,385 11,793
5/31/90 12,640 13,677 11,820
6/30/90 12,758 13,798 11,884
7/31/90 12,960 14,002 11,929
8/31/90 12,709 13,799 12,038
9/30/90 12,649 13,807 12,140
10/31/90 12,830 14,057 12,212
11/30/90 13,121 14,339 12,239
12/31/90 13,073 14,403 12,239
1/31/91 13,294 14,596 12,313
2/28/91 13,429 14,722 12,331
3/31/91 13,478 14,728 12,350
4/30/91 13,665 14,926 12,368
5/31/91 13,766 15,059 12,405
6/30/91 13,779 15,044 12,441
7/31/91 13,957 15,227 12,460
8/31/91 14,085 15,428 12,496
9/30/91 14,264 15,629 12,551
10/31/91 14,367 15,769 12,570
11/30/91 14,445 15,813 12,606
12/31/91 14,676 16,153 12,615
1/31/92 14,698 16,191 12,634
2/29/92 14,694 16,195 12,680
3/31/92 14,743 16,202 12,744
4/30/92 14,858 16,346 12,762
5/31/92 15,041 16,539 12,780
6/30/92 15,266 16,817 12,826
7/31/92 15,722 17,321 12,853
8/31/92 15,584 17,152 12,889
9/30/92 15,608 17,263 12,925
10/31/92 15,413 17,094 12,970
11/30/92 15,741 17,400 12,988
12/31/92 15,987 17,577 12,979
1/31/93 16,165 17,781 13,043
2/28/93 16,582 18,425 13,088
3/31/93 16,467 18,230 13,134
4/30/93 16,591 18,414 13,171
5/31/93 16,701 18,517 13,189
6/30/93 16,927 18,826 13,208
7/31/93 16,924 18,851 13,208
8/31/93 17,223 19,243 13,245
9/30/93 17,451 19,462 13,273
10/31/93 17,489 19,499 13,327
11/30/93 17,441 19,327 13,337
12/31/93 17,745 19,735 13,337
1/31/94 17,903 19,960 13,373
2/28/94 17,602 19,443 13,418
3/31/94 16,986 18,652 13,464
4/30/94 17,072 18,810 13,482
5/31/94 17,187 18,974 13,492
6/30/94 17,076 18,858 13,538
7/31/94 17,345 19,203 13,574
8/31/94 17,432 19,271 13,629
9/30/94 17,228 18,987 13,665
10/31/94 16,929 18,649 13,675
11/30/94 16,600 18,312 13,693
12/31/94 16,985 18,715 13,693
1/31/95 17,388 19,250 13,748
2/28/95 17,887 19,810 13,803
3/31/95 17,993 20,038 13,848
4/30/95 18,083 20,062 13,894
5/31/95 18,558 20,702 13,922
6/30/95 18,341 20,522 13,949
7/31/95 18,478 20,717 13,949
8/31/95 18,682 20,980 13,986
9/30/95 18,804 21,112 14,014
10/31/95 19,057 21,418 14,060
11/30/95 19,296 21,774 14,050
12/31/95 19,453 21,983 14,040
1/31/96 19,578 22,150 14,123
2/29/96 19,436 21,999 14,150
Total Return 94.36% 119.99% 41.50%
</TABLE>
GRAPHIC MATERIAL (40)
This bar chart shows the comparison between the fund's distribution rate of
5.01% and the taxable equivalent distribution rate of 8.29%, for Class II
shares.
GRAPHIC MATERIAL (41)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 10,000 10,000 9,904
5/31/95 10,155 10,319 10,020
6/30/95 10,031 10,229 10,040
7/31/95 10,110 10,326 10,040
8/31/95 10,216 10,458 10,066
9/30/95 10,277 10,523 10,086
10/31/95 10,410 10,676 10,120
11/30/95 10,543 10,853 10,112
12/31/95 10,615 10,957 10,105
1/31/96 10,686 11,041 10,165
2/29/96 10,504 10,966 10,184
Total 5.04% 9.66% 1.84%
Return
</TABLE>
GRAPHIC MATERIAL (42)
This chart shows in pie chart format the fund'securities breakdown by sector as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 14.0%
AA 10.0%
A 23.2%
BBB 49.2%
Below Investment Grade 3.6%
</TABLE>
GRAPHIC MATERIAL (43)
This bar chart shows the comparison between the fund's distribution rate of
4.93% and the taxable equivalent distribution rate of 8.16%.
GRAPHIC MATERIAL (44)
The following line graph hypothetically compares the performance of the fund
with the Consumer Price Index (CPI) and the Lehman Brothers Municipal Bond
Index, based on a $10,000 investment from 9/23/92 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/23/92 10,000 10,000 9,775
10/1/92 9,785 10,019 10,007
10/31/92 9,746 9,917 10,042
11/30/92 9,932 10,099 10,056
12/31/92 10,010 10,216 10,049
1/31/93 10,094 10,388 10,098
2/28/93 10,395 10,769 10,133
3/31/93 10,420 10,611 10,169
4/30/93 10,496 10,712 10,197
5/31/93 10,531 10,750 10,211
6/30/93 10,687 10,962 10,226
7/31/93 10,744 10,989 10,226
8/31/93 10,931 11,216 10,254
9/30/93 11,038 11,354 10,276
10/31/93 11,105 11,373 10,318
11/30/93 11,040 11,279 10,325
12/31/93 11,280 11,520 10,325
1/31/94 11,408 11,661 10,353
2/28/94 11,205 11,342 10,388
3/31/94 10,855 10,908 10,424
4/30/94 10,912 11,028 10,438
5/31/94 11,000 11,117 10,445
6/30/94 10,972 11,069 10,481
7/31/94 11,124 11,255 10,509
8/31/94 11,203 11,299 10,551
9/30/94 11,111 11,146 10,580
10/31/94 10,965 10,983 10,587
11/30/94 10,820 10,776 10,601
12/31/94 10,975 10,970 10,601
1/31/95 11,229 11,254 10,643
2/28/95 11,440 11,572 10,686
3/31/95 11,543 11,729 10,721
4/30/95 11,570 11,743 10,757
5/31/95 11,862 12,115 10,778
6/30/95 11,801 12,040 10,800
7/31/95 11,907 12,217 10,800
8/31/95 12,070 12,383 10,828
9/30/95 12,178 12,462 10,849
10/31/95 12,319 12,606 10,885
11/30/95 12,473 12,774 10,878
12/31/95 12,560 12,852 10,870
1/31/96 12,635 12,982 10,934
2/29/96 12,573 12,929 10,955
Total Return 25.73% 29.29% 9.55%
</TABLE>
GRAPHIC MATERIAL (45)
This chart shows in pie chart format the fund'securities breakdown by sector as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on 2/29/96
<S> <C>
AAA 17.1%
AA 3.8%
A 5.6%
BBB 41.1%
Below Investment Grade 32.4%
</TABLE>
GRAPHIC MATERIAL (46)
This bar chart shows the comparison between the fund's distribution rate of
6.26% and the taxable equivalent distribution rate of 10.36%, for Class I
shares.
GRAPHIC MATERIAL (47)
The following line graph hypothetically compares the performance of the fund's
Class I Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 3/18/86 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/18/86 9,579 10,000 10,000
3/31/86 9,579 10,001 9,981
4/30/86 9,617 10,009 9,963
5/31/86 9,588 9,846 9,991
6/30/86 9,770 9,940 10,046
7/31/86 9,511 10,000 10,046
8/31/86 9,770 10,448 10,064
9/30/86 9,837 10,474 10,110
10/31/86 10,038 10,656 10,119
11/30/86 10,153 10,867 10,128
12/31/86 10,172 10,836 10,137
1/31/87 10,327 11,162 10,201
2/28/87 10,386 11,217 10,238
3/31/87 10,328 11,098 10,284
4/30/87 10,084 10,541 10,339
5/31/87 10,055 10,488 10,376
6/30/87 10,194 10,797 10,412
7/31/87 10,324 10,907 10,439
8/31/87 10,405 10,931 10,494
9/30/87 10,160 10,527 10,549
10/31/87 10,161 10,564 10,576
11/30/87 10,451 10,840 10,586
12/31/87 10,629 10,997 10,586
1/31/88 10,944 11,389 10,613
2/29/88 11,019 11,509 10,641
3/31/88 10,934 11,376 10,687
4/30/88 11,009 11,462 10,742
5/31/88 11,096 11,429 10,779
6/30/88 11,359 11,596 10,825
7/31/88 11,480 11,671 10,871
8/31/88 11,580 11,682 10,916
9/30/88 11,770 11,893 10,989
10/31/88 11,974 12,103 11,026
11/30/88 11,940 11,991 11,035
12/31/88 12,100 12,114 11,053
1/31/89 12,267 12,364 11,109
2/28/89 12,262 12,223 11,154
3/31/89 12,279 12,194 11,219
4/30/89 12,533 12,483 11,292
5/31/89 12,740 12,743 11,356
6/30/89 12,914 12,916 11,383
7/31/89 12,992 13,092 11,411
8/31/89 12,962 12,963 11,429
9/30/89 12,919 12,924 11,466
10/31/89 13,036 13,082 11,521
11/30/89 13,191 13,311 11,548
12/31/89 13,284 13,420 11,567
1/31/90 13,209 13,357 11,686
2/28/90 13,386 13,476 11,741
3/31/90 13,373 13,480 11,805
4/30/90 13,270 13,383 11,824
5/31/90 13,553 13,675 11,851
6/30/90 13,709 13,795 11,915
7/31/90 13,906 13,999 11,961
8/31/90 13,656 13,796 12,071
9/30/90 13,642 13,805 12,172
10/31/90 13,763 14,054 12,245
11/30/90 13,991 14,337 12,272
12/31/90 13,964 14,400 12,272
1/31/91 14,141 14,593 12,346
2/28/91 14,195 14,720 12,364
3/31/91 14,265 14,726 12,383
4/30/91 14,473 14,923 12,401
5/31/91 14,599 15,056 12,439
6/30/91 14,656 15,041 12,475
7/31/91 14,855 15,224 12,493
8/31/91 15,011 15,425 12,530
9/30/91 15,227 15,626 12,585
10/31/91 15,328 15,767 12,604
11/30/91 15,387 15,811 12,640
12/31/91 15,695 16,151 12,649
1/31/92 15,650 16,188 12,668
2/29/92 15,636 16,193 12,714
3/31/92 15,711 16,199 12,778
4/30/92 15,875 16,343 12,796
5/31/92 16,117 16,536 12,814
6/30/92 16,354 16,814 12,860
7/31/92 16,913 17,318 12,887
8/31/92 16,659 17,149 12,923
9/30/92 16,682 17,260 12,960
10/31/92 16,456 17,091 13,005
11/30/92 16,856 17,397 13,023
12/31/92 17,116 17,574 13,014
1/31/93 17,346 17,778 13,078
2/28/93 17,850 18,422 13,124
3/31/93 17,794 18,226 13,170
4/30/93 17,915 18,411 13,206
5/31/93 18,021 18,514 13,225
6/30/93 18,340 18,823 13,243
7/31/93 18,365 18,847 13,243
8/31/93 18,754 19,239 13,280
9/30/93 18,961 19,459 13,308
10/31/93 19,001 19,496 13,363
11/30/93 19,075 19,324 13,372
12/31/93 19,387 19,732 13,372
1/31/94 19,599 19,957 13,408
2/28/94 19,383 19,440 13,454
3/31/94 18,801 18,649 13,500
4/30/94 18,822 18,807 13,519
5/31/94 18,930 18,971 13,528
6/30/94 18,968 18,855 13,574
7/31/94 19,219 19,200 13,611
8/31/94 19,276 19,267 13,665
9/30/94 19,135 18,984 13,702
10/31/94 18,938 18,646 13,712
11/30/94 18,634 18,309 13,729
12/31/94 18,890 18,711 13,729
1/31/95 19,349 19,247 13,784
2/28/95 19,829 19,807 13,840
3/31/95 20,090 20,034 13,885
4/30/95 20,184 20,059 13,931
5/31/95 20,672 20,698 13,959
6/30/95 20,692 20,518 13,987
7/31/95 20,826 20,713 13,987
8/31/95 21,038 20,976 14,023
9/30/95 21,212 21,108 14,051
10/31/95 21,483 21,415 14,098
11/30/95 21,755 21,770 14,088
12/31/95 21,972 21,979 14,078
1/31/96 22,091 22,146 14,161
2/29/96 22,073 21,995 14,188
Total Return 120.73% 119.95% 41.88%
</TABLE>
GRAPHIC MATERIAL (48)
This bar chart shows the comparison between the fund's distribution rate of
5.88% and the taxable equivalent distribution rate of 9.74%, for Class II
shares.
GRAPHIC MATERIAL (49)
The following line graph hypothetically compares the performance of the fund's
Class II Shares with the Consumer Price Index (CPI) and the Lehman Brothers
Municipal Bond Index, based on a $10,000 investment from 5/1/95 to 2/29/96.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 10,000 10,000 9,899
5/31/95 10,138 10,319 10,020
6/30/95 10,152 10,229 10,040
7/31/95 10,221 10,326 10,040
8/31/95 10,319 10,458 10,066
9/30/95 10,399 10,523 10,086
10/31/95 10,525 10,676 10,120
11/30/95 10,662 10,853 10,112
12/31/95 10,762 10,957 10,105
1/31/96 10,814 11,041 10,165
2/29/96 10,701 10,966 10,184
Total 7.01% 9.66% 1.84%
Return
</TABLE>
