Amendment to the Franklin Tax-Free Trust Annual Report Dated February 28, 1997
This amendment reflects changes to the Franklin Tax-Free Trust Annual Report for
the period ended February 28, 1997, for the funds listed below:
Fund As Printed Correct Page
Franklin Michigan Insured Tax-Free Income - Class II
1-year average annual total return 2.43% 2.44% 34
Distribution rate 4.73% 4.79% 32,34
Taxable equivalent distribution rate 8.20% 8.30% 32,34
Franklin Minnesota Insured Tax-Free Income - Class II
1-year average annual total return 1.98% 1.99% 41
Distribution rate 4.37% 4.57% 39,41
Taxable equivalent distribution rate 7.90% 8.26% 39,41
Franklin Ohio Insured Tax-Free Income - Class II
Distribution rate 4.80% 4.76% 46,48
Taxable equivalent distribution rate 8.59% 8.52% 46,48
Please keep this amendment with the annual report for future reference. If you
have any questions, please contact Franklin Templeton Fund Information at
1-800/342-5236.
Table of Contents Page
Message from the Chairman 1
Special Feature:
Q&A with the Municipal Bond Department 3
Fund Reports
Franklin Arizona Insured
Tax-Free Income Fund 6
Franklin Florida Insured
Tax-Free Income Fund 10
Franklin Insured
Tax-Free Income Fund 14
Franklin Massachusetts Insured
Tax-Free Income Fund 21
Franklin Michigan Insured
Tax-Free Income Fund 28
Franklin Minnesota Insured
Tax-Free Income Fund 35
Franklin Ohio Insured
Tax-Free Income Fund 42
Glossary of Investment Terms 49
Statement of Investments 50
Financial Statements 102
Notes to Financial Statements 109
Report of Independent Auditors 116
MESSAGE FROM THE CHAIRMAN
================================================================================
April 15, 1997
Dear Shareholder:
It's a pleasure to bring you the Franklin Tax-Free Trust's annual report for the
period ended February 28, 1997.
Interest rates fluctuated within a relatively narrow range during this 12-month
reporting period, as investors reacted to various U.S. economic reports. The
30-year U.S. Treasury bond, for example, yielded 6.48% at the beginning of the
Trust's fiscal year yielding 6.48%. By August 31, 1996, the yield on this
bellwether issue had jumped to 7.13% following reports of a strong gross
domestic product growth rate in the second quarter. Many investors anticipated
that the Federal Reserve Board (the Fed) would raise interest rates to help cool
the economy. Instead, the Fed opted to allow the market to determine interest
rates. When the economy appeared to be slowing down in late summer, interest
rates began to fall. At the close of the period on February 28, 1997, 30-year
Treasuries were yielding 6.90%.* A range of less than three-quarters of one
percent over the year is considered relatively narrow by recent standards.
While record high closings of the Dow Jones Industrial Average can get the
attention of many investors, certain experts agree that the extremely attractive
yields offered by the fixed-income markets -- and especially tax-free securities
- -- might be a better value at this juncture.
The November 1996 election results were well-received by both the fixed-income
and equity markets, and Federal Reserve Chairman Alan Greenspan's ever vigilant
position on inflation has been reassuring, both domestically and to our foreign
trading partners. Most recently, Mr. Greenspan warned investors against becoming
too euphoric that the markets will continue to rise. Of particular concern to
some observers are rising labor costs and the strength of commodity prices.
We will continue to manage our funds for maximum tax-free income and stable
share value. It is important to remember that financial markets always have been
- -- and probably always will be -- subject to daily fluctuation. No one can
predict the future performance of the securities markets, but history has shown
that, over the long term, stocks and bonds have delivered impressive results
when income is left to compound. For this reason, we encourage you to review
your investment program periodically with your investment representative, and
focus on your continuing long-term goals.
*Source: Micropal.
As a Franklin Templeton fund shareholder, you receive the benefits of
professional management and dedicated service. If you have any questions
concerning the funds in the Franklin Tax-Free Trust, we welcome the opportunity
to answer them.
We appreciate your support, welcome new shareholders, and look forward to
serving your investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
================================================================================
-- Celebrating 50 Years --
This year marks 50 years of business for Franklin Templeton. Over these years,
we have experienced profound changes in technology, regulations and customer
expectations within the mutual fund industry. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest in companies and governments around the globe.
We thank you for your past support and look forward to serving your investment
needs in the years ahead.
================================================================================
SPECIAL FEATURE: Q&A WITH THE MUNICIPAL BOND DEPARTMENT
Tom Kenny, director of Franklin's Municipal Bond Department, and portfolio
managers Don Duerson, Sheila Amoroso and Bernie Schroer discuss some issues
facing the municipal bond market.
1997 marks the start of a second presidential term for Bill Clinton. Do you
think his re-election was good news for the markets?
Tom Kenny: Market participants do not like uncertainty, so they appear
comfortable with the re-election of a Democratic president and a Republican
Congress. Alan Greenspan's reappointment as Federal Reserve Board Chairman was
also positive for the markets.
Why is that?
Tom: His monetary policy is designed to encourage low inflation with moderate
growth, which he has been able to accomplish.
Sheila Amoroso: We expect at least the first two quarters of 1997 to be similar
to 1996 with regard to growth and inflation, though it is difficult to predict.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Alan Greenspan maintained a relatively neutral stance on monetary policy
throughout most of 1996. Do you see this carrying over into 1997?
Bernie Schroer: Possibly. As you know, we do not try to predict where rates will
be in the future. But, I think Greenspan will continue to look for signs of
above-trend growth, and will probably focus on wages and commodity prices. At
this point, wage inflation is moderate and companies do not feel they can raise
prices.
Don Duerson: The "threat" of higher rates seems to be sufficient to control
market expectations. Also, the recent strength of the dollar should have a
moderating effect on the economy by slowing export growth while keeping import
price inflation under control.
Floods in the Western U.S.: What impact do you see this having on state
finances, bond issuance, and bond ratings?
Sheila: Historically, very few bond issues are affected negatively by natural
disasters. At worst, some types of issues may be called and paid off from
insurance proceeds. Bond ratings are generally long term in nature and are
usually not affected by such short-term events. Most of the repair costs are
covered by insurance companies, the Federal Emergency Management Agency, and
state disaster relief funds.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Bernie: Generally, these disasters create an increase in construction activity,
however, which can contribute to increased economic growth in those affected
areas. The states of California, Oregon and Washington are leading the country
in economic growth and shouldn't be adversely affected by the floods.
What kinds of bonds are you purchasing for your funds?
Don: We try to choose bonds whose coupons provide higher income with lower
volatility than, for example, deep discount bonds with lower coupons. We feel
that the best relative value in the market today is in the insured sector. The
narrow quality spreads in the market are due to the low interest-rate
environment and the increase in volume of insured issues in the market. Close to
50% of new issues came to market insured, taking more spread out of the market.
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. Because interest rates
have been relatively low for most of the 1990s, investor demand has increased
for higher-yielding, lower-quality securities, which drives the prices of these
securities higher. This results in lower relative yield differentials between
lower-quality issues and AAA-rated insured bonds. When this happens, it makes
more sense for us to buy insured bonds.
Do you plan on changing your investment strategy in 1997?
Tom: Franklin employs a long-term "buy and hold" strategy, and our major
objective for the tax-free funds is to pay out high tax-free income. Our
portfolio managers don't speculate on the market by trying to predict future
interest rates. We use a consistent and disciplined long-term relative value
strategy toward meeting our objectives, and we plan on maintaining this
approach.
GRAPHIC PICTURE OMITTED
FRANKLIN ARIZONA INSURED TAX-FREE INCOME FUND
================================================================================
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Arizona
state personal income taxes through a portfolio consisting primarily of insured
Arizona municipal bonds.*
State Update
For the past two years, employment growth in Arizona has ranked in the nation's
top 10, and for good reason. Low housing costs and a diversifying employment
base continued to attract workers from neighboring states, particularly from
California.
Arizona's largest employers include Motorola (20,000 workers), Allied-Signal
Aerospace Co. (9,000), U.S. Postal Service (9,000), and Honeywell (8,000), in
addition to state and local government, universities, and health care employers.
Though California's economic recovery may slow the migration of workers into
Arizona, the outlook remains positive for continued above-average growth.**
Franklin Arizona Insured Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Education 31.5%
Utilities 23.0%
Industrial 10.0%
General Obligations 9.5%
Certificates of Participation 6.5%
Hospitals 6.5%
Sales Tax 3.8%
Other Revenue Bonds 2.6%
Housing 2.5%
Pre-Refunded 1.7%
Miscellaneous 1.4%
Transportation 1.0%
For a complete list of portfolio holdings, please see page 50 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
The risks of investing in a non-diversified fund, such as increased
susceptibility to adverse economic or regulatory developments, are described in
the fund's prospectus.
**Standard & Poor's Creditweek Municipal, July 8, 1996.
Performance Summary
The Franklin Arizona Insured Tax-Free Income Fund's share price, as measured by
net asset value, ended the reporting period unchanged at $10.36 from February
29, 1996, through February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 5.10%,
based on an annualization of the February dividend of 4.6 cents ($0.046) per
share and the maximum offering price of $10.82 on February 28, 1997. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. An investor in the maximum combined federal and Arizona
state personal income tax bracket of 43.0% would need to earn 8.94% from a
taxable investment to match the fund's tax-free distribution rate.
Franklin Arizona Insured Tax-Free Income Fund
Dividend Distributions 3/1/96 - 2/28/97+
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 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions or market spreads to buy and sell securities. Unlike
unmanaged indices, mutual funds are never fully invested because of the need to
have cash on hand to redeem shares or pay for upcoming investments. In addition,
the performance shown for the fund includes the maximum initial sales charge,
all fund expenses and account fees. If the fund's costs had been applied to the
index, the index's performance would have been lower. Additionally, 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 cannot be invested in directly.
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Arizona Insured Tax-Free Income Fund
Periods ended February 28, 1997
Since
Inception
1-Year 3-Year (4/30/93)
- -------------------------------------------------------------------------------
Cumulative Total Return1 5.55% 18.89% 25.94%
Average Annual Total Return2 1.06% 4.40% 5.02%
Distribution Rate3 5.10%
Taxable Equivalent Distribution Rate4 8.94%
30-Day Standardized Yield5 4.92%
Taxable Equivalent Yield4 8.63%
- -------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Based on an annualization of the current 4.6 cent per share monthly dividend
and the maximum offering price of $10.82 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Arizona state personal income tax bracket of 43.0%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
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 the period
would have been somewhat lower than noted above. All total return calculations
assume reinvestment of dividends and capital gains at net asset value. Your
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares. Past performance is not
predictive of future results.
The fund's manager agreed in advance to waive a portion of management fees,
which reduces operating expenses and increases yield, distribution rate and
total return to shareholders. Without these reductions, the fund's distribution
rate would have been lower and yield for the period would have been 4.46%. The
fee waiver may be discontinued at any time upon notification to the fund's Board
of Trustees.
FRANKLIN FLORIDA INSURED TAX-FREE INCOME FUND
================================================================================
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal personal income
taxes through a portfolio consisting primarily of insured Florida municipal
bonds.* In addition, the fund's shares are free from Florida's annual
intangibles tax.
State Update
Florida's economy continued to expand during 1996, with steady increases in both
employment and population. Job growth in 1996-97 was projected at 3%, less than
the 3.2% originally estimated for the state, but above the 1.8% projected for
the nation. More than 64% of the state's work force is tied to the service,
construction, and trade sectors -- industries leading the state in terms of
growth.
While Florida's 1996 fiscal-year budget emphasized spending on public
protection, the 1997 budget focuses spending on education and human services
programs. It also envisions adding $148.6 million to the Budget Stabilization
Fund. Contributions to this fund during 1997 could bring the balance up to $409
million, or about 3% of total state revenues.** The state's well-managed
financial program and historically steady economic performance contribute to our
positive outlook for Florida in the coming year.
Franklin Florida Insured Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 54.5%
Other Revenue 13.7%
Hospitals 9.8%
Certificates of Participation 8.0%
Sales Tax 4.6%
Transportation 3.0%
Housing 2.2%
Pre-Refunded 1.5%
General Obligations 1.4%
Industrial 1.3%
For a complete list of portfolio holdings, please see page 53 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.
**Moody's Municipal Credit Report, March 7, 1996.
Performance Summary
The Franklin Florida Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined 3 cents, from $10.02 on February 29, 1996, to $9.99 on
February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 5.06%,
based on an annualization of the February dividend of 4.4 cents ($0.044) per
share and the maximum offering price of $10.43 on February 28, 1997. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. An investor in the maximum federal income tax bracket of
39.6% would need to earn 8.38% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Florida Insured Tax-Free Income Fund
Dividend Distributions 3/1/96 - 2/28/97+
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 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions or market spreads to buy and sell securities. Unlike
unmanaged indices, mutual funds are never fully invested because of the need to
have cash on hand to redeem shares or pay for upcoming investments. In addition,
the performance shown for the fund includes the maximum initial sales charge,
all fund expenses and account fees. If the fund's costs had been applied to the
index, the index's performance would have been lower. Additionally, 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 cannot be invested in directly.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Florida Insured Tax-Free Income Fund
Periods ended February 28, 1997
Since
Inception
1-Year 3-Year (4/30/93)
- -------------------------------------------------------------------------------
Cumulative Total Return1 5.17% 16.89% 21.41%
Average Annual Total Return2 0.75% 3.82% 4.02%
Distribution Rate3 5.06%
Taxable Equivalent Distribution Rate4 8.38%
30-Day Standardized Yield5 5.04%
Taxable Equivalent Yield4 8.34%
- -------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Based on an annualization of the current 4.4 cent per share monthly dividend
and the maximum offering price of $10.43 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
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 the period
would have been somewhat lower than noted above. All total return calculations
assume reinvestment of dividends and capital gains at net asset value. Your
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares. Past performance is not
predictive of future results.
The fund's manager agreed in advance to waive a portion of management expenses,
which reduces operating expenses and increases yield, distribution rate and
total return to shareholders. Without these reductions, the fund's distribution
rate would have been lower and yield for the period would have been 4.69%. The
fee waiver may be discontinued at any time upon notification to the fund's Board
of Trustees.
FRANKLIN INSURED TAX-FREE INCOME FUND
================================================================================
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal income taxes
through a portfolio consisting primarily of insured municipal bonds.*
During the reporting period, interest rates continued to react to changes in the
strength of the economy. Whether such changes were real or imagined is another
matter. Nevertheless, we remain positive in our long-term view of the
fixed-income market, given the current combination of relatively low inflation
and modest growth.
The municipal securities in which your fund invests are insured by private,
municipal bond insurance companies as to the scheduled payment of principal and
interest at maturity. Because of this insurance, your fund enjoys an "AAAf"
rating -- the highest mutual fund rating possible -- from Standard & Poor's
Corporation(R), a national rating agency. This rating reflects Standard & Poor's
assessment of the portfolio's overall credit quality based primarily on your
fund's stated investment objectives and policies. It does not reflect the yield
or market price of the fund's shares, nor does it imply approval by Standard &
Poor's, and is subject to change.
Even though nearly half of the debt brought to market during the past year was
insured, there is a remarkable lack of breadth in selection. Nevertheless, the
portfolio achieved diversification and balance in its holdings, which remain
ongoing portfolio management objectives. As you can see from the table above, we
maintained investments in a broad range of municipal sectors throughout the
nation. Such diversification helped us reduce the fund's exposure to sector
market volatility.
Franklin Insured Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 25.9%
Pre-Refunded 21.8%
Hospitals 17.0%
Education 8.7%
Transportation 8.4%
Housing 5.5%
General Obligations 4.8%
Certificates of Participation 3.7%
Other Revenue 1.9%
Sales Tax 1.4%
Industria l0.7%
Miscellaneous 0.2%
For a complete list of portfolio holdings, please see page 55 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
Performance Summary
Class I
The Franklin Insured Tax-Free Income Fund's share price, as measured by net
asset value, declined 12 cents, from $12.27 on February 29, 1996, to $12.15 on
February 28, 1997.
Franklin Insured Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
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 5.7 cents
October 5.7 cents
November 5.7 cents
December 5.7 cents
January 5.7 cents
February 5.7 cents
Total 69.6 cents
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of this reporting period, the fund's distribution rate was 5.39%,
based on an annualization of the February dividend of 5.7 cents ($0.057) per
share and the maximum offering price of $12.69 on February 28, 1997. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. An investor in the maximum federal income tax bracket of
39.6% would need to earn 8.92% from a taxable investment to match the fund's
tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, 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 cannot be invested in directly.
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Insured Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year 10-year (4/3/85)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 4.88% 39.84% 95.68% 165.09%
Average Annual Total Return2 0.46% 6.01% 6.48% 8.14%
Distribution Rate3 5.39%
Taxable Equivalent Distribution Rate4 8.92%
30-Day Standardized Yield5 4.44%
Taxable Equivalent Yield4 7.35%
- ----------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Based on an annualization of the current 5.7 cent per share monthly dividend
and the maximum offering price of $12.69 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Insured Tax-Free Income Fund's share price, as measured by net
asset value, declined 10 cents, from $12.31 on February 29, 1996, to $12.21 on
February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 4.95%,
based on an annualization of the current monthly dividend of 5.08 cents
($0.0508) per share, plus an annual dividend adjustment of .01 cent, and the
offering price of $12.33 on February 28, 1997. This tax-free rate is generally
higher than the after-tax return on a comparable taxable investment. An investor
in the maximum federal income tax bracket of 39.6% would need to earn 8.20% from
a taxable investment to match the fund's tax-free distribution rate.
Franklin Insured Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.40 cents
April 5.30 cents
May 5.30 cents
June 5.30 cents
July 5.36 cents
August 5.36 cents
September 5.16 cents
October 5.10 cents
November 5.10 cents
December 5.10 cents
January 5.08 cents
February 5.08 cents
Total 62.64 cents
GRAPHIC MATERIAL 10 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, 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 cannot be invested in directly.
GRAPHIC MATERIAL 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Insured Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- --------------------------------------------------------------------------------
Cumulative Total Return1 4.42% 11.92%
Average Annual Total Return2 2.43% 5.76%
Distribution Rate3 4.95%
Taxable Equivalent Distribution Rate4 8.20%
30-Day Standardized Yield5 4.00%
Taxable Equivalent Yield4 6.62%
- --------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge (CDSC), applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 5.08 cent per share monthly
dividend, plus the annual dividend adjustment of .01 cent, and the offering
price of $12.33 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN MASSACHUSETTS INSURED TAX-FREE INCOME FUND
================================================================================
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and
Massachusetts state personal income taxes through a portfolio consisting
primarily of insured Massachusetts municipal bonds.*
Commonwealth Update
Massachusetts has experienced three consecutive years of balanced financial
operations, reductions in short-term borrowing, conservative revenue estimation
and a demonstrated commitment to restricting expenditures from 1994 through
1996. Following weak financial performance that resulted in a 1990 fiscal
deficit of roughly $1.1 billion, significant changes in the budget, including
the issuance of fiscal recovery bonds to finance the debt, restored balances.
Revenue projections were on target for fiscal years 1992 through 1996, and
remain on track for 1997.
The 1997 budget shows increased expenditures, including $254 million in
education reform aid to cities and towns. These spending pressures are expected
persist over the next several years as local communities' limited
revenue-raising ability could hamper the common-wealth's attempts to reduce
local aid.**
Franklin Massachusetts Insured
Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Hospitals 33.0%
Education 19.7%
Pre-Refunded 13.5%
General Obligations 13.1%
Housing 6.9%
Utilities 6.6%
Transportation 4.6%
Health Care 1.6%
Certificates of Participation 1.0%
For a complete list of portfolio holdings, please see page 76 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Standard & Poor's Creditweek Municipal, October 28, 1996.
Performance Summary
Class I
The Franklin Massachusetts Insured Tax-Free Income Fund's share price, as
measured by net asset value, declined 11 cents, from $11.65 on February 29,
1996, to $11.54 on February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 5.18%,
based on an annualization of the February dividend of 5.2 cents ($0.052) per
share and the maximum offering price of $12.05 on February 28, 1997. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. An investor in the maximum combined federal and
Massachusetts state personal income tax bracket of 46.8% would need to earn
9.74% from a taxable investment to match the fund's tax-free distribution rate.
Franklin Massachusetts Insured
Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
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 5.2 cents
October 5.2 cents
November 5.2 cents
December 5.2 cents
January 5.2 cents
February 5.2 cents
Total 64.2 cents
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, the index includes over 25,000
municipal securities 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 cannot be invested in directly.
GRAPHIC MATERIAL 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Massachusetts Insured Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 4.75% 39.74% 90.44% 142.79%
Average Annual Total Return2 0.27% 6.00% 6.19% 7.35%
Distribution Rate3 5.18%
Taxable Equivalent Distribution Rate4 9.74%
30-Day Standardized Yield5 4.43%
Taxable Equivalent Yield4 8.33%
- -------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Based on an annualization of the current 5.2 cent per share monthly dividend
and the maximum offering price of $12.05 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Massachusetts personal income tax rate of 46.8%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Massachusetts Insured Tax-Free Income Fund's share price, as
measured by net asset value, declined 10 cents, from $11.69 on February 29,
1996, to $11.59 on February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 4.77%,
based on an annualization of the current monthly dividend of 4.64 cents
($0.0464) per share, plus an annual dividend adjustment of .01 cent, and the
offering price of $11.71 on February 28, 1997. This tax-free rate is generally
higher than the after-tax return on a comparable taxable investment. An investor
in the maximum federal and Massachusetts state personal income tax bracket of
46.8% would need to earn 8.97% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Massachusetts Insured
Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.07 cents
April 4.94 cents
May 4.94 cents
June 4.94 cents
July 4.98 cents
August 4.98 cents
September 4.68 cents
October 4.65 cents
November 4.65 cents
December 4.65 cents
January 4.64 cents
February 4.64 cents
Total 57.76 cents
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, the index includes over 25,000
municipal securities 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 cannot be invested in directly.
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Massachusetts Insured Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- --------------------------------------------------------------------------------
Cumulative Total Return1 4.22% 11.75%
Average Annual Total Return2 2.18% 5.70%
Distribution Rate3 4.77%
Taxable Equivalent Distribution Rate4 8.97%
30-Day Standardized Yield5 4.01%
Taxable Equivalent Yield4 7.54%
- --------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge (CDSC), applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.64 cent per share monthly
dividend, plus the annual dividend adjustment of .01 cent, and the offering
price of $11.71 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Massachusetts personal income tax rate of 46.8%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN MICHIGAN INSURED TAX-FREE INCOME FUND
================================================================================
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Michigan
state personal income taxes through a portfolio consisting primarily of insured
Michigan municipal bonds.*
State Update
Michigan's economy performed well during the 12 month reporting period.
Realistic revenue assumptions, moderate economic growth, and effective
expenditure controls have had a positive impact on the state's operations,
enhancing Michigan's fiscal position. Reserve funds -- particularly the budget
stabilization fund -- have been replenished well beyond their recessionary
levels in the early 1990s. Although these reserve funds can be used to offset
the increased cost of school finance reform, Michigan also has large, unfunded
pension liabilities that represent an area of possible fiscal stress. **
Given our opinion that the state will continue its efforts to replenish reserve
funds and correct budget imbalances, our outlook for Michigan -- and for the
fund -- is positive.
Franklin Michigan Insured Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Education 28.3%
Pre-Refunded 19.2%
Hospitals 15.5%
Utilities 13.6%
General Obligations 12.2%
Transportation 4.7%
Other Revenue 3.6%
Housing 1.5%
Industria l0.8%
Health Care 0.5%
Sales Tax Revenue Bonds 0.1%
For a complete list of portfolio holdings, please see page 81 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Standard & Poor's Creditweek Municipal, April 1, 1996.
Performance Summary
Class I
The Franklin Michigan Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined 9 cents, from $12.09 on February 29, 1996, to $12.00
on February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 5.27%,
based on an annualization of the February dividend of 5.5 cents ($0.055) per
share and the maximum offering price of $12.53 on February 28, 1997. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. An investor in the maximum combined federal and Michigan
personal income tax bracket of 42.3% would need to earn 9.13% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Michigan Insured Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
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
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, the index includes over 25,000
municipal securities 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 cannot be invested in directly.
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Michigan Insured Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
- --------------------------------------------------------------------------------
Cumulative Total Return1 4.90% 40.42% 94.12% 153.51%
Average Annual Total Return2 0.42% 6.09% 6.39% 7.74%
Distribution Rate3 5.27%
Taxable Equivalent Distribution Rate4 9.13%
30-Day Standardized Yield5 4.51%
Taxable Equivalent Yield4 7.81%
- --------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Based on an annualization of the current 5.5 cent per share monthly dividend
and the maximum offering price of $12.53 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Michigan personal income tax rate of 42.3%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Michigan Insured Tax-Free Income Fund's share price, as measured by
net asset value, declined 7 cents, from $12.14 on February 29, 1996, to $12.07
on February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 4.73%,
based on an annualization of the current monthly dividend of 4.87 cents
($0.0487) per share, plus an annual dividend adjustment of -.07 cent, and the
offering price of $12.19 on February 28, 1997. This tax-free rate is generally
higher than the after-tax return on a comparable taxable investment. An investor
in the maximum combined federal and Michigan state personal income tax bracket
of 42.3% would need to earn 8.20% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Michigan Insured Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 4.67 cents
April 4.91 cents
May 4.91 cents
June 4.91 cents
July 5.00 cents
August 5.00 cents
September 5.00 cents
October 4.91 cents
November 4.91 cents
December 4.91 cents
January 4.87 cents
February 4.87 cents
Total 58.87 cents
GRAPHIC MATERIAL 18 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, the index includes over 25,000
municipal securities 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 cannot be invested in directly.
GRAPHIC MATERIAL 19 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Michigan Insured Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- --------------------------------------------------------------------------------
Cumulative Total Return1 4.44% 12.23%
Average Annual Total Return2 2.43% 5.91%
Distribution Rate3 4.73%
Taxable Equivalent Distribution Rate4 8.20%
30-Day Standardized Yield5 4.09%
Taxable Equivalent Yield4 7.08%
- --------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge (CDSC), applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.87 cent per share monthly
dividend, plus the annual dividend adjustment of -.07 cent, and the offering
price of $12.19 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Michigan 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 28, 1997.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN MINNESOTA INSURED TAX-FREE INCOME FUND
================================================================================
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Minnesota
state personal income taxes through a portfolio consisting primarily of insured
Minnesota municipal bonds.*
State Update
Minnesota enjoyed gratifying fiscal success during the year under review, with
its 1996-1997 biennium projected to end with substantial surpluses. The ongoing
strength in the state's economy translates into an improved revenue forecast for
the current fiscal and upcoming biennium. Governor Carlson's proposed fiscal
1998-1999 biennium includes the use of proceeds from $500 million in bond sales,
combined with the projected 1996-1997 surplus, to cut taxes. Other projected
expenditures include education incentives and possible financial assistance for
a new Minnesota Twins baseball stadium.
Continued financial discipline and past successes rank Minnesota among the
nation's prime state borrowers. Although a proposed property tax freeze could
put funding pressure on schools and suburban communities, the state's continued
ability to balance its spending with reserves will be a key factor in
Minnesota's financial outlook.**
Franklin Minnesota Insured Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Pre-Refunded 23.9%
Utilities 20.5%
Housing 14.4%
Hospitals 13.5%
Education 12.6%
Health Care 4.8%
General Obligations 4.2%
Certificates of Participation 2.3%
Other Revenue 1.8%
Tax Allocation 1.5%
Transportation 0.5%
For a complete list of portfolio holdings, please see page 89 of this report.
*For investors subject to the federal alternative minimum tax, a small portion
of this income may be subject to such tax. Distributions of capital gains and of
ordinary income from accrued market discount, if any, are generally taxable.
**Standard & Poor's Creditweek Municipal, January 20, 1997.
Performance Summary
Class I
The Franklin Minnesota Insured Tax-Free Income Fund's share price, as measured
by net asset value, declined 13 cents, from $12.14 on February 29, 1996, to
$12.01 on February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 5.17%,
based on an annualization of the February dividend of 5.4 cents ($0.054) per
share and the maximum offering price of $12.54 on February 28, 1997. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. An investor in the maximum combined federal and Minnesota
state personal income tax bracket of 44.7% would need to earn 9.35% from a
taxable investment to match your fund's tax-free distribution rate.
Franklin Minnesota Insured Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
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 5.4 cents
October 5.4 cents
November 5.4 cents
December 5.4 cents
January 5.4 cents
February 5.4 cents
Total 66.0 cents
GRAPHIC MATERIAL 20 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, the index includes over 25,000
municipal securities 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 cannot be invested in directly.
GRAPHIC MATERIAL 21 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Minnesota Insured Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
- --------------------------------------------------------------------------------
Cumulative Total Return1 4.54% 37.02% 88.77% 153.76%
Average Annual Total Return2 0.09% 5.58% 6.10% 7.74%
Distribution Rate3 5.17%
Taxable Equivalent Distribution Rate4 9.35%
30-Day Standardized Yield5 4.49%
Taxable Equivalent Yield4 8.12%
- --------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Based on an annualization of the current 5.4 cent per share monthly dividend
and the maximum offering price of $12.54 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Minnesota personal income tax rate of 44.7%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Minnesota Insured Tax-Free Income Fund's share price, as measured
by net asset value, declined 12 cents, from $12.17 on February 29, 1996, to
$12.05 on February 28, 1997.
At the end of this reporting period the fund's distribution rate was 4.37%,
based on an annualization of the current monthly dividend of 4.65 cents
($0.0465) per share, plus an annual dividend adjustment of -.22 cent, and the
offering price of $12.17 on February 28, 1997. This tax-free rate is generally
higher than the after-tax return on a comparable taxable investment. An investor
in the maximum combined federal and Minnesota state personal income tax bracket
of 44.7% would need to earn 7.90% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Minnesota Insured Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 4.95 cents
April 5.01 cents
May 5.01 cents
June 5.01 cents
July 5.07 cents
August 5.07 cents
September 4.87 cents
October 4.88 cents
November 4.88 cents
December 4.88 cents
January 4.65 cents
February 4.65 cents
Total 58.93 cents
GRAPHIC MATERIAL 22 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, the index includes over 25,000
municipal securities 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 cannot be invested in directly.
GRAPHIC MATERIAL 23 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Minnesota Insured Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- --------------------------------------------------------------------------------
Cumulative Total Return1 3.98% 10.80%
Average Annual Total Return2 1.98% 5.18%
Distribution Rate3 4.37%
Taxable Equivalent Distribution Rate4 7.90%
30-Day Standardized Yield5 4.07%
Taxable Equivalent Yield4 7.36%
- --------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and 1.0% contingent deferred sales charge (CDSC), applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.65 cent per share monthly
dividend, plus the annual dividend adjustment of -.22 cent, and the offering
price of $12.17 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Minnesota personal income tax rate of 44.7%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
FRANKLIN OHIO INSURED TAX-FREE INCOME FUND
================================================================================
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Ohio state
personal income taxes through a portfolio consisting primarily of insured Ohio
municipal securities.*
State Update
Prudent fiscal management and quick response to a changing economy have enabled
the state of Ohio to replenish fund balances eroded by the last recession and to
establish a sound financial base for the future. Conservative revenue
projections and control of spending, aided by steady economic growth, produced
large operating surpluses during the 1995 and 1996 fiscal years.**
If revenues again exceed forecasts, the 1997 fiscal year tax surplus will be
directed toward an income tax relief fund established for years 1996 and 1997.
Although Ohio projects a surplus for its 1998-1999 biennium, how to use it is
less clear. If these projections are accurate, this could provide additional
funding for education and -- possibly -- some tax relief.
Franklin Ohio Insured Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 27.7%
Education 20.7%
Hospitals 14.9%
General Obligations 11.6%
Pre-Refunded 10.9%
Housing 5.6%
Transportation 3.6%
Industrial 2.5%
Certificates of Participation 2.4%
Other Revenue Bonds 0.1%
For a complete list of portfolio holdings, please see page 94 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.
**Moody's Municipal Credit Report, January 2, 1997.
Performance Summary
Class I
The Franklin Ohio Insured Tax-Free Income Fund's share price, as measured by net
asset value, declined 3 cents, from $12.22 on February 29, 1996, to $12.19 on
February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 5.18%,
based on an annualization of the February dividend of 5.5 cents ($0.055) per
share and the maximum offering price of $12.73 on February 28, 1997. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. An investor in the maximum combined federal and Ohio state
personal income tax bracket of 44.1% would need to earn 9.27% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Ohio Insured Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
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 24 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, the index includes over 25,000
municipal securities 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 cannot be invested in directly.
GRAPHIC MATERIAL 25 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Ohio Insured Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
- --------------------------------------------------------------------------------
Cumulative Total Return1 5.35% 40.48% 94.66% 154.95%
Average Annual Total Return2 0.89% 6.11% 6.42% 7.79%
Distribution Rate3 5.18%
Taxable Equivalent Distribution Rate4 9.27%
30-Day Standardized Yield5 4.53%
Taxable Equivalent Yield4 8.11%
- --------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, maximum 4.25%
initial sales charge. See Note below.
3. Based on an annualization of the current 5.5 cent per share monthly dividend
and the maximum offering price of $12.73 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Ohio personal income tax rate of 44.1%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value, and 12b-1
fees from the date of the plan's implementation. Your investment return and
principal value will fluctuate with market conditions, and you may have a gain
or loss when you sell your shares. Past performance is not predictive of future
results.
Class II
The Franklin Ohio Insured Tax-Free Income Fund's share price, as measured by net
asset value, declined 2 cents, from $12.26 on February 29, 1996, to $12.24 on
February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 4.80%,
based on an annualization of the current monthly dividend of 4.90 cents
($0.0490) per share, plus an annual dividend adjustment of .04 cent, and the
offering price of $12.36 on February 28, 1997. This tax-free rate is generally
higher than the after-tax return on a comparable taxable investment. An investor
in the maximum federal and Ohio state personal income tax bracket of 44.1% would
need to earn 8.59% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Ohio Insured Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 4.87 cents
April 4.91 cents
May 4.91 cents
June 4.91 cents
July 4.93 cents
August 4.93 cents
September 4.93 cents
October 4.84 cents
November 4.84 cents
December 4.84 cents
January 4.90 cents
February 4.90 cents
Total 58.71 cents
GRAPHIC MATERIAL 26 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the day
you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.
The chart to the right compares your fund's performance with the unmanaged
Lehman Brothers Municipal Bond Index. Of course, such unmanaged market indices
have inherent performance differentials over any fund. They do not pay
management fees to cover salaries of securities analysts or portfolio managers,
or pay commissions to buy and sell securities. Unlike unmanaged indices, mutual
funds are never fully invested because of the need to have cash on hand to
redeem shares or pay for upcoming investments. In addition, the performance
shown for the fund includes the maximum initial sales charge, all fund expenses
and account fees. If the fund's costs had been applied to the index, the index's
performance would have been lower. Additionally, the index includes over 25,000
municipal securities 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 cannot be invested in directly.
GRAPHIC MATERIAL 27 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Ohio Insured Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- --------------------------------------------------------------------------------
Cumulative Total Return1 4.79% 12.44%
Average Annual Total Return2 2.79% 6.03%
Distribution Rate3 4.80%
Taxable Equivalent Distribution Rate4 8.59%
30-Day Standardized Yield5 4.10%
Taxable Equivalent Yield4 7.34%
- --------------------------------------------------------------------------------
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1.0% initial sales
charge and the 1.0% contingent deferred sales charge (CDSC), applicable to
shares redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.90 cent per share monthly
dividend, plus the annual dividend adjustment of .04 cent, and the offering
price of $12.36 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Ohio personal income tax rate of 44.1%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
GLOSSARY OF INVESTMENT TERMS
================================================================================
Call Protection: the length of time during which a bond cannot be redeemed by
its issuer.
Coupon: the interest rate on a bond that the issuer promises to pay to the
holder until the bond matures.
Full-Coupon Bond: a bond with a coupon rate that is at, or near, current market
interest rates.
High-Grade Bond/High-Quality Bond: a bond rated AAA or AA by Standard &
Poor's(R) or Aaa or Aa by Moody's Investors Service -- two national
credit-rating agencies.
Investment-Grade Bond: a bond with a rating of AAA to BBB-, usually within the
top-four rating categories assigned to bonds.
Non-Rated Bonds: a bond that has not been rated by one or more of the major
rating agencies. Issues are usually non-rated because they are too small to
justify the expense of getting a rating. In many instances, just because a bond
is non-rated by an agency, it does not mean it has a lower credit rating.
Pre-Refunded Bond: A bond that will be paid off at its first call date with
proceeds of the sale of a second bond carrying a lower interest rate.
Primary Market: the market for new issues of securities; a market is "primary"
if the issuer of the securities receives the proceeds of the sale.
Secondary Market: a market where previously issued securities are bought and
sold; the selling dealers and investors receive the proceeds, not the issuer.
Underwriter: an investment banker who agrees to purchase a new issue of
securities from an issuer and distribute it to investors, making a profit on the
underwriting spread.
Weighted Average Maturity: the weighted average of all individual maturities in
the portfolio based on their par values.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Arizona Insured Tax-Free Income Fund (Note 1)
<S> <C> <C>
Long Term Investments 97.4%
$ 750,000 Arizona State Management Authority, Financial Assistance Revenue, AMBAC Insured, 5.75%, 07/01/15 $ 761,595
900,000 Arizona State Power Authority, Power Resources Revenue, Refunding, Hoover Uprating Project,
MBIA Insured, 5.375%, 10/01/13 .................................................................. 888,786
1,000,000 Arizona State University Revenues, Refunding, Series A, MBIA Insured, 5.50%, 07/01/19 ........... 993,550
400,000 Casa Grande Excise Tax Revenue, FGIC Insured, 6.00%, 04/01/10 ................................... 419,436
525,000 Douglas Municipal Property Corp., Municipal Facilities Excise Tax Revenue, MBIA Insured,
5.75%, 07/01/15 ................................................................................ 534,807
1,000,000 Gilbert GO, Projects of 1988, Series C, MBIA Insured, 5.50%, 07/01/23 ........................... 1,002,080
480,000 La Paz County School District No. 4, Quartzsite Elementary School Improvement, MBIA Insured,
5.70%, 07/01/16 ................................................................................ 483,950
700,000 Maricopa County School District No. 3, Tempe Elementary, Refunding, AMBAC Insured,
6.00%, 07/01/13 ................................................................................ 735,091
500,000 Maricopa County School District No. 28, Kyrene Elementary, Series B, FGIC Insured, 6.00%, 07/01/14 519,125
570,000 Maricopa County School District No. 31, Series A, AMBAC Insured, 6.20%, 07/01/13 ................ 604,274
100,000 Maricopa County School District No. 41, Series A, FGIC Insured, Pre-Refunded, 5.40%, 07/01/13 ... 106,407
Maricopa County School District No. 98, Fountain Hills,
500,000 AMBAC Insured, 5.75%, 07/01/12 ............................................................... 517,265
235,000 MBIA Insured, Pre-Refunded, 6.20%, 07/01/10 .................................................. 260,589
500,000 Maricopa County UHSD No. 216, 1988 Project, FGIC Insured, 5.30%, 07/01/11 ....................... 500,685
500,000 Maricopa County USD No. 8, Osborn School Improvement Project, Series A, FGIC Insured,
5.875%, 07/01/14 ............................................................................... 519,445
700,000 Maricopa County USD No. 11, Peoria, Refunding, AMBAC Insured, 6.10%, 07/01/10 ................... 750,211
Maricopa County USD No. 68, Alhambra, Refunding and Improvement,
AMBAC Insured,
500,000 5.125%, 07/01/13 ............................................................................. 487,280
100,000 5.625%, 07/01/13 ............................................................................. 101,326
700,000 Maricopa County USD No. 80, Chandler, Refunding, FGIC Insured, 5.85%, 07/01/13 .................. 724,843
400,000 Maricopa County USD No. 95, Queens Creek, Series A, AMBAC Insured, 5.70%, 07/01/14 .............. 409,048
610,000 Mohave County, Hospital District No. 1, Kingman Regional Medical Center Project, FGIC Insured,
6.50%, 06/01/15 ................................................................................ 651,132
Navajo County PCR, Arizona Public Service Co., Series A,
2,400,000 AMBAC Insured, 5.50%, 08/15/28 .............................................................. 2,340,336
1,500,000 MBIA Insured, 5.875%, 08/15/28 .............................................................. 1,520,340
100,000 Northern Arizona University Revenues, Refunding, Series A, AMBAC Insured, 5.75%, 06/01/07 ....... 104,438
700,000 Oro Valley Municipal Property Corp. Revenue, Municipal Water System, MBIA Insured, 5.55%, 07/01/17 701,897
100,000 Peoria GO, Projects of 1990, AMBAC Insured, 6.25%, 07/01/12 ..................................... 105,150
1,000,000 Phoenix Civic Improvement Corp., Municipal Facilities Excise Tax Revenue, MBIA Insured,
Pre-Refunded, 6.90%, 07/01/21 .................................................................. 1,102,520
800,000 Phoenix Civic Improvement Corp., Wastewater Systems Lease Revenue, Refunding, MBIA Insured,
5.00%, 07/01/18 ................................................................................ 742,496
Phoenix Civic Improvement Corp., Water Systems Revenue, Junior Lien,
500,000 AMBAC Insured, 5.50%, 07/01/21 .............................................................. 492,705
1,000,000 FGIC Insured, 5.50%, 07/01/24 ............................................................... 980,520
925,000 Pima County IDA, SFMR, GNMA Secured, 6.625%, 11/01/14 ........................................... 966,496
Puerto Rico Commonwealth GO,
500,000 FSA Insured, 5.40%, 07/01/25 ................................................................. 489,310
845,000 MBIA Insured, 6.45%, 07/01/17 ................................................................ 906,575
800,000 Puerto Rico Electric Power Authority Revenue, Series R, FSA Insured, 6.25%, 07/01/17 ............ 839,672
840,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities, Financing
Authority, Hospital Revenue, Hospital Auxilio Mutuo Obligation Group, Series A, MBIA Insured,
6.25%, 07/01/24 ................................................................................ 883,327
1,500,000 Puerto Rico Public Buildings Authority Revenue, Government Facilities, Series A, AMBAC Insured,
5.50%, 07/01/25 ................................................................................ 1,476,585
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
$1,500,000 Refunding, Series D, 5.50%, 01/01/25 ......................................................... $ 1,462,335
1,500,000 Refunding, Series D, 6.25%, 01/01/27 ......................................................... 1,558,815
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 ... 273,883
360,000 Sierra Vista Municipal Property Corp. Facilities Revenue, AMBAC Insured, 6.15%, 01/01/15 ........ 378,439
375,000 Tucson Airport Authority Revenue, Refunding, MBIA Insured, 5.70%, 06/01/13 ...................... 380,126
Tucson GO,
500,000 Series A, MBIA Insured, 5.375%, 07/01/19 ..................................................... 491,975
650,000 Series G, 1984, FGIC Insured, 6.25%, 07/01/18 ................................................ 689,410
University of Arizona COP, Administrative & Packaging Facility, MBIA Insured, 6.00%,
500,000 07/15/16 ..................................................................................... 521,405
1,625,000 07/15/23 ..................................................................................... 1,688,505
1,000,000 University of Arizona COP, Residence Life Project, Series A, FSA Insured, 5.80%, 09/01/13 ....... 1,023,420
1,050,000 University of Arizona Medical Center Corp., Hospital Revenue, Refunding, MBIA Insured,
5.00%, 07/01/21 ................................................................................ 965,465
250,000 Yavapai County, Elementary School District No. 6, Cottonwood-Oak Creek, 1993 Project,
AMBAC Insured, Series B, 6.70%, 07/01/09 ....................................................... 277,510
775,000 Yavapai County, Elementary School District No. 028, Refunding, Camp Verde, FGIC Insured,
6.00%, 07/01/09 ................................................................................ 832,118
Yavapai County, USD No. 22, Humboldt,
300,000 Series A, FGIC Insured, 5.95%, 07/01/14 ...................................................... 311,694
575,000 Series C, FGIC Insured, 5.40%, 07/01/14 ...................................................... 571,751
500,000 Yuma County Elementary School District No. 1, Series A, MBIA Insured, 5.75%, 07/01/14 ........... 518,930
1,000,000 Yuma County Jail District Revenue, AMBAC Insured, 5.25%, 07/01/12 ............................... 989,550
----------
Total Long Term Investments (Cost $37,268,563) ........................................... 38,678,654
----------
aShort Term Investments0.8%
300,000 Maricopa County IDA, Hospital Facilities Revenue, Samaritan Health Service Hospital, Series B-2,
MBIA Insured, Daily VDRN and Put, 3.50%, 12/01/08 (Cost $300,000) .............................. 300,000
----------
Total Investments (Cost $37,568,563)98.2% ............................................. 38,978,654
Other Assets and Liabilities, Net1.8% ................................................. 714,474
----------
Net Assets100.0% ..................................................................... $39,693,128
==========
At February 28,1997, the net unrealized appreciation based on the cost of investments for
income tax purposes of $37,568,563 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................................. $ 1,436,582
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................................. (26,491)
----------
Net unrealized appreciation ................................................................... $ 1,410,091
==========
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
IDA - Industrial Development Authority
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
UHSD - Unified High School District
USD - Unified School District
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Florida Insured Tax-Free Income Fund (Note 1)
<S> <C> <C>
Long Term Investments 98.0%
$1,000,000 Canaveral Port Authority Revenue, Refunding, Series B, FGIC Insured, 5.625%, 06/01/21 ........... $ 1,003,620
2,435,000 Citrus County PCR, Refunding, Florida Power Co., MBIA Insured, 6.625%, 01/01/27 ................. 2,643,022
1,000,000 Clay County Utilities System Revenue, Series B, FGIC Insured, 5.25%, 11/01/13 ................... 987,900
1,000,000 Cocoa Beach Improvement Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/20 ...................... 975,210
1,600,000 Florida State HFA, Spinnaker Cove Apartments, Series G, AMBAC Insured, 6.50%, 07/01/36 .......... 1,654,240
1,000,000 Gainesville Public Improvements, Guaranteed, Refunding, AMBAC Insured, 5.50%, 08/01/17 .......... 998,720
1,915,000 Gulf Breeze Revenue, Local Government Loan Program, FGIC Insured, 6.05%, 12/01/15................ 2,009,122
2,000,000 Hernando County Water and Sewer Revenue, Refunding and Improvement, FGIC Insured, 6.00%,
06/01/19 ....................................................................................... 2,057,640
2,000,000 Hillsborough County IDA, IDR, University Community Hospital, MBIA Insured, 5.80%, 08/15/24 ...... 2,024,560
1,500,000 Hillsborough County IDA, PCR, Refunding, Tampa Electric Co. Project, MBIA Insured, 6.25%, 12/01/34 1,583,790
1,250,000 Indian River County Water and Sewer Revenue, FGIC Insured, 5.50%, 09/01/26 ...................... 1,232,038
1,090,000 Indian Trail Water Control District Improvement Bonds, MBIA Insured, 5.75% 08/01/16 ............. 1,118,373
1,000,000 Jacksonville Sales Tax Revenue, River City Renaissance Project, FGIC Insured, 5.375%, 10/01/18 .. 974,420
1,000,000 Jacksonville Water and Sewer Revenue, United Water Project, AMBAC Insured, 6.35%, 08/01/25 ...... 1,051,220
1,415,000 Lake Clarke Shores, Utility Systems Revenue, Refunding and Improvement, FGIC Insured, 5.80%, 10/01/18 1,443,031
1,000,000 Lake Mary Public Improvement Revenue, FGIC Insured, 5.25%, 09/01/15 ............................. 975,730
2,000,000 Lakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding,
MBIA Insured, 5.25%, 11/15/16 .................................................................. 1,919,240
500,000 Lakeland Utility Tax Revenue, Refunding and Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 518,385
3,000,000 Lee County Capital and Transportation Facilities Revenue, Refunding, Series A, MBIA Insured,
5.55%, 10/01/18 ................................................................................ 3,001,860
Lee County IDA, Utilities Revenue, Refunding, Bonita Springs Utilities Project, MBIA Insured, 6.05%,
2,000,000 11/01/15 ..................................................................................... 2,076,180
1,500,000 11/01/20 ..................................................................................... 1,543,770
2,000,000 Lee County Solid Waste Systems Revenue, MBIA Insured, 5.375%, 10/01/15 .......................... 1,946,100
1,000,000 Lynn Haven Capital Improvement Revenue, Series A, MBIA Insured, 5.75% 12/01/16 .................. 1,016,720
1,000,000 Martin County Consolidated Utilities Systems Revenue, Refunding and Improvement, FGIC Insured,
6.00%, 10/01/24 ................................................................................ 1,034,520
1,000,000 Martin County Improvement Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/14 .................... 1,046,620
2,000,000 Miramar Waste Water Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25 ............... 2,209,420
5,220,000 Ocoee Water and Sewer System Revenue, AMBAC Insured, 5.625%, 10/01/26 ........................... 5,215,981
1,500,000 Okeechobee Utility Systems Authority Revenue, Acquisition and Improvement, Refunding, MBIA
Insured, 5.60%, 10/01/25 ....................................................................... 1,489,350
1,300,000 Orange County Capital Improvement Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/22 ............ 1,337,310
Orange County Health Facilities Authority Revenue,
2,400,000 Crossover Refunding, Orlando Regional Healthcare, Series A, MBIA Insured, 6.00%, 11/01/24 .... 2,432,064
1,000,000 Sunbelt Adventist Health, Series B, FSA Insured, 6.75%, 11/15/21 ............................. 1,086,860
1,000,000 Orange County Public Services Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ........................ 1,037,190
Orange County Sales Tax Revenue, FGIC Insured,
500,000 6.125%, 01/01/19 ............................................................................. 513,455
1,000,000 5.375%, 01/01/24 ............................................................................. 956,840
1,900,000 Osceola County School Board COP, Series A, AMBAC Insured, 6.00%, 06/01/19 ....................... 1,963,726
1,225,000 Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured, 6.10%, 04/01/17 ... 1,272,604
1,000,000 Palm Beach County Criminal Justice Facilities Revenue, FGIC Insured, 6.00%, 06/01/15 ............ 1,041,620
1,250,000 Pinellas County Sewer Revenue, FGIC Insured, 6.00%, 10/01/24 .................................... 1,280,450
4,000,000 Port Orange Water and Sewer Revenue, Refunding, Junior Lien, AMBAC Insured, 5.25%, 10/01/21 ..... 3,803,920
1,000,000 Puerto Rico Commonwealth GO, FSA Insured, 6.00%, 07/01/22 ....................................... 1,029,710
1,000,000 Puerto Rico Electric Power Authority Revenue, Series P, Pre-Refunded, FSA Insured, 7.00%, 07/01/21 1,126,250
1,000,000 Puerto Rico Public Buildings Authority Revenue, Government Facilities, Series A, AMBAC Insured,
5.50%, 07/01/25 ................................................................................ 984,390
1,400,000 bRiviera Beach Water and Sewer Revenue, MBIA Insured, 5.25%, 10/01/16 ........................... 1,359,932
Seminole County School Board COP, Series A, MBIA Insured, 6.125%,
1,000,000 07/01/14 ..................................................................................... 1,044,270
1,000,000 07/01/19 ..................................................................................... 1,036,160
$ 500,000 St. Lucie County Water and Sewer Revenue, Refunding, AMBAC Insured, 5.50%, 10/01/17 ............. $ 495,115
Stuart Utilities Revenue, FGIC Insured,
500,000 6.70%, 10/01/14 .............................................................................. 549,145
500,000 6.80%, 10/01/24 .............................................................................. 550,155
1,000,000 Sunrise Utility System Revenue, Series A, AMBAC Insured, 5.75%, 10/01/26 ........................ 1,005,450
490,000 Titusville Water and Sewer Revenue, Refunding, MBIA Insured, 6.20%, 10/01/14 .................... 521,992
1,500,000 Vero Beach Electric Revenue, Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 ................ 1,460,835
500,000 West Melbourne Water and Sewer Revenue, Refunding and Improvement, FGIC Insured, 6.75%, 10/01/14. 558,343
1,500,000 West Palm Beach Utility Systems Revenue, Series B, FGIC Insured, 5.40%, 10/01/23 ................ 1,446,660
----------
Total Long Term Investments (Cost $73,617,016)............................................. 75,645,228
----------
aShort Term Investments0.3%
200,000 Manatee County Pollution Control Revenue, Refunding, Weekly VRDN and Put, 3.40%, 09/01/24
(Cost $200,000) ................................................................................ 200,000
----------
Total Investments (Cost $73,817,016)98.3% ............................................. 75,845,228
Other Assets and Liabilities, Net 1.7% ............................................... 1,331,671
----------
Net Assets100.0% ...................................................................... $77,176,899
==========
At February 28, 1997, the net unrealized appreciation based on the cost of investments for
income tax purposes of $73,817,016 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an excess
of value over tax cost ......................................................................... $ 2,381,378
Aggregate gross unrealized depreciation for all investments in which there was an excess
of tax cost over value ......................................................................... (353,166)
----------
Net unrealized appreciation ................................................................... $ 2,028,212
==========
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Corp.
FSA - Financial Security Assistance
GO - General Obligation
HFA - Housing Finance Authority/Agency
IDA - Industrial Development Authority
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
PCR - Pollution Control Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S Treasury bills rate).
bSee note 1(i) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Insured Tax-Free Income Fund (Note 1)
<S> <C> <C>
Long Term Investments98.6%
Alabama2.9%
$ 1,000,000 Alabama Agricultural and Mechanical University Revenues, MBIA Insured, 5.50%, 11/01/20 ....... $ 986,890
4,600,000 Alabama HFA, SFMR, HMR Program, Series A-1, GNMA Secured, 7.80%, 10/01/20 .................... 4,778,066
1,000,000 Alabama State Board Educational Revenue, Southern Union State Junior College, MBIA Insured,
6.50%, 07/01/12 ........................................................................... 1,079,740
Alabama Water Pollution Control Authority, Revolving Fund Loan, AMBAC Insured,
100,000 6.25%, 08/15/14 .......................................................................... 103,794
2,000,000 Series A, 5.60%, 08/15/16 ................................................................ 2,004,740
1,565,000 Auburn Governmental Utility Services Corp., Waste Water Treatment Revenue, Merscot-Auburn
L. P. Project, FGIC Insured, 7.30%, 01/01/12 ................................................ 1,684,910
2,000,000 Birmingham Airport Authority, Airport Revenue, MBIA Insured, 5.625%, 07/01/26 ................ 1,987,020
3,500,000 Birmingham Baptist Medical Center, Special Care Facilities Financing Authority Revenue,
Refunding, Baptist Health Systems, Inc., MBIA Insured, 5.875%, 11/15/19 ..................... 3,545,430
Daphne Utilities Board, Water, Gas and Sewer Revenue, FGIC Insured,
4,030,000 Refunding, Series 1990-B, 7.30%, 06/01/10 ................................................ 4,370,978
2,000,000 Series B, Capital Improvement Bonds, 7.35%, 06/01/20 ..................................... 2,150,980
1,100,000 Druit Community Hospital Health Care Authority, Facilities Revenue, MBIA Insured, Pre-Refunded,
7.875%, 06/01/07............................................................................. 1,133,297
3,550,000 Fort Payne Waterworks, Board of Water Revenue, MBIA Insured, 5.45%, 07/01/21 ................. 3,470,196
300,000 Huntsville Health Care Facilities Authority Revenue, Series A, MBIA Insured, 6.375%, 06/01/22 316,779
1,500,000 Marshall County Limited Obligation, AMBAC Insured, Pre-Refunded, 7.00%, 02/01/12 ............. 1,663,770
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 ................................................ 523,140
4,000,000 Montgomery Medical Clinic Board, Health Care Facilities Revenue, Jackson Hospital and Clinic,
Refunding, AMBAC Insured, 6.00%, 03/01/26 ................................................... 4,090,400
Pelham GO Unlimited Warrants, AMBAC Insured, 5.50%,
1,565,000 12/01/21.................................................................................. 1,539,913
2,000,000 12/01/26.................................................................................. 1,951,200
1,960,000 Phenix City GO, Refunding, AMBAC Insured, 5.75%, 03/01/13 .................................... 1,993,771
4,000,000 University of Alabama, University Hospital Revenues, Refunding, Huntsville, Series A, MBIA Insured,
5.50%, 05/01/18 ........................................................................... 3,945,560
5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant Co., Series C, MBIA Insured,
6.05%, 05/01/23 ............................................................................. 5,079,650
----------
48,400,224
----------
Alaska3.8%
Alaska Energy Authority Power Revenue, Bradley Lake Hydro Project,
5,795,000 MBIA Insured, 7.25%, 07/01/21 ............................................................ 6,330,284
5,000,000 Series 1, MBIA Insured, 7.25%, 07/01/09 .................................................. 5,362,100
4,765,000 Series 1, MBIA Insured, 7.25%, 07/01/16 .................................................. 5,117,753
3,205,000 Series 1, MBIA Insured, 6.25%, 07/01/21 .................................................. 3,261,312
18,500,000 Alaska Energy Utilities Revenue, City and Boro of Sitka, Refunding, FSA Insured, 6.75%, 07/01/20 19,981,110
5,000,000 Anchorage Electric Utility Revenue, Refunding, Senior Lien, Series A, MBIA Insured, 7.125%,
06/01/06..................................................................................... 5,328,100
Anchorage GO, AMBAC Insured,
2,765,000 General Purpose, Pre-Refunded, 7.30%, 08/01/10 ........................................... 3,025,021
5,000,000 Refunding, 7.20%, 06/01/17 ............................................................... 5,382,150
3,505,000 Refunding, 6.25%, 06/01/23 ............................................................... 3,558,556
5,100,000 Anchorage Water Revenue, Refunding, Senior Lien, MBIA Insured, 7.25%, 08/01/14 ............... 5,383,713
500,000 University of Alaska COP, Series 1990, FSA Insured, 7.375%, 10/01/07 ......................... 548,315
250,000 University of Alaska Revenues, Series B, AMBAC Insured, 6.50%, 10/01/17 ...................... 262,088
----------
63,540,502
----------
Arizona3.7%
Arizona State Municipal Financing Program, COP, MBIA Insured,
$ 2,250,000 Series 10, Pre-Refunded, 7.90%, 08/01/17 ................................................. $ 2,313,383
6,000,000 Series 1986-20, ETM, 7.70%, 08/01/10 ..................................................... 7,303,380
10,000,000 Series 1986-26, 7.70%, 08/01/05 .......................................................... 10,542,600
2,200,000 Chandler Water and Sewer Revenue, Refunding, FGIC Insured, 7.00%, 07/01/12 ................... 2,419,978
Cochise County USD No. 68, Sierra Vista, FGIC Insured,
500,000 Refunding, 7.50%, 07/01/10 ............................................................... 604,640
3,000,000 Series B, Pre-Refunded, 7.625%, 07/01/10 ................................................. 3,341,370
300,000 Maricopa County IDAR, Hospital Facility Revenues, Samaritan Hospital Health Services, Refunding,
Series A, MBIA Insured, 7.00%, 12/01/16 ..................................................... 352,941
Maricopa County USD No. 80, Chandler, FGIC Insured, Pre-Refunded,
775,000 7.20%, 07/01/07 .......................................................................... 853,081
825,000 7.20%, 07/01/08 .......................................................................... 908,119
500,000 7.25%, 07/01/09 .......................................................................... 551,140
1,000,000 Maricopa County USD No. 98, Fountain Hills, Series A, FGIC Insured, Pre-Refunded, 7.10%, 07/01/10 1,077,130
1,000,000 Maricopa UHSD No. 216, Refunding and Improvement, FGIC Insured, 6.70%, 07/01/11 .............. 1,085,400
1,000,000 Mesa IDA, Health Care Facilities Revenue, Western Health Network, Refunding, Series B-2,
MBIA Insured, 7.50%, 01/01/08 ............................................................... 1,065,360
500,000 Mohave County USD No. 1, Lake Havasu Project, Series 1991-B, AMBAC Insured, 5.375%, 07/01/11 . 503,125
3,925,000 Navajo County PCR, Arizona Public Service Co., Series A, MBIA Insured, 5.875%, 08/15/28 ...... 3,978,223
2,700,000 Phoenix Civic Improvement Corp., Wastewater Systems Lease Revenue, Refunding, MBIA Insured,
5.00%, 07/01/18 ............................................................................. 2,505,924
890,000 Phoenix GO, Refunding, Series B, MBIA Insured, 5.50%, 07/01/16 ............................... 888,870
Pima County Sewer Revenue, FGIC Insured,
230,000 Pre-Refunded, 6.75%, 07/01/15 ............................................................ 253,906
270,000 Refunding, 6.75%, 07/01/15 ............................................................... 292,286
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
1,150,000 Refunding, Series A, FGIC Insured, 5.50%, 01/01/19 ....................................... 1,139,800
10,000,000 Refunding, Series C, MBIA Insured, 5.00%, 01/01/13 ....................................... 9,505,800
300,000 Series A, MBIA Insured, 6.50%, 01/01/22 .................................................. 318,048
5,000,000 Tucson Local Development Corp., Leasehold Revenue, Series F, FGIC Insured, Pre-Refunded,
7.30%, 07/01/10.............................................................................. 5,251,600
5,000,000 Tucson Water Revenue, Series A, MBIA Insured, 6.00%, 07/01/21 ................................ 5,178,300
----------
62,234,404
----------
Arkansas0.2%
Arkansas State Development Finance Authority Water Revenue, Series A, MBIA Insured,
1,400,000 Pre-Refunded, 7.00%, 06/01/14 ............................................................ 1,553,734
2,000,000 Refunding, 6.50%, 07/01/10 ............................................................... 2,282,760
25,000 Pulaski County Health Facilities Board, Hospital Revenue, St. Vincent's Infirmary, MBIA Insured,
Pre-Refunded, 10.00%, 09/01/12 .............................................................. 28,424
----------
3,864,918
----------
California3.5%
3,750,000 California State Public Works, Board Lease Revenue, University of California Projects, Series A,
AMBAC Insured, Pre-Refunded, 6.40%, 12/01/16 ................................................ 4,194,975
15,000,000 cCorona COP, Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/20 ............... 20,295,150
1,515,000 Lancaster RDA, Refunding, Residential Redevelopment, MBIA Insured, 6.10%, 08/01/19 ........... 1,569,237
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue,
3,475,000 Proposition A, Series A, MBIA Insured, Refunding, 5.625%, 07/01/18 ....................... 3,459,710
12,000,000 Proposition C, Series A, AMBAC Insured, 5.00%, 07/01/25 .................................. 10,887,720
3,000,000 Los Angeles County Sanitation Districts Financing, MBIA Insured, 5.25%, 10/01/19 ............. 2,825,970
California (cont.)
$ 250,000 Oakland RDA, Refunding, Central District Redevelopment, AMBAC Insured, 5.50%, 02/01/14 ....... $ 252,435
5,500,000 Sacramento Municipal Utility District, Refunding, Series D, MBIA Insured, 5.25%, 11/15/20 .... 5,173,135
1,000,000 San Diego Regional Building Authority, Lease Revenue, Refunding, San Miguel Fire Protection,
Series A, MBIA Insured, 5.65%, 01/01/20 ..................................................... 1,008,710
2,000,000 San Francisco Bay Area Rapid Transit, District Sales Tax Revenue, FGIC Insured, 5.50%, 07/01/20 1,971,400
2,250,000 Stockton, East Water District, 1992 Project, Series A, AMBAC Insured, 6.40%, 04/01/22 ........ 2,392,178
4,630,000 Suisun-Solano Water Authority Revenue, Refunding, FSA Insured, 5.55%, 05/01/17 ............... 4,708,571
----------
58,739,191
----------
Colorado5.7%
3,500,000 Adams and Weld Counties GO, Brighton School District No. 27-J, MBIA Insured, Pre-Refunded,
6.30%, 12/01/12 ............................................................................. 3,842,335
1,000,000 Arapahoe County COP, Arapahoe County Building Finance Corp., FSA Insured, Pre-Refunded,
7.50%, 12/01/10 ............................................................................. 1,111,160
8,695,000 Arapahoe County COP, Refunding, FSA Insured, 6.625%, 12/01/16 ................................ 9,443,379
1,500,000 Castle Pines Metropolitan District, Refunding and Improvement, FSA Insured, 7.625%, 12/01/15 . 1,659,705
2,400,000 Colorado Association of School Boards, COP, Pueblo School District No. 60 Project Series A,
MBIA Insured, Pre-Refunded, 7.25%, 12/01/09 ................................................. 2,608,704
Colorado Health Facilities Authority Revenue,
1,174,000 Community Provider Pooled Loan Program, Series A, FSA Insured, 7.25%, 07/15/17 ........... 1,274,459
3,000,000 Rose Medical Center, MBIA Insured, Pre-Refunded, 7.00%, 08/15/21 ......................... 3,361,110
2,455,000 Colorado Springs Hospital Revenue, Refunding, MBIA Insured, 6.00%, 12/15/24 .................. 2,521,408
1,000,000 Colorado Springs Utilities Revenue, Refunding and Improvement, Series A, MBIA Insured, 5.125%,
11/15/18 .................................................................................... 949,100
Colorado State Board of Agriculture Revenue, Refunding and Improvement, Colorado State
University Auxiliary Facilities, MBIA Insured, 6.40%,
800,000 03/01/11.................................................................................. 857,352
1,000,000 03/01/17 ................................................................................. 1,056,260
2,000,000 Colorado Water Resource and Power Development Authority, Small Water Resource Revenue,
Series A, FGIC Insured, 6.70%, 11/01/12 ..................................................... 2,157,360
Denver City and County Airport Revenue, MBIA Insured
4,290,000 Series A, 5.60%, 11/15/20 ................................................................ 4,228,696
8,000,000 Series C, 6.125%, 11/15/25 ............................................................... 8,104,240
1,500,000 Denver City and County Board, Water Commissioner, COP, FGIC Insured, 6.625%, 11/15/11 ........ 1,615,875
3,000,000 Denver City and County Revenue, Childrens Hospital Association Project, FGIC Insured,
6.00%, 10/01/15 ............................................................................. 3,084,750
2,000,000 Denver City and County Revenue, Mercy Medical Center Project, MBIA Insured, Pre-Refunded,
7.75%, 05/01/14 ............................................................................. 2,127,800
1,055,000 Denver City and County SFMR, Series A, GNMA Secured, 8.125%, 12/01/20 ........................ 1,092,125
2,000,000 Douglas County School District No. 1, Douglas and Elbert Counties COP, Series D, FGIC Insured,
6.80%, 12/01/11 ............................................................................. 2,179,080
625,000 El Paso County SFMR, Series 1990-A, GNMA Secured, 8.00%, 09/01/22 ............................ 655,413
3,600,000 Garfield, Pitkin and Eagle Counties, Reorganized School District No. 1, MBIA Insured,
Pre-Refunded, 6.60%, 12/15/14 ............................................................... 4,054,680
2,000,000 Goldsmith Metropolitan District, Refunding, MBIA Insured, 6.125%, 12/01/12 ................... 2,089,580
1,000,000 Havana Water and Sanitation District Sewer Revenue, FSA Insured, Pre-Refunded, 7.375%,
09/15/14 .................................................................................... 1,055,440
Jefferson County COP, MBIA Insured,
2,000,000 Pre-Refunded, 7.125%, 12/01/10 ........................................................... 2,246,920
5,000,000 Refunding, 6.65%, 12/01/08 ............................................................... 5,503,100
5,000,000 Jefferson County School District No. R-001, AMBAC Insured, 6.25%, 12/15/12 ................... 5,282,950
380,000 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ................... 403,834
Colorado (cont.)
La Plata County School District No. R-9, Durango City, FGIC Insured, 6.55%,
$ 490,000 11/01/12.................................................................................. $ 535,991
2,510,000 Pre-Refunded,11/01/12 .................................................................... 2,783,741
1,000,000 Morgan County PCR, Refunding, First Mortgage, Public Service Co., Series A, MBIA Insured,
5.50%, 06/01/12.............................................................................. 1,004,640
Mountain College Residence Hall Revenue Authority, MBIA Insured,
1,900,000 5.625%, 06/01/12 ......................................................................... 1,931,597
3,000,000 5.75%, 06/01/23 .......................................................................... 3,039,060
1,600,000 Parker Water and Sanitation District, Water and Sewer Revenue, Refunding, FGIC Insured, 6.20%,
10/01/15..................................................................................... 1,674,272
Postsecondary Educational Facilities Revenue Authority, Connie Lee Insured,
1,000,000 Refunding, University of Denver Project, 6.00%, 03/01/10 ................................. 1,035,540
1,000,000 Regis University Project, 6.625%, 06/01/13 ............................................... 1,049,930
2,700,000 University of Denver Project, 6.25%, 03/01/12 ............................................ 2,819,880
2,700,000 University of Denver Project, 6.25%, 03/01/18 ............................................ 2,793,555
2,500,000 Regional Transportation District Sales Tax Revenue, Refunding and Improvement, FGIC Insured,
6.25%, 11/01/12 ............................................................................. 2,641,900
----------
95,876,921
----------
Connecticut0.8%
Connecticut State Health and Educational Facilities Authority Revenue,
2,000,000 Danbury Hospital, Series E, MBIA Insured, 6.50%, 07/01/14 ................................ 2,120,940
2,450,000 Mansfield Nursing Home, AMBAC Insured, 6.00%, 11/01/22 ................................... 2,501,107
2,000,000 Trinity College, Series D, FGIC Insured, 6.125%, 07/01/24 ................................ 2,063,520
2,000,000 Yale New Haven Hospital, Refunding, Series H, MBIA Insured, 5.70%, 07/01/25 .............. 1,988,680
2,900,000 Yale New Haven Hospital, Series F, MBIA Insured, Pre-Refunded, 7.10%, 07/01/25 ........... 3,203,746
2,000,000 New Haven Air Rights Parking Facility Revenue, Refunding, MBIA Insured, 6.50%, 12/01/15 ...... 2,143,480
----------
14,021,473
----------
Delaware0.3%
1,000,000 Delaware State EDA, PCR, Refunding, Series B, AMBAC Insured, 6.75%, 05/01/19 ................. 1,081,730
2,900,000 Delaware State Health Facilities Authority Revenue, Refunding, Medical Center, MBIA Insured,
7.00%, 10/01/15 ............................................................................. 3,098,012
250,000 Delaware Transportation Authority System Revenue, MBIA Insured, Pre-Refunded, 7.75%, 07/01/08 266,500
----------
4,446,242
----------
District of Columbia0.2%
875,000 District of Columbia HFA, RMR, Series 1986-1, FGIC Insured, 7.75%, 09/01/16 .................. 897,671
2,000,000 District of Columbia Revenue, Howard University, Series A, MBIA Insured, 8.00%, 10/01/17 ..... 2,086,160
----------
2,983,831
----------
Florida4.5%
2,500,000 Bay Medical Center Hospital Revenue, Refunding, Bay Medical Center Project, AMBAC Insured,
5.65%, 10/01/26 ............................................................................. 2,485,625
1,800,000 Cape Coral, Franchise Fees Revenue, AMBAC Insured, 5.40%, 12/01/13 ........................... 1,803,222
15,000 Dade County, Series DD, MBIA Insured, 7.75%, 10/01/18 ........................................ 15,336
2,750,000 Dade County Health Facilities Authority, Hospital Revenue, Mt. Sinai Medical Center Project,
FSA Insured, Pre-Refunded, 8.40%, 12/01/17 .................................................. 2,899,738
200,000 Dade County Seaport Revenue, Refunding, Series E, MBIA Insured, 8.00%, 10/01/08 .............. 250,816
725,000 Florida HFA, SFMR, Series 1, FGIC Insured, 8.00%, 12/15/13 ................................... 742,516
200,000 Florida State Municipal Power Agency Revenue, Refunding, Stanton Project, MBIA Insured, 6.00%,
10/01/15 .................................................................................... 204,032
Florida State Turnpike Authority Revenue, Department of Transportation, Series A,
3,000,000 AMBAC Insured, Pre-Refunded, 7.20%, 07/01/11 ............................................. 3,383,130
710,000 FGIC Insured, 6.35%, 07/01/22 ............................................................ 746,814
Florida (cont.)
Florida State Turnpike Authority Revenue, Department of Transportation, Series A, (cont.)
$ 7,400,000 FGIC Insured, 5.625%, 07/01/25 ........................................................... $ 7,342,280
1,290,000 FGIC Insured, Pre-Refunded, 6.35%, 07/01/22 .............................................. 1,415,117
25,000 Fort Myers Utility Revenue, Refunding, Series A, MBIA Insured, 6.00%, 10/01/19 ............... 25,337
3,000,000 Hillsborough County IDA, IDR, University Community Hospital, MBIA Insured, 5.80%, 08/15/24 ... 3,036,840
1,000,000 Hillsborough County IDA, PCR, Refunding, Tampa Electric Co. Project, MBIA Insured, 6.25%, 12/01/34 1,055,860
2,000,000 Lakeland Hospital System Revenue, Lakeland Regional Medical Center Project, Refunding
MBIA Insured, 5.25%, 11/15/25 ............................................................... 1,894,980
Lee County IDA, Utilities Revenue, Refunding, Bonita Springs Utilities Project, MBIA Insured, 6.05%
1,000,000 11/01/15.................................................................................. 1,038,090
1,000,000 11/01/20.................................................................................. 1,029,180
2,000,000 Lee County Solid Waste Systems Revenue, MBIA Insured, 5.375%, 10/01/15 ....................... 1,946,100
5,000,000 Manatee County School Board COP, MBIA Insured, 6.125%, 07/01/21 .............................. 5,191,900
100,000 Miami, Refunding, MBIA Insured, Pre-Refunded, 7.40%, 04/01/05 ................................ 108,430
2,000,000 North Port Utility Revenue, FGIC Insured, 6.20%, 10/01/12 .................................... 2,121,200
1,000,000 Opa-Locka Capital Improvement Revenue, Refunding, FGIC Insured, 6.125%, 01/01/24 ............. 1,041,000
960,000 Orange City Utilities System Revenue, Refunding and Improvement, AMBAC Insured, Pre-Refunded,
7.20%, 10/01/17 ............................................................................. 1,028,179
100,000 Orange County Capital Improvement Revenue, Series B, MBIA Insured, Pre-Refunded, 7.70%,
10/01/18..................................................................................... 107,778
1,000,000 Orange County Health Facilities Authority Revenue, Crossover Refunding, Orlando Regional
Healthcare, Series A, MBIA Insured, 6.00%, 11/01/24 ......................................... 1,013,360
Orlando and Orange County Expressway Authority Revenue, FGIC Insured,
100,000 Junior Lien, 6.50%, 07/01/10 ............................................................. 113,511
225,000 Junior Lien, 6.50%, 07/01/12 ............................................................. 255,098
2,765,000 Refunding, Senior Lien, 5.25%, 07/01/23 .................................................. 2,628,686
2,535,000 Orlando Utilities Commission, Water and Electric Revenue, Series A, AMBAC Insured, 5.50%,
10/01/26..................................................................................... 2,452,258
1,000,000 Osceola County School Board COP, Refunding, Series A, AMBAC Insured, 5.50%, 06/01/19 ......... 986,020
1,000,000 Osceola County Transportation Revenue, Osceola Parkway Project, MBIA Insured, 6.10%, 04/01/17 1,038,860
4,000,000 Palm Beach County Solid Waste Authority Revenue, MBIA Insured, 8.375%, 07/01/10 .............. 4,173,760
1,000,000 Panama City Water and Sewer Revenue, Refunding and Improvement, AMBAC Insured, 5.625%,
06/01/19..................................................................................... 1,001,960
1,000,000 Polk County IDAR, Winter Haven Hospital, Series 2, MBIA Insured, 6.25%, 09/01/15 ............. 1,049,620
3,500,000 Reedy Creek Improvement District, Utilities Revenue, Refunding, Series 1, MBIA Insured, 5.00%,
10/01/19..................................................................................... 3,215,835
1,500,000 bRiviera Beach Water and Sewer Revenue, MBIA Insured, 5.25%, 10/01/16 ........................ 1,457,070
1,970,000 Royal Palm Beach Utilities System Revenue, Series B, AMBAC Insured, Pre-Refunded, 8.875%,
10/15/15 .................................................................................... 2,071,278
3,910,000 Saint Petersburg Public Utilities Revenue, MBIA Insured, 5.60%, 10/01/18 ..................... 3,912,424
250,000 Sumter County School District Revenue, Multi-District Loan Program, FSA Insured, 7.15%, 11/01/15 302,673
1,200,000 Temple Terrace Water and Sewer Revenue, FGIC Insured, Pre-Refunded, 6.25%, 10/01/12 .......... 1,303,416
3,200,000 Vero Beach Electric Revenue, Refunding, Series A, MBIA Insured, 5.375%, 12/01/21 ............. 3,116,448
5,000,000 West Palm Beach Utilities System Revenue, MBIA Insured, 5.75%, 10/01/27 ...................... 5,033,350
----------
76,039,127
----------
Georgia 1.0%
2,860,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded, 8.00%,
09/01/15..................................................................................... 3,088,514
1,535,000 Brunswick Water and Sewer Revenue, Refunding and Improvement, MBIA Insured, 6.10%, 10/01/14 .. 1,650,432
2,000,000 Burke County Development Authority, PCR, Georgia Power Co., Vogtle Project, MBIA Insured,
Seventh Series, 6.625%, 10/01/24 ............................................................ 2,117,640
Georgia (cont.)
$ 1,000,000 Cherokee County Water and Sewage Revenue, Refunding, MBIA Insured, 6.90%, 08/01/18 ........... $ 1,089,070
1,500,000 Columbia County Water and Sewage Revenue, Refunding, AMBAC Insured, 6.25%, 06/01/12 .......... 1,578,840
1,055,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A, MBIA Insured,
6.50%, 07/01/24 ............................................................................. 1,082,852
200,000 Fulton and De Kalb County Hospital Authority Revenue, COP, Grady Memorial Hospital Project,
AMBAC Insured, Pre-Refunded, 6.90%, 01/01/15 ................................................ 221,158
1,000,000 Marietta Development Authority Revenue, Life College, FSA Insured, Pre-Refunded, 7.20%,
12/01/09 .................................................................................... 1,098,720
Metropolitan Atlanta Rapid Transit Authority, Sales Tax Revenue,
5,000,000 Series A, Refunding, Second Indenture, MBIA Insured, 5.625%, 07/01/20 .................... 4,989,850
10,000 Series J, FGIC Insured, Pre-Refunded, 8.00%, 07/01/18 .................................... 10,733
----------
16,927,809
----------
Hawaii1.2%
Hawaii County GO, Refunding and Improvement, Series A, FGIC Insured, 5.60%
1,000,000 05/01/12 ................................................................................. 1,034,070
1,000,000 05/01/13.................................................................................. 1,030,010
5,000,000 Hawaii State Airports System Revenue, Second Series, FGIC Insured, 7.50%, 07/01/20 ........... 5,501,450
Hawaii State Department of Budget and Finance, Special Purpose Mortgage Revenue,
3,000,000 Hawaiian Electric Co., MBIA Insured, 6.55%, 12/01/22 ..................................... 3,210,630
335,000 Refunding, Queens Medical Center Project, FGIC Insured, Pre-Refunded, 6.50%, 07/01/12 .... 347,191
4,000,000 Refunding, St. Francis Medical Centers, FSA Insured, 6.50%, 07/01/22 ..................... 4,287,960
2,000,000 Hawaii State Department of Budget and Finance, Special Purpose Revenue, Hawaiian Electric Co.
Project, Series B, MBIA Insured, 5.875%, 12/01/26 ........................................... 2,009,040
Hawaii State Harbor Capital Improvement Revenue, FGIC Insured, 6.40%
535,000 07/01/05.................................................................................. 581,994
605,000 07/01/06 ................................................................................. 656,655
610,000 07/01/07 ................................................................................. 659,099
Kauai County GO, Refunding, MBIA Insured, Pre-Refunded,
385,000 7.40%, 08/01/06 .......................................................................... 404,585
415,000 7.45%, 08/01/07 .......................................................................... 436,393
445,000 7.45%, 08/01/08 .......................................................................... 467,940
----------
20,627,017
----------
Idaho0.1%
1,000,000 Idaho State University at Boise Revenue, Student Fees, MBIA Insured, 6.50%, 04/01/19 ......... 1,105,500
----------
Illinois4.0%
40,000 Aurora, Series B, MBIA Insured, Pre-Refunded, 7.25%, 01/01/19 ................................ 42,595
510,000 Aurora SFMR, GNMA Secured, AMBAC Insured, 7.80%, 12/01/15 .................................... 526,876
270,000 Bloomingdale Waterworks and Sewer Revenue, MBIA Insured, 7.80%, 05/01/06 ..................... 274,263
1,350,000 Cary Waterworks and Sewerage Revenue, Series A, MBIA Insured, Pre-Refunded, 6.40%, 05/01/17 .. 1,466,748
100,000 Central Lake County Joint Action Water Agency, Interim Revenue, Series A, AMBAC Insured,
Pre-Refunded, 7.00%, 05/01/19 ............................................................... 109,629
320,000 Chicago Board of Education Lease, Series A, Refunding, MBIA Insured, 6.25%, 01/01/09 ......... 351,149
Chicago Central Public Library, Series B, AMBAC Insured,
1,800,000 6.70%, 01/01/06 .......................................................................... 1,985,706
1,800,000 6.75%, 01/01/07 .......................................................................... 1,985,436
100,000 Chicago Heights, MBIA Insured, Pre-Refunded, 7.40%, 12/01/03 ................................. 112,242
1,600,000 Chicago Public Building Commission Revenue, Community College District No. 508, Series A,
MBIA Insured, ETM, Pre-Refunded, 7.70%, 01/01/08 ............................................ 1,684,304
100,000 Chicago Waste Water Transmission Revenue, AMBAC Insured, Pre-Refunded, 7.20%, 11/15/19 ....... 109,481
1,500,000 Cicero GO, FSA Insured, 6.90%, 12/01/12 ...................................................... 1,646,520
Illinois (cont.)
Cook County Community College District No. 508, COP, FGIC Insured,
$ 7,470,000 8.50%, 01/01/02 .......................................................................... $ 8,723,391
5,000,000 8.75%, 01/01/05 .......................................................................... 6,245,150
4,935,000 Decatur Hospital Revenue, Decatur Memorial Hospital, Series B, MBIA Insured, Pre-Refunded,
6.85%, 10/01/16 ............................................................................. 5,511,507
750,000 Des Plains Hospital Facility Revenue, Refunding, Holy Family Hospital, AMBAC Insured, 9.25%,
01/01/14..................................................................................... 760,763
2,000,000 Evergreen Park, Village of, Hospital Facility Revenue, Refunding, Little Co. of Mary Hospital, Inc.,
MBIA Insured, 7.75%, 02/15/09 ............................................................... 2,094,840
500,000 Franklin Park Alternate Revenue, AMBAC Insured, Pre-Refunded, 6.85%, 07/01/22 ................ 566,855
Illinois Health Facilities Authority Revenue,
4,452,000 Community Provider Pooled Loan Program, Series A, FSA Insured, 7.35%, 08/15/10 ........... 4,981,076
2,635,000 Methodist Health Services Corp., Series G, MBIA Insured, 8.00%, 08/01/15 ................. 2,846,222
4,280,000 Michael Reese Hospital, Series A, FSA Insured, ETM, 7.60%, 02/15/05 ...................... 4,796,468
403,000 Refunding, Series B, MBIA Insured, ETM, 7.90%, 08/15/03 .................................. 461,443
2,583,000 Series 1990, FSA Insured, 7.75%, 08/15/10 ................................................ 2,869,506
47,000 Series 1990, FSA Insured, ETM, 7.75%, 08/15/10 ........................................... 58,228
2,210,000 Series B, MBIA Insured, 7.90%, 08/15/03 .................................................. 2,269,073
1,000,000 Silver Cross Hospital, MBIA Insured, 7.00%, 08/15/21 ..................................... 1,077,800
5,750,000 Illinois State COP, FSA Insured, 6.95%, 07/01/13 ............................................. 6,277,045
Joliet GO, Series 1987, MBIA Insured, Pre-Refunded, 8.00%
560,000 01/01/09.................................................................................. 579,107
605,000 01/01/10.................................................................................. 625,643
650,000 01/01/11.................................................................................. 672,178
200,000 .Kane County Public Building Commission, Community College Facilities Revenue, Elgin Community
College District No. 509, FGIC Insured, Pre-Refunded, 7.00%, 12/01/10 ....................... 214,596
300,000 Macon County and Decatur COP, Decatur Public Building Commission, FGIC Insured, 6.50%,
01/01/06 .............................................................................. 333,339
2,000,000 Onterie Center Project, HFC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 7.05%,
07/01/27 .............................................................................. 2,113,120
300,000 Regional Transportation Authority, Series A, AMBAC Insured, 7.20%, 11/01/20 .................. 359,793
2,040,000 Southwestern Development Authority, Capital Improvement Revenue, McKendre College Project,
FSA Insured, Pre-Refunded, 7.375%, 02/01/11 ................................................. 2,200,874
----------
66,932,966
----------
Indiana1.4%
1,000,000 Carroll County Consolidated School Building Corp., Refunding, First Mortgage, AMBAC Insured,
7.625%, 01/01/04 ............................................................................ 1,044,880
Fort Wayne Hospital Authority Revenue, Ancillary System, Inc.,
250,000 Parkview Memorial Hospital Project, Series A, FGIC Insured, 7.50%, 11/15/11 .............. 271,113
2,000,000 Refunding, Series C, MBIA Insured, Pre-Refunded, 8.125%, 07/01/18 ........................ 2,195,500
250,000 Indiana Health Facility Financing Authority Hospital Revenue, MBIA Insured, Refunding and
Improvement, Community Hospital Project, 6.40%, 05/01/12 .................................... 264,805
10,000,000 Indianapolis Airport Authority, Indianapolis International Airport Revenue, MBIA Insured, 8.30%,
07/01/18 .................................................................................... 10,633,900
500,000 Indianapolis Gas Utility Revenue, Refunding, Series B, FGIC Insured, 4.00%, 06/01/15 ......... 401,900
500,000 Jasper County PCR, Refunding, Collateralized, Northern Indiana Public Service Co., MBIA Insured,
7.10%, 07/01/17 ............................................................................. 540,670
6,000,000 Monroe County Hospital Authority Revenue, Refunding, Bloomington Hospital Project, MBIA Insured,
7.125%, 05/01/11 ............................................................................ 6,275,760
1,500,000 Patoka Lake Regional Water and Sewer District, Waterworks Revenue, Series A, AMBAC Insured,
6.45%, 01/01/15 ............................................................................. 1,584,570
185,000 Rockport PCR, Refunding, Michigan Power Co., Series B, FGIC Insured, 7.60%, 03/01/16 ......... 205,948
----------
23,419,046
----------
Iowa0.4%
$ 4,040,000 Davenport Hospital Facility Revenue, Mercy Hospital Project, MBIA Insured, 6.625%, 07/01/14 .. $ 4,342,273
200,000 Davenport Hospital Revenue, St. Lukes Hospital, Series A, AMBAC Insured, 7.40%, 07/01/20 ..... 218,544
2,135,000 Greater Iowa Housing Assistance Corp., Mortgage Revenue, Refunding, Logan Park Project,
Series B, MBIA Insured, 6.50%, 01/01/24 ..................................................... 2,197,022
----------
6,757,839
----------
Kansas0.6%
3,350,000 Burlington PCR, Refunding, Kansas Gas and Electric Co. Project, MBIA Insured, 7.00%, 06/01/31 3,682,722
1,245,000 Cowley and Shawnee Counties, SFMR, GNMA Secured, AMBAC Insured, 7.35%, 12/01/11 .............. 1,310,748
1,330,000 Kansas State Development Finance Authority, Health Facility Revenue, MBIA Insured, 5.80%,
11/15/21 .................................................................................... 1,342,622
2,000,000 Wichita Hospital Revenue, Refunding and Improvement, St. Francis, MBIA Insured, 6.25%, 10/01/10 2,138,440
1,000,000 Wichita Water and Sewer Utility Revenue, Refunding and Improvement, Series B, FGIC Insured,
6.00%, 10/01/12 ............................................................................. 1,030,420
----------
9,504,952
----------
Kentucky0.9%
2,000,000 Danville Multi-City Lease Revenue, Sewer and Drain System, Series G, MBIA Insured,
Pre-Refunded, 6.75%, 03/01/11 ............................................................... 2,231,100
1,000,000 Jefferson County Health Facilities Revenue, Jewish Hospital Healthcare Services, Inc.,
AMBAC Insured, 6.55%, 05/01/22 .............................................................. 1,078,930
1,250,000 Kenton County Water District No. 001, Waterworks Revenue, Series B, FGIC Insured, 5.70%,
02/01/20 .................................................................................... 1,259,700
Kentucky Economic Development Financing Authority,
2,000,000 Hospital Facilities Revenue, Baptist Healthcare System, Refunding, MBIA Insured, 5.00%,
08/15/24................................................................................. 1,801,720
2,375,000 Hospital Facilities Revenue, St. Elizabeth Medical Center Project, Series A, FGIC Insured,
6.00%, 12/01/22.......................................................................... 2,450,715
1,000,000 Medical Center Revenue, Refunding and Improvement, Ashland Hospital Corp., Series A,
FSA Insured, 6.125%, 02/01/12 ........................................................... 1,048,710
40,000 Kentucky HFC, MFMR, Series A, MBIA Insured, 8.875%, 07/01/19 ................................. 40,528
Louisville and Jefferson County Metropolitan Sewer District, Sewer and Drain System Revenue,
100,000 Pre-Refunded, FGIC Insured, 7.35%, 05/01/19 .............................................. 110,651
2,000,000 Refunding, Series A, AMBAC Insured, 6.75%, 05/15/25 ...................................... 2,223,960
2,000,000 Northern Kentucky University COP, Student Housing Facilities, FSA Insured, 7.25%, 01/01/12 ... 2,169,500
----------
14,415,514
----------
Louisiana0.3%
100,000 Alexandria Utilities Revenue, FGIC Insured, Pre-Refunded, 8.15%, 05/01/06 .................... 103,687
Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Memorial Hospital
Project, MBIA Insured, Pre-Refunded,
1,000,000 8.40%, 12/01/12 .......................................................................... 1,053,690
850,000 7.50%, 12/01/18 .......................................................................... 873,885
15,000 East Baton Rouge Parish, Sales and Use Tax Public Improvement, MBIA Insured, Pre-Refunded,
7.25%, 02/01/12 ............................................................................. 16,079
1,700,000 Jefferson Sales Tax District, Special Sales Tax Revenue, Refunding, Series A, MBIA Insured,
Pre-Refunded, 8.00%, 07/01/05 ............................................................... 1,841,355
300,000 Lafayette Public Improvement, Sales Tax Revenue, Refunding, FGIC Insured, Pre-Refunded,
8.00%, 03/01/08 ............................................................................. 317,742
150,000 Louisiana Regional Transit Authority Revenue, Refunding, FGIC Insured, 8.00%, 12/01/13 ....... 161,474
500,000 New Orleans Public Improvement, FGIC Insured, Pre-Refunded, 7.50%, 09/01/21 .................. 572,230
----------
4,940,142
----------
Maine0.7%
$ 2,000,000 Maine Health and Higher Educational Facilities Authority Hospital Revenue, Eastern Maine Health
Care, FGIC Insured, 6.625%, 10/01/11 ........................................................ $ 2,162,320
Maine Health and Higher Educational Facilities Authority Revenue, FSA Insured,
2,000,000 Series B, 7.00%, 07/01/24 ................................................................ 2,213,160
2,015,000 Series C, 6.20%, 07/01/25 ................................................................ 2,094,190
Maine State Turnpike Authority Revenue, MBIA Insured, 6.00%
525,000 07/01/14 ................................................................................. 547,397
2,500,000 07/01/18.................................................................................. 2,591,825
Old Orchard Beach GO, MBIA Insured, 6.65%
1,180,000 09/01/11.................................................................................. 1,291,062
535,000 09/01/12 ................................................................................. 585,081
----------
11,485,035
----------
Maryland0.4%
Maryland State Health and Higher Educational Facilities Authority Revenue, University of Maryland
Medical System, FGIC Insured,
3,000,000 Refunding, 5.00%, 07/01/20 ............................................................... 2,752,350
200,000 Series B, ETM, 7.00%, 07/01/22 ........................................................... 241,968
Maryland State Housing and Community Development Administration Department, Infrastructure
Financing, Series A, AMBAC Insured,
2,000,000 6.625%, 06/01/12 ......................................................................... 2,151,940
820,000 6.70%, 06/01/22 .......................................................................... 868,979
----------
6,015,237
----------
Massachusetts5.0%
3,700,000 Boston Water and Sewer Commission Revenue, Series A, FGIC Insured, 6.00%, 11/01/21 ........... 3,765,638
100,000 Massachusetts Bay Transportation Authority, Series A, MBIA Insured, Pre-Refunded, 7.625%,
03/01/15..................................................................................... 111,142
Massachusetts Health and Educational Facilities Authority Revenue,
10,000,000 Bay State Medical Center, Series E, FSA Insured, 6.00%, 07/01/26 ......................... 10,163,300
1,500,000 Berkshire Health System, Series A, MBIA Insured, Pre-Refunded, 6.75%, 10/01/19 ........... 1,566,855
1,500,000 Beverly Hospital, Series E, MBIA Insured, Pre-Refunded, 7.70%, 07/01/20 .................. 1,684,710
1,100,000 Capital Asset Program F-1, MBIA Insured, 7.30%, 10/01/18 ................................. 1,197,966
12,555,000 Fallon Health Care System, Series A, FSA Insured, Pre-Refunded, 6.75%, 06/01/20 .......... 13,918,096
9,220,000 Massachusetts General Hospital, Series F, AMBAC Insured, 6.25%, 07/01/20 ................. 9,477,607
1,000,000 Massachusetts Medical Center, Series A, AMBAC Insured, 7.10%, 07/01/21 ................... 1,096,370
8,500,000 Northeastern University, Series E, MBIA Insured, 6.55%, 10/01/22 ......................... 9,082,335
1,085,000 Refunding, Mclean Hospital, Series C, FGIC Insured, 6.625%, 07/01/15 ..................... 1,174,599
2,000,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.60%, 07/01/20 .................... 2,141,580
2,000,000 Youville Hospital, Refunding, Series B, MBIA Insured, 6.00%, 02/15/25 .................... 2,044,300
4,455,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue, Refunding,
Series A, AMBAC Insured, 6.00%, 07/01/18 .................................................... 4,470,593
Massachusetts State Industrial Finance Agency Revenue,
3,000,000 Babson College, Series A, MBIA Insured, 6.50%, 10/01/22 .................................. 3,179,790
5,000,000 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 ............................. 5,297,550
5,000,000 Refunding, Combined Jewish Philanthropies, Series A, AMBAC Insured, 6.375%, 02/01/15 ..... 5,311,700
4,000,000 Massachusetts State Port Authority Revenue, Refunding, Series A, FGIC Insured, 6.00%, 07/01/23 4,033,440
2,000,000 Monson GO, School District, Series 1990, MBIA Insured, Pre-Refunded, 7.70%, 10/15/10 ......... 2,262,960
2,300,000 Palmer GO, Series B, AMBAC Insured, Pre-Refunded, 7.70%, 10/01/10 ............................ 2,599,897
----------
84,580,428
----------
Michigan 2.2%
$ 100,000 Chippewa Valley School Building and Site, FGIC Insured, Pre-Refunded, 6.375%, 05/01/06 ....... $ 108,869
6,000,000 Detroit Sewerage Disposal Revenue, MBIA Insured, 5.00%, 07/01/25 ............................. 5,436,000
1,040,000 Howell Public Schools, Refunding, AMBAC Insured, 5.375%, 05/01/20 ............................ 1,013,709
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding and Improvement,
Bronson Methodist, MBIA Insured,
5,500,000 5.875%, 5/15/26 .......................................................................... 5,569,190
2,000,000 Series A, 6.375%, 05/15/17 ............................................................... 2,115,340
10,000,000 Kent Hospital Finance Authority, Health Care Revenue, Butterworth Health System, Series A,
MBIA Insured, 5.625%, 01/15/26 .............................................................. 9,865,700
5,000,000 Marquette City Hospital Finance Authority Revenue, Refunding, Marquette General Hospital,
Series D, FSA Insured, 6.10%, 04/01/19 ...................................................... 5,195,550
Michigan State Hospital Finance Authority Revenue, St. John's Hospital, AMBAC Insured,
3,000,000 5.25%, 05/15/26 .......................................................................... 2,800,740
2,500,000 Refunding, Series A, 6.00%, 05/15/13 ..................................................... 2,591,325
Michigan State Strategic Fund, Limited Obligation Revenue, Refunding, Detroit Edison Co.,
200,000 FGIC Insured, 6.875%, 12/01/21 ........................................................... 215,884
250,000 Series BB, AMBAC Insured, 7.00%, 05/01/21 ................................................ 299,770
2,400,000 Warren Consolidated School District, Refunding, Series II, FGIC Insured, 5.25%, 05/01/21 ..... 2,295,432
----------
37,507,509
----------
Minnesota1.9%
2,000,000 Eden Prairie MFHR, Olympic Ridge, Refunding, Series A, GNMA Secured, 6.25%, 01/20/31 ......... 2,045,760
2,365,000 Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured, 6.00%, 02/01/22 ...... 2,394,775
4,000,000 Minneapolis-St. Paul Housing Finance Board, MFMR, GNMA Secured, Mortgage Loan, Riverside
Plaza Project, 8.20%, 12/20/18 .............................................................. 4,155,640
200,000 Northern Municipal Power Agency, Minnesota Electric System Revenue, Refunding, Series B,
AMBAC Insured, 5.50%, 01/01/18 .............................................................. 195,856
2,870,000 Southern Minnesota Municipal Power Agency, Power Supply System Revenue, Series A,
AMBAC Insured, 5.75%, 01/01/18 .............................................................. 2,884,063
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 ......................................... 7,796,478
2,415,000 Washington County, Raymie Johnson Apartments, Series C, Refunding, FGIC Insured, 6.30%,
01/01/20..................................................................................... 2,564,295
1,200,000 Washington County Governmental Housing, Scandia II, Series B, FGIC Insured, 6.30%, 07/01/24 .. 1,274,184
8,775,000 Western Minnesota Municipal Power Agency, Power Supply Revenue, Series A, MBIA Insured,
6.125%, 01/01/16 ............................................................................ 8,780,528
----------
32,091,579
----------
Mississippi0.1%
Harrison County Correctional Facilities Finance Authority, Special Obligation Revenue, FGIC
Insured, Pre-Refunded, 8.30%
1,000,000 09/01/05 ................................................................................. 1,043,220
1,000,000 09/01/06 ................................................................................. 1,043,220
200,000 Harrison County Waste Water Management District Revenue, Refunding, Waste Water Treatment
Facilities, Series A, FGIC Insured, 8.50%, 02/01/13 ......................................... 270,810
10,000 Mississippi HFC, SFMR, Refunding, Series A, FGIC Insured, 7.70%, 10/15/08 .................... 10,292
----------
2,367,542
----------
Missouri2.4%
2,000,000 Branson Reorganization School District No. R-4, Refunding and Improvement, FSA Insured,
Pre-Refunded, 6.20%, 03/01/06 ............................................................... 2,085,240
1,000,000 Cape Girardeau County IDA, Health Care Facilities Revenue, Refunding, Southeast Missouri
Hospital Association, MBIA Insured, 5.25%, 06/01/16 ......................................... 962,420
Missouri (cont.)
$ 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 ....................................... $ 4,234,680
1,445,000 Missouri HDC, SFMR, Series 1990-B, GNMA Secured, 7.75%, 06/01/22 ............................. 1,524,157
1,000,000 Missouri School Board Lease Association, COP, Series R-III, School District Project, MBIA Insured,
Pre-Refunded, 6.875%, 03/01/11 .............................................................. 1,095,370
1,000,000 Missouri State Health and Educational Facilities Authority, Health Facilities Revenue, Heartland
Health System Project, AMBAC Insured, 6.35%, 11/15/17 ....................................... 1,057,780
7,500,000 Missouri State Health and Educational Facilities Authority Revenue, Sisters of St. Mary's Health
Care Project, Series A, MBIA Insured, Pre-Refunded, 7.75%, 06/01/16 ......................... 8,011,950
8,575,000 Sikeston Electric Revenue, MBIA Insured, Pre-Refunded, 6.25%, 06/01/22 ....................... 9,445,877
2,850,000 St. Charles County Public Facilities Authority Leasehold Revenue, FGIC Insured, 6.375%, 03/15/07 3,062,753
530,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19 ............................ 553,039
St. Louis Municipal Finance Corp., Leasehold Revenue,
2,000,000 Refunding and Improvement, Refunded, FGIC Insured, Pre-Refunded, 6.25%, 02/15/12 ......... 2,043,480
2,025,000 City Justice Center, Series A, AMBAC Insured, 5.95%, 02/15/16 ............................ 2,231,024
2,950,000 St. Louis School District GO, Refunding, FGIC Insured, 6.00%, 04/01/12 ....................... 3,090,125
1,250,000 Washington County GO, Pauwels Transformers Project, Series A, 7.60%, 12/01/09 ................ 1,296,875
----------
40,694,770
----------
Montana1.5%
Forsyth PCR, Refunding,
4,475,000 Puget Sound Power and Light Project, AMBAC Insured, 6.80%, 03/01/22 ...................... 4,845,038
5,000,000 Washington Water Co., Series A, MBIA Insured, 7.125%, 12/01/13 ........................... 5,405,150
750,000 Helena Water Revenue, Series C, FGIC Insured, 6.65%, 11/01/12 ................................ 814,755
Montana State Board, Workers Compensation Investment Program, MBIA Insured, ETM, 6.875%,
1,560,000 06/01/20 ................................................................................. 1,708,184
4,545,000 06/01/20 ................................................................................. 4,976,730
2,395,000 06/01/20 ................................................................................. 2,622,501
1,000,000 Montana State University Revenue, Higher Education Facilities, Acquisition and Improvement,
Series C, MBIA Insured, 6.00%, 11/15/14 ..................................................... 1,001,260
3,000,000 Montana Water System Revenue, Butte-Silver Bow Project, FGIC Insured, 6.50%, 11/01/14 ........ 3,248,970
----------
24,622,588
----------
Nebraska1.3%
2,500,000 Cass County School District No. 001, Plattsmouth Community Schools, FGIC Insured, 6.35%,
12/01/19..................................................................................... 2,588,950
1,000,000 Douglas County Hospital Authority Revenue, No. 2, Health Facilities, Series C, MBIA Insured,
5.50%, 11/15/21 ............................................................................. 982,670
2,500,000 Lancaster County Hospital Authority Revenue, Bryan Memorial Hospital Project No. 1, MBIA
Insured, 6.70%, 06/01/22 .................................................................... 2,721,225
5,000,000 Lincoln Electric System Revenue, Refunding, Series A, MBIA Insured, 5.25%, 09/01/15 .......... 4,850,350
2,000,000 Lincoln Hospital Revenue, Refunding, Lincoln General Hospital, Series A, FSA Insured, 6.20%,
12/01/14 .................................................................................... 2,098,620
Municipal Energy Agency of Nebraska, Power Supply System Revenue, Refunding, Series A,
AMBAC Insured, 6.00%,
2,000,000 04/01/15 ................................................................................. 2,080,220
1,350,000 04/01/17.................................................................................. 1,394,618
1,000,000 Nebraska Educational Finance Authority Revenue, Creighton University Project, AMBAC Insured,
5.95%, 01/01/11 ............................................................................. 1,045,280
Nebraska Investment Finance Authority, SFMR, Refunding
430,000 Series 1, GNMA Secured, MBIA Insured, 8.125%, 08/15/38 ................................... 448,507
3,470,000 Series B, FGIC Insured, 8.00%, 07/15/17 .................................................. 3,654,257
280,000 Series R1-A, FGIC Insured, 8.00%, 07/15/17 ............................................... 287,392
----------
22,152,089
----------
Nevada 0.5%
$ 250,000 Clark County GO, Series A, AMBAC Insured, 6.50%, 06/01/17 .................................... $ 282,578
4,000,000 Clark County School District, Series A, MBIA Insured, 7.00%, 06/01/10 ........................ 4,665,640
1,250,000 North Las Vegas, FGIC Insured, Pre-Refunded, 7.125%, 04/01/11 ................................ 1,386,138
10,000 Reno Hospital Revenue, Refunding, St. Mary's Regional Medical Center, Series A, MBIA Insured,
7.75%, 07/01/07 ............................................................................. 10,611
1,695,000 Sparks Public Safety GO, AMBAC Insured, Pre-Refunded, 7.50%, 10/01/09 ........................ 1,864,788
----------
8,209,755
----------
New Hampshire 0.6%
New Hampshire Higher Educational and Health Facilities Authority Revenue,
2,000,000 Concord Hospital, FGIC Insured, Pre-Refunded, 7.00%, 10/01/12 ............................ 2,211,320
4,300,000 Refunding, Concord Hospital, AMBAC Insured, 6.00%, 10/01/26 .............................. 4,397,008
4,000,000 Refunding, University System, MBIA Insured, 6.25%, 07/01/20 .............................. 4,141,880
----------
10,750,208
----------
New Jersey 2.7%
Camden County Municipal Utilities Authority, Sewer Revenue, FGIC Insured, 8.25%,
2,050,000 Pre-Refunded, 12/01/17 ................................................................... 2,153,197
3,950,000 12/01/17.................................................................................. 4,160,812
Essex County Improvement Authority Lease, Jail and Youth House Projects, AMBAC Insured,
3,000,000 Pre-Refunded, 7.00%, 12/01/24 ............................................................ 3,506,280
4,750,000 Refunding, 5.35%, 12/01/24 ............................................................... 4,576,863
2,525,000 Essex County Improvement Authority Revenue, Garden State Cancer Center Project, AMBAC
Insured, 6.00%, 12/01/20 .................................................................... 2,607,467
90,000 Hoboken Union City, Weehawken Sewer Authority Revenue, MBIA Insured, Pre-Refunded, 7.25%,
08/01/19 .................................................................................... 98,168
5,000,000 Hudson County COP, Correctional Facility, MBIA Insured, Pre-Refunded, 7.60%, 12/01/21 ........ 5,410,000
Lacey Municipal Utilities Authority, Water Revenue, MBIA Insured,
2,500,000 6.10%, 12/01/23 .......................................................................... 2,602,700
3,255,000 6.25%, 12/01/24 .......................................................................... 3,426,799
1,700,000 Mantua Township, New Jersey School District COP, MBIA Insured, Pre-Refunded, 7.25%, 06/30/10 . 1,888,564
2,000,000 Mount Laurel Township Municipal Utilities Authority System Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 07/01/15 ............................................................... 2,078,940
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 1,396,818
2,000,000 Community Medical Center, Series D, MBIA Insured, 6.00%, 07/01/19 ........................ 2,026,100
2,860,000 Jersey Shore Memorial Hospital, Series B, AMBAC Insured, Pre-Refunded, 8.00%, 07/01/18 ... 3,069,581
2,600,000 Jersey Shore Memorial Hospital, Series C, MBIA Insured, Pre-Refunded, 7.875%, 07/01/12 ... 2,688,556
3,000,000 Muhlenberg Regional Medical Center, Series B, AMBAC Insured, 8.00%, 07/01/18 ............. 3,206,070
485,000 New Jersey HFA, Home Buyer Revenue, Series C, MBIA Insured, 7.375%, 10/01/17 ................. 504,424
300,000 New Jersey State Turnpike Authority Revenue, Refunding, Series C, AMBAC Insured, 6.50%,
01/01/16..................................................................................... 340,584
100,000 North Bergen Township Municipal Utility Authority Sewer Revenue, FGIC Insured, Pre-Refunded,
7.625%, 12/15/19 ............................................................................ 105,076
----------
45,846,999
----------
New Mexico 0.7%
3,600,000 Albuquerque Airport Revenue, Series B, AMBAC Insured, 7.00%, 07/01/16 ........................ 3,623,976
5,000,000 Farmington PCR, Refunding, Public Service Co. of New Mexico, Series A, AMBAC Insured,
6.375%, 12/15/22 ............................................................................ 5,260,350
2,000,000 Gallup PCR, Refunding, Plains Electric Generation, MBIA Insured, 6.65%, 08/15/17 ............. 2,181,080
1,190,000 New Mexico Mortgage Finance Authority, SFMR, Series 1987-C, FGIC Insured, 8.625%, 07/01/17 ... 1,228,889
----------
12,294,295
----------
New York 8.6%
$ 900,000 Central Square School District, FGIC Insured, 6.50%, 06/15/10 ................................ $ 997,389
2,900,000 MAC for the City of New York, Series 61, MBIA Insured, 6.875%, 07/01/07 ...................... 2,986,971
1,585,000 Metropolitan Transportation Authority Service Contract, Refunding, Series K, AMBAC Insured,
Pre-Refunded, 7.50%, 07/01/17 ............................................................... 1,692,098
New York City GO,
1,000,000 Series B, FGIC Insured, Pre-Refunded, 7.25%, 08/01/11 .................................... 1,047,620
105,000 Series C, Subseries C-1, MBIA Insured, 6.625%, 08/01/12 .................................. 113,727
New York City Municipal Water Finance Authority, Water and Sewer System Revenue,
430,000 Series A, FGIC Insured, Pre-Refunded, 6.75%, 06/15/14 .................................... 461,356
2,000,000 Series A, MBIA Insured, Pre-Refunded, 7.25%, 06/15/15 .................................... 2,207,720
5,000,000 Series B, FGIC Insured, Pre-Refunded, 7.625%, 06/15/17 ................................... 5,313,850
5,000,000 Series C, AMBAC Insured, 6.20%, 06/15/21 ................................................. 5,240,000
10,000,000 Series C, AMBAC Insured, Pre-Refunded, 6.50%, 06/15/21 ................................... 10,233,900
2,000,000 New York City Trust for Cultural Resources Revenue, New York Botanical Garden, MBIA Insured,
5.80%, 07/01/26 ............................................................................. 2,021,460
New York State Dormitory Authority Revenues,
4,000,000 Brooklyn Law School, FSA Insured, 6.40%, 07/01/11 ........................................ 4,300,560
8,655,000 City University System, Series C, FGIC Insured, 7.00%, 07/01/14 .......................... 9,549,235
2,000,000 Maimonides Medical Center, Series A, MBIA Insured, FHA Guaranteed, 5.75%, 08/01/24 ....... 2,004,680
5,560,000 Pooled Capital Program, FGIC Insured, 7.80%, 12/01/05 .................................... 5,916,618
1,500,000 Refunding, Mt. Sinai School of Medicine, MBIA Insured, 6.75%, 07/01/15 ................... 1,621,950
15,000,000 St. John's University, MBIA Insured, 5.70%, 07/01/26 ..................................... 14,977,350
New York State Energy Research and Development Authority, PCR,
2,000,000 Central Hudson Gas, Series A, FGIC Insured, 7.375%, 10/01/14 ............................. 2,188,520
3,500,000 Refunding, Niagara Mohawk Power Corp., Series A, FGIC Insured, 6.625%, 10/01/13 .......... 3,791,550
5,000,000 Refunding, Rochester Gas and Electric Project, Series B, MBIA Insured, 6.75%, 01/15/27 ... 5,335,600
5,000,000 Refunding, Rochester Gas and Electric Project, Series B, MBIA Insured, 6.50%, 05/15/32 ... 5,330,900
5,000,000 New York State Local GAC, Series C, AMBAC Insured, 5.50%, 04/01/22 ........................... 4,886,750
New York State Medical Care Facilities, Financing Agency Revenue,
1,000,000 Montefiore Medical Center, Insured Mortgage, Series A, AMBAC Insured, FHA Guaranteed,
5.75%, 02/15/25 ......................................................................... 999,950
3,000,000 North Shore University Hospital, Mortgage Project, Series A, MBIA Insured, 7.20%, 11/01/20 3,291,060
7,485,000 Presbyterian Hospital, Series A, MBIA Insured, FHA Guaranteed, 5.375%, 02/15/25 .......... 7,126,618
5,000,000 St. Lukes Hospital, Series B, MBIA Insured, Pre-Refunded, 7.45%, 02/15/29 ................ 5,526,600
New York State Thruway Authority, General Revenue,
5,210,000 Series A, FGIC Insured, 5.50%, 01/01/23 .................................................. 5,055,836
6,635,000 Series B, MBIA Insured, 5.00%, 01/01/20 .................................................. 6,149,252
9,000,000 Niagara Frontier Transportation Authority, Airport Revenue, Greater Buffalo International Airport,
Series A, AMBAC Insured, 6.25%, 04/01/24 .................................................... 9,378,720
Port Authority of New York and New Jersey, Consolidated, MBIA Insured,
5,000,000 5.625%, 10/15/17 ......................................................................... 5,016,500
10,000,000 5.875%, 10/15/27 ......................................................................... 10,155,400
----------
144,919,740
----------
North Carolina
North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, MBIA Insured, 6.50%,
80,000 01/01/10 ................................................................................. 84,964
20,000 ETM, 01/01/10 ............................................................................ 22,240
----------
107,204
----------
North Dakota
$ 150,000 North Dakota State Building Authority Lease Revenue, Series B, Department of Corrections and
Rehabilitation, AMBAC Insured, Pre-Refunded, 7.40%, 06/01/10 ................................ $ 163,905
300,000 North Dakota State Building Authority Revenue, Refunding, Series A, AMBAC Insured, 6.75%,
06/01/11..................................................................................... 319,212
----------
483,117
----------
Ohio 2.1%
2,000,000 Akron Waterworks Mortgage Revenue, AMBAC Insured, Pre-Refunded, 6.55%, 03/01/12 .............. 2,200,960
2,000,000 Clermont County, Refunding, Building and Road Improvement, AMBAC Insured, 5.60%, 09/01/14 .... 2,018,800
Cleveland Waterworks First Mortgage Revenue, Series 1992-F, AMBAC Insured, 6.50%,
1,625,000 01/01/11.................................................................................. 1,744,340
1,375,000 Pre-Refunded, 01/01/11 ................................................................... 1,521,410
2,750,000 Pre-Refunded, 01/01/21 ................................................................... 3,042,820
1,080,000 Cuyahoga County Hospital Revenue, Metrohealth System Project, MBIA Insured, 6.00%, 02/15/19 .. 1,095,617
1,750,000 Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ................ 1,847,405
3,000,000 Lucas County Hospital Revenue, St. Vincent Medical Center, MBIA Insured, 6.625%, 08/15/22 .... 3,305,820
12,720,000 Montgomery County Hospital Facilities Revenue, Kettering Medical Center, MBIA Insured,
Pre-Refunded, 7.50%, 04/01/14 ............................................................... 13,844,066
4,070,000 Ohio HFA, SFMR, Series D, 7.05%, 09/01/16 .................................................... 4,239,271
----------
34,860,509
----------
Oklahoma 1.6%
685,000 Grady County HFA, SFMR, Refunding, Series A, FGIC Insured, 6.70%, 01/01/12 ................... 720,031
3,300,000 Jenks Public Works Authority Revenue, Refunding, AMBAC Insured, 7.80%, 07/01/11 .............. 3,503,709
300,000 McGee Creek Authority Water Revenue, MBIA Insured, 6.00%, 01/01/23 ........................... 318,378
5,000,000 Moore Public Works Authority Revenue, Refunding, AMBAC Insured, 7.60%, 07/01/06 .............. 5,416,300
855,000 Muskogee County, HFAR, Refunding, SFMR, Series A, FGIC Insured, 7.60%, 12/01/10 .............. 885,344
2,000,000 Oklahoma State Turnpike Authority Revenue, Series A, AMBAC Insured, 6.00%, 01/01/12 .......... 2,101,180
1,255,000 Owasso Public Works Authority, Public Improvement Revenue, FSA Insured, 7.40%, 11/01/07 ...... 1,320,486
250,000 Pottawatomie County Development Authority Water Revenue, North Deer Creek Reservoir Project,
AMBAC Insured, Pre-Refunded, 7.375%, 07/01/26 ............................................... 278,295
3,275,000 Tulsa Airport Improvements Trust, General Revenue Consolidated, MBIA Insured, Pre-Refunded,
7.50%, 06/01/08 ............................................................................. 3,388,315
Tulsa County HFAR, GNMA Secured,
4,460,000 Series A, 8.30%, 12/01/19 ................................................................ 4,671,226
320,000 Series D, 6.95%, 12/01/22 ................................................................ 332,653
3,270,000 Tulsa Industrial Authority Revenue, Holland Hall School Project, FSA Insured, 6.75%, 12/01/14 3,569,565
----------
26,505,482
----------
Oregon1.9%
3,000,000 Chemeketa Community College District, FGIC Insured, 5.95%, 06/01/16 .......................... 3,094,260
2,955,000 Clackamas Oregon Community College District, MBIA Insured, 5.80%, 06/01/26 ................... 2,992,617
1,500,000 Deschutes and Jefferson Counties School District No. 2-J, Redmond, MBIA Insured, 5.60%,
06/01/09..................................................................................... 1,539,510
5,000,000 Josephine County School District No. 7, FGIC Insured, 5.70%, 06/01/13 ........................ 5,096,600
1,000,000 Northern Wasco County Peoples Utilities District, Electric Revenue, FGIC Insured, 5.625%, 12/01/22 1,005,480
700,000 Ontario Catholic Health Corp., Hospital Facilities Authority Revenue, Holy Rosary Medical Facility,
Refunding, Series C, MBIA Insured, 5.50%, 11/15/12 .......................................... 705,565
1,500,000 Oregon Health Sciences University Revenue, Series B, MBIA Insured, 5.25%, 07/01/15 ........... 1,458,600
1,000,000 Oregon State Department of Administrative Services, Series A, MBIA Insured, 5.70%, 05/01/17 .. 1,009,890
1,000,000 Port of Portland International Airport Revenue, Portland International Airport, Series 11, FGIC
Insured, 5.625%, 07/01/26 ................................................................... 971,260
6,025,000 Portland Hospital Facilities Authority Hospital Revenue, Refunding, Legacy Health System, Series A,
AMBAC Insured, 6.70%, 05/01/21 .............................................................. 6,538,149
Oregon (cont.)
Washington County Unified Sewer Agency Revenue,
$ 1,000,000 Refunding, Senior Lien, Series A, AMBAC Insured, 6.125%, 10/01/12 ........................ $ 1,059,810
1,845,000 Senior Lien, FGIC Insured, 5.50%, 10/01/16 ............................................... 1,857,472
1,000,000 Subordinated Lien, Series 1, AMBAC Insured, 6.125%, 10/01/12 ............................. 1,059,810
3,000,000 Western Lane Hospital District, Hospital Facilities Authority Revenue, Sister/St. Joseph Peace,
Health and Hospital Services, MBIA Insured, 5.875%, 08/01/12 ................................ 3,115,020
----------
31,504,043
----------
Pennsylvania 2.4%
2,000,000 Beaver County, Series A, MBIA Insured, 5.90%, 10/01/26 ....................................... 2,043,880
3,900,000 Butler County Hospital Authority Revenue, North Hills Passavant Hospital, FSA Insured, 7.00%,
06/01/22 .................................................................................... 4,210,791
5,000,000 Cambria County Hospital Development Authority Revenue, Refunding and Improvement,
Conemaugh Valley Hospital, Series B, Connie Lee Insured, 6.375%, 07/01/18 ................... 5,217,450
3,000,000 Dauphin County Hospital Authority Revenue, Refunding, Harrisburg Hospital, MBIA Insured, 8.25%
07/01/14..................................................................................... 3,094,320
1,500,000 Delaware River Port Authority, Pennsylvania and New Jersey Delaware River Bridges Revenue,
Refunding, AMBAC Insured, 7.375%, 01/01/07 .................................................. 1,605,990
200,000 Exeter Township School District, FGIC Insured, Pre-Refunded, 6.50%, 05/15/06 ................. 218,812
100,000 Lehigh County General Purpose Authority Revenues, Hospital Healtheast, Inc., Series A,
Refunding, MBIA Insured, 7.00%, 07/01/15 .................................................... 106,850
8,000,000 Montgomery County IDAR, PCR, Philadelphia Electric Co., Series B, MBIA Insured, 6.70%, 12/01/21 8,615,840
500,000 Pennsylvania Convention Center Authority Revenue, Series A, FGIC Insured, ETM, 6.00%,
09/01/19 .................................................................................... 532,030
100,000 Pennsylvania State Higher Educational Facilities Authority, College and University Revenues,
Hahnemann University Project, MBIA Insured, Pre-Refunded, 7.20%, 07/01/19 ................... 108,728
2,740,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ............................................................... 2,873,602
Pennsylvania State Turnpike Commission Revenue,
500,000 Refunding, Series P, AMBAC Insured, 6.00%, 12/01/17 ...................................... 515,850
2,500,000 Series K, MBIA Insured, Pre-Refunded, 7.50%, 12/01/12 .................................... 2,759,150
4,000,000 Philadelphia Airport Revenue, Philadelphia Airport System, Series A, AMBAC Insured, 6.10%, 06/15/25 4,107,080
1,000,000 Philadelphia Water and Waste Water Revenue, Refunding, FSA Insured, 5.50%, 06/15/15 .......... 984,060
90,000 Pittsburgh Water and Sewer System Authority Revenue, Refunding, FGIC Insured, ETM, 7.25%,
09/01/14 .................................................................................... 106,155
2,000,000 Quaker Valley School District, FGIC Insured, 5.70%, 01/15/19 ................................. 2,013,680
10,000 Scranton-Lackawanna Health and Welfare Authority Revenue, Community Medical Center Project,
MBIA Insured, 7.875%, 07/01/10 .............................................................. 10,607
1,000,000 South Fork Municipal Authority, Hospital Revenue, Conemaugh Valley Memorial Hospital Project,
Series A, MBIA Insured, 5.75%, 07/01/26 ..................................................... 1,000,730
----------
40,125,605
----------
Rhode Island 1.5%
2,100,000 Kent County Water Authority, General Revenue, Series A, MBIA Insured, 6.35%, 07/15/14 ........ 2,252,880
5,000,000 Providence PBA General Revenue, Series A, FSA Insured, Pre-Refunded, 7.25%, 12/15/10 ......... 5,603,250
350,000 Rhode Island Convention Center Authority Revenue, Series A, MBIA Insured, Pre-Refunded, 6.65%,
05/15/12 .................................................................................... 385,665
3,335,000 Rhode Island Health and Education Building Authority, Series A, FSA Insured, Pre-Refunded,
7.50%, 09/15/19 ............................................................................. 3,664,765
Rhode Island Health and Educational Building Corp. Revenue, Higher Educational Facilities,
Connie Lee Insured,
3,000,000 6.30%, 03/15/20 .......................................................................... 3,108,720
2,000,000 Roger Williams Facility, Pre-Refunded, 7.25%, 11/15/24 ................................... 2,353,900
Rhode Island (cont.)
$ 2,000,000 Rhode Island Port Authority and Economic Development Corp. Revenue, Shepard Building Project,
Series B, AMBAC Insured, 6.75%, 06/01/25 .................................................... $ 2,179,420
250,000 Rhode Island State, Refunding, Series A, FGIC Insured, 6.25%, 06/15/07 ....................... 271,205
3,000,000 Rhode Island State Health and Educational Building Corp. Revenue, Lifespan Obligation Group,
Refunding, MBIA Insured, 5.75%, 05/15/23 .................................................... 3,012,750
2,000,000 West Warwick GO, MBIA Insured, Pre-Refunded, 7.25%, 09/01/11 ................................. 2,279,220
----------
25,111,775
----------
South Carolina 0.5%
250,000 Charleston Waterworks and Sewer Revenue, Refunding and Improvement, AMBAC Insured,
6.00%, 01/01/16 ............................................................................. 258,730
2,910,000 Cherokee County COP, Peachtree Centre Project, FSA Insured, 7.05%, 09/01/11 .................. 3,214,852
250,000 Edgefield County School District, Refunding, FSA Insured, 8.50%, 02/01/01 .................... 287,363
200,000 North Charleston Sewer District Revenue, MBIA Insured, Pre-Refunded, 7.75%, 08/01/18 ......... 214,782
200,000 Piedmont Municipal Power Agency, South Carolina Electric Revenue, Refunding, FGIC Insured,
6.25%, 01/01/21 ............................................................................. 219,482
3,000,000 Richland County Hospital Facilities Revenue, Community Provider, Pooled Loan Program, Series A,
FSA Insured, ETM, 7.125%, 07/01/17 .......................................................... 3,364,260
----------
7,559,469
----------
South Dakota 0.7%
4,800,000 Grant County PCR, Refunding, MBIA Insured, 5.90%, 06/01/23 ................................... 4,830,576
2,000,000 Lawrence County COP, Courthouse, FSA Insured, 7.65%, 07/01/10 ................................ 2,202,540
2,345,000 Sioux Falls Medical Clinic Revenue, AMBAC Insured, 8.00%, 09/01/08 ........................... 2,368,708
2,720,000 South Dakota State Lease Revenue, Series A, FSA Insured, 6.75%, 12/15/16 ..................... 3,101,507
20,000 South Dakota State University Revenue, Housing and Auxiliary Facilities, Refunding, Series A,
MBIA Insured, 5.50%, 04/01/17 ............................................................... 19,454
----------
12,522,785
----------
Tennessee 0.3%
1,450,000 Greater Tennessee Housing Assistance Corp., Mortgage Revenue, Refunding, Series A,
MBIA Insured, 6.00%, 07/01/24 ............................................................... 1,459,686
200,000 Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%, 07/01/15 .... 215,108
3,450,000 Trenton Special School District, AMBAC Insured, 5.75%, 11/01/20 .............................. 3,493,574
----------
5,168,368
----------
Texas 9.2%
Austin Combined Utility System Revenue,
1,000,000 MBIA Insured, Pre-Refunded, 8.625%, 11/15/17 ............................................. 1,186,520
50,000 Refunding, Series A, FGIC Insured, 6.00%, 05/15/15 ....................................... 50,806
3,000,000 Series A, MBIA Insured, Pre-Refunded, 8.00%, 11/15/16 .................................... 3,403,110
3,750,000 Bexar County HFC Revenue, GNMA Secured, Series A, 8.20%, 04/01/22 ............................ 3,958,725
Brazos River Authority Revenue, Refunding, Houston Light and Power Co. Project,
2,000,000 Series A, AMBAC Insured, 6.70%, 03/01/17 ................................................. 2,160,360
3,360,000 Series D, FGIC Insured, 7.75%, 10/01/15 .................................................. 3,590,160
12,230,000 Coastal Bend Health Facilities Development Corp., Series B, AMBAC Insured, 6.30%, 01/01/17 ... 12,835,997
800,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 .............................................. 839,520
790,000 East Texas HFC, SFMR, Series 1990, GNMA Secured, 7.85%, 12/01/10 ............................. 836,262
1,520,000 Faulkey Gully MUD, Refunding, Waterworks and Sewerage System, AMBAC Insured, 6.625%
03/01/07 .................................................................................... 1,635,490
Fort Bend County Levee Improvement District No. 011, AMBAC Insured, 6.00%,
1,395,000 09/01/21.................................................................................. 1,428,494
1,495,000 09/01/22.................................................................................. 1,530,895
1,610,000 09/01/23.................................................................................. 1,654,114
Texas (cont.)
$ 2,700,000 Grand Prairie Health Facilities, Refunding, Dallas/Fort Worth Medical Center Project,
AMBAC Insured, 6.875%, 11/01/10 ............................................................. $ 3,033,423
1,500,000 Harris County GO, Criminal Justice Center, FGIC Insured, 5.625%, 10/01/23 .................... 1,486,635
2,350,000 Harris County Hospital District Mortgage Revenue, Refunding, AMBAC Insured, 7.40%, 02/15/10 .. 2,817,744
3,000,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, MBIA Insured,
Pre-Refunded, 7.80%, 12/15/11 ............................................................... 3,257,520
Harris County Toll Road,
35,000 Series A, FGIC Insured, 6.50%, 08/15/11 .................................................. 37,904
1,580,000 Series A, Senior Lien, AMBAC Insured, 6.50%, 08/15/17 .................................... 1,699,353
240,000 Series B, Senior Lien, AMBAC Insured, 6.625%, 08/15/17 ................................... 246,382
Houston Airport System Revenue, Subordinated Lien, FGIC Insured,
2,500,000 Series A, 6.75%, 07/01/21 ................................................................ 2,653,075
1,000,000 Series B, 6.625%, 07/01/22 ............................................................... 1,068,040
Houston Water and Sewer System Revenue, Refunding, Junior Lien, Series C,
935,000 AMBAC Insured, 6.375%, 12/01/17 .......................................................... 1,000,076
65,000 AMBAC Insured, Pre-Refunded, 6.375%, 12/01/17 ............................................ 71,490
500,000 MBIA Insured, 5.75%, 12/01/15 ............................................................ 506,170
6,380,000 MBIA Insured, 6.375%, 12/01/22 ........................................................... 6,776,836
1,620,000 MBIA Insured, Pre-Refunded, 6.375%, 12/01/22 ............................................. 1,797,082
1,600,000 Lower Colorado River Authority Revenue, Refunding, MBIA Insured, Pre-Refunded, 7.625%,
1/01/16...................................................................................... 1,683,328
1,110,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, MBIA Insured, 8.875%,
12/01/12 .................................................................................... 1,117,093
Matagorda County Navigation District No. 1,
200,000 PCR, Central Power and Light Co. Project, AMBAC Insured, 7.50%, 12/15/14 ................. 220,284
12,850,000 PCR, Refunding, Central Power and Light Co. Project, Series E, MBIA Insured, 6.10%, 07/01/28 13,188,469
2,000,000 Refunding, Houston Light and Power Co., Series C, FGIC Insured, 7.125%, 07/01/19 ......... 2,142,620
100,000 Refunding, Houston Light and Power Co., Series E, FGIC Insured, 7.20%, 12/01/18 .......... 108,186
2,000,000 North Central Health Facility Development Corp. Revenue, Refunding, Presbyterian Health Care
Project, Series A, MBIA Insured, Pre-Refunded, 8.875%, 12/01/15 ............................. 2,115,000
6,000,000 Palo Duro River Authority, Refunding, FSA Insured, 6.375%, 08/01/08 .......................... 6,178,980
3,250,000 Sabine River Authority, PCR, Refunding, Collateralized, Texas Utilities Electric Co. Project,
FGIC Insured, 6.55%, 10/01/22 ............................................................... 3,475,908
9,900,000 San Antonio Electric and Gas System Revenue, Series A, FGIC Insured, Pre-Refunded, 8.00%,
02/01/16..................................................................................... 10,475,784
5,200,000 San Antonio Water Revenue, Refunding, MBIA Insured, 6.50%, 05/15/10 .......................... 5,637,164
2,500,000 San Patricio County COP, MBIA Insured, 6.60%, 04/01/07 ....................................... 2,689,875
1,095,000 Smithville HDC Mortgage Revenue, Smithville Retirement, Refunding, Series A, MBIA Insured,
6.40%, 01/01/22 ............................................................................. 1,113,889
1,170,000 Southeast HDC Mortgage Revenue, Stonegate Retirement, MBIA Insured, 6.40%, 01/01/24 .......... 1,206,399
3,250,000 Tarrant County HFC, Health System Revenue, Harris Methodist Health System, MBIA Insured,
6.00%, 09/01/24 ............................................................................. 3,327,838
8,760,000 Tarrant County HFC, SFMR, GNMA Secured, Series A, 8.00%, 07/01/21 ............................ 9,234,529
Texas Health Facilities Development Corp. Hospital Revenue, Refunding,
2,500,000 All Saints Episcopal Hospitals, Series B, MBIA Insured, 6.25%, 08/15/22 .................. 2,626,900
4,885,000 All Saints Episcopal Hospitals, Series B, MBIA Insured, 6.375%, 08/15/23 ................. 5,160,270
2,000,000 Cook-Fort Worth Medical Center Project, FGIC Insured, Pre-Refunded, 8.125%, 06/01/18 ..... 2,141,700
Texas State Turnpike Authority Revenue, Dallas North Tollway,
50,000 FGIC Insured, Pre-Refunded, 7.125%, 01/01/15 ............................................. 52,425
7,250,000 Refunding, AMBAC Insured, 5.00%, 01/01/20 ................................................ 6,657,893
5,975,000 Texas Water Resources Financial Authority Revenue, AMBAC Insured, 7.50%, 08/15/13 ............ 6,355,428
Texas (cont.)
$ 3,630,000 Travis County HFC, SFMR, GNMA Secured, 8.20%, 04/01/22 ....................................... $ 3,761,442
1,965,000 Webb County GO, Limited Tax, FSA Insured, Pre-Refunded, 7.25%, 02/15/09 ...................... 2,081,367
----------
154,314,954
----------
Utah 1.6%
Intermountain Power Agency, Power Supply Revenue, Refunding, AMBAC Insured,
4,680,000 Series A, 5.50%, 07/01/20 ................................................................ 4,553,734
2,000,000 Series 1987-C, Pre-Refunded, 8.375%, 07/01/12 ............................................ 2,070,620
6,300,000 Series 1987-D, Pre-Refunded, 8.375%, 07/01/12 ............................................ 6,523,461
6,230,000 Intermountain Power Agency, Special Obligation, Refunding, Fifth Crossover Series, FGIC Insured,
7.00%, 07/01/15 ............................................................................. 6,403,817
40,000 Provo Electric System Revenue, Refunding, Series 1984-A, AMBAC Insured, ETM, 10.375%,
09/15/15 .................................................................................... 57,076
1,080,000 Utah State Board of Regents, Student Loan Revenue, Series H, AMBAC Insured, 6.70%, 11/01/15 .. 1,121,720
660,000 Utah State Municipal Finance Corp., Local Government Revenue, St. George Water, FGIC Insured,
Pre-Refunded, 6.90%, 06/01/08 ............................................................... 728,600
2,935,000 Washington County Water Conservancy District, MBIA Insured, 8.20%, 02/01/18 .................. 3,040,455
Weber County Municipal Building Authority, Lease Revenue, FSA Insured, Pre-Refunded, 7.20%,
825,000 06/01/05.................................................................................. 879,104
875,000 06/01/06 ................................................................................. 932,383
950,000 06/01/07.................................................................................. 1,012,301
----------
27,323,271
----------
Vermont 0.6%
2,205,000 Vermont COP, MBIA Insured, 7.25%, 06/15/11 ................................................... 2,383,583
6,630,000 Vermont Home Mortgage, Series 1989-B, MBIA Insured, 7.60%, 12/01/24 .......................... 6,937,566
1,000,000 Vermont Municipal Bond Bank, Series 2, FSA Insured, 6.25%, 12/01/19 .......................... 1,046,650
----------
10,367,799
----------
Virginia 1.1%
9,850,000 Chesapeake Bay Bridge and Tunnel Commission, Virginia District Revenue, Refunding,
General Resolution, MBIA Insured, 5.75%, 07/01/25 ........................................... 9,835,324
5,000,000 Chesapeake IDA, Public Facilities, Lease Revenue, Chesapeake Jail Project, MBIA Insured,
6.00%, 06/01/12.............................................................................. 5,226,550
1,000,000 Danville IDA, Hospital Revenue, Danville Regional Medical Center, Refunding, FGIC Insured,
6.50%, 10/01/24 ............................................................................. 1,070,390
3,405,000 Hampton Roads Regional Jail Authority, Regional Jail Facilities Revenue, Series A, MBIA Insured,
5.00%, 07/01/28 ............................................................................. 3,099,912
----------
19,232,176
----------
Washington 6.9%
5,700,000 Benton County PUD No. 001, Electric Revenue, Refunding, AMBAC Insured, 6.75%, 11/01/11 ....... 6,172,587
2,000,000 Clallam County PUD No. 001, Electric Revenue, Refunding, AMBAC Insured, 6.50%, 01/01/08 ...... 2,175,500
900,000 Douglas County PUD No. 001, Electric Distribution System Revenue, MBIA Insured, 6.00%, 01/01/15 937,179
850,000 Everett COP, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 04/01/09 .......................... 941,044
Grant County PUD No. 002, Wanapum Hydro-Electric Revenue, Second Series,
3,065,000 Series A, MBIA Insured, 5.625%, 01/01/26 ................................................. 3,002,627
2,000,000 Series B, AMBAC Insured, 6.75%, 01/01/23 ................................................. 2,136,100
2,245,000 Grays Harbor County PUD No. 001, Electric Revenue, Refunding, AMBAC Insured, 7.10%,
01/01/06..................................................................................... 2,334,239
1,500,000 King County Public Hospital District No. 001, Hospital Facilities Revenue, Valley Medical Center,
AMBAC Insured, 7.25%, 09/01/15 .............................................................. 1,639,635
3,375,000 King County School District No. 411, Issaquah, Refunding, AMBAC Insured, Pre-Refunded, 6.50%,
12/01/09..................................................................................... 3,721,714
Washington (cont.)
$ 3,000,000 King County Sewer, MBIA Insured, 6.125%, 01/01/33 ............................................ $ 3,089,220
1,015,000 Kitsap County School District No. 100-C, Refunding, MBIA Insured, 6.60%, 12/01/08 ............ 1,103,478
2,105,000 Kittitas County School District No. 404, AMBAC Insured, Pre-Refunded, 6.80%, 12/01/11 ........ 2,323,520
Klickitat County PUD No. 001, Electric Revenue, FGIC Insured,
1,000,000 5.65%, 10/01/15 .......................................................................... 1,005,820
1,000,000 5.75%, 10/01/27 .......................................................................... 1,005,790
1,040,000 Mason County School District No. 402, Pioneer, MBIA Insured, 6.60%, 12/01/11 ................. 1,142,097
2,000,000 Port of Longview, Cowlitz County, Airport and Marina Improvements, MBIA Insured, 6.00%,11/01/15 2,096,860
2,890,000 Seatac Storm Water Revenue, MBIA Insured, 6.50%, 12/01/13 .................................... 3,107,646
11,000,000 Seattle Metropolitan Sewer System Revenue, Series W, MBIA Insured, 6.30%, 01/01/33 ........... 11,417,780
4,250,000 Snohomish County PUD No. 001, Electric Revenue, Generation System, FGIC Insured, ETM,
6.65%, 01/01/16 ............................................................................. 4,743,468
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 ..................................................... 5,301,050
Tacoma Electric System Revenue,
6,000,000 AMBAC Insured, Pre-Refunded, 8.00%, 01/01/11 ............................................. 6,328,020
500,000 Refunding, AMBAC Insured, 6.25%, 01/01/11 ................................................ 532,480
6,190,000 Refunding, FGIC Insured, 6.25%, 01/01/15 ................................................. 6,492,815
1,305,000 Thurston and Pierce Counties, Community Schools, Series B, AMBAC Insured, 6.65%, 12/01/09 .... 1,412,075
Washington Public Power Supply System, Nuclear Project No. 1 Revenue,
500,000 Refunding, Series A, MBIA Insured, 6.25%, 07/01/17 ....................................... 509,930
4,420,000 Refunding, Series B, FGIC Insured, Pre-Refunded, 7.25%, 07/01/12 ......................... 4,896,034
2,500,000 Refunding, Series C, FGIC Insured, Pre-Refunded, 7.75%, 07/01/08 ......................... 2,807,550
1,465,000 Series A, MBIA Insured, Pre-Refunded, 7.50%, 07/01/15 .................................... 1,600,806
2,200,000 Series A, MBIA Insured, Pre-Refunded, 7.50%, 07/01/15 .................................... 2,403,940
100,000 Washington Public Power Supply System Revenue, Nuclear Project No. 3, Refunding, Series A,
MBIA Insured, Pre-Refunded, 7.25%, 07/01/16 ................................................. 108,721
Washington State Health Care Facilities Authority Revenue,
1,000,000 Franciscan Health System, MBIA Insured, Pre-Refunded, 7.70%, 01/01/13 .................... 1,042,970
5,000,000 Mason Medical Center, MBIA Insured, 8.00%, 07/01/15 ...................................... 5,160,900
3,250,000 Swedish Hospital Medical Center, AMBAC Insured, 6.30%, 11/15/22 .......................... 3,375,905
2,895,000 Washington State HFA, Series A, GNMA Secured, 7.70%, 07/01/32 ................................ 3,009,787
Western Washington University Revenue, Housing and Dining System, MBIA Insured,
3,000,000 6.375%, 10/01/22 ......................................................................... 3,145,050
1,050,000 Refunding, 6.70%, 10/01/11 ............................................................... 1,114,176
3,500,000 Refunding, 6.375%, 10/01/21 .............................................................. 3,620,715
6,130,000 Refunding, 6.40%, 10/01/24 ............................................................... 6,500,436
2,000,000 Whatcom County School District No. 501, Bellingham, FGIC Insured, 6.125%, 12/01/13 ........... 2,116,440
350,000 Yakima-Tieton Irrigation District Revenue, Refunding, FSA Insured, 6.20%, 06/01/19 ........... 366,965
----------
115,943,069
----------
West Virginia 1.9%
11,560,000 Harrison County, Community Solid Waste Disposal Revenue, Potomac Edison Co., Series C,
AMBAC Insured, 6.75%, 08/01/24 .............................................................. 12,465,726
1,000,000 Monongalia County Building Community Hospital Revenue, Refunding, Monongalia General
Hospital, Series B, MBIA Insured, 6.50%, 07/01/17 ........................................... 1,047,370
South Charleston Hospital Revenue, Refunding, Herbert J. Thomas Memorial Hospital, MBIA Insured,
Pre-Refunded, 8.00%,
3,060,000 10/01/04.................................................................................. 3,306,973
2,400,000 10/01/10 ................................................................................. 2,593,704
300,000 West Virginia School Building Authority Revenue, Capital Improvement, Series B, MBIA Insured,
Pre-Refunded, 6.75%, 07/01/17 ............................................................... 327,714
West Virginia (cont.)
$ 2,000,000 West Virginia State HDA, SFMR, MBIA Insured, 7.40%, 11/01/11 ................................. $ 2,055,320
2,000,000 West Virginia State Hospital Finance Authority Revenue, Monongalia General Hospital Project,
MBIA Insured, Pre-Refunded, 8.60%, 07/01/17 ................................................. 2,032,480
2,250,000 West Virginia State University Revenue, Refunding, AMBAC Insured, 6.00%, 04/01/12 ............ 2,359,755
West Virginia State Water Development Authority Revenue, FSA Insured,
3,000,000 Loan Program II, Series B, Pre-Refunded, 7.50%, 11/01/29 ................................. 3,303,780
2,750,000 Refunding, Loan Program, Series A, 7.00%, 11/01/25 ....................................... 2,979,928
----------
32,472,750
----------
Wisconsin 1.0%
500,000 Holmen School District, Series A, AMBAC Insured, 6.25%, 10/01/10 ............................. 528,375
Lake County School District GO, Refunding, AMBAC Insured, 6.35%,
850,000 04/01/11 ................................................................................. 889,500
900,000 04/01/12 ................................................................................. 948,474
3,000,000 Superior Limited Obligation Revenue, Refunding, Midwest Energy Resources, Series E, FGIC
Insured, 6.90%, 08/01/21 .................................................................... 3,537,660
Wisconsin Health Educational Revenue, Series A, FSA Insured, 7.50%,
2,000,000 01/15/09.................................................................................. 2,122,640
1,965,000 Community Provider Program, 01/15/04 ..................................................... 2,100,015
Wisconsin Health Facilities Authority Revenue,
2,000,000 Meriter Hospital, Inc., FGIC Insured, Pre-Refunded, 8.375%, 12/01/09 ..................... 2,107,780
4,000,000 Milwaukee Psychiatric Hospital, MBIA Insured, 7.30%, 04/01/12 ............................ 4,086,600
500,000 Wisconsin State Health and Educational Facilities Authority Revenue, Refunding, Series AA,
MBIA Insured, 6.25%, 06/01/20 ............................................................... 517,265
----------
16,838,309
----------
Wyoming 1.2%
500,000 Gillette Health Facilities Revenue, Lutheran Hospital and Home Society, Refunding, MBIA Insured,
5.90%, 01/01/16 ............................................................................. 511,570
7,135,000 Natrona County Hospital Revenue, Wyoming Medical Center Projects, Refunding, AMBAC Insured,
6.00%, 09/15/24 ............................................................................. 7,296,536
2,245,000 University of Wyoming, University Facilities Revenues, MBIA Insured, 7.10%, 06/01/10 ......... 2,375,704
1,525,000 Worland GO, Refunding, AMBAC Insured, 5.30%, 06/01/12 ........................................ 1,485,991
6,750,000 Wyoming CDA, AMBAC Insured, 6.00%, 06/01/23 .................................................. 6,775,313
2,000,000 Wyoming Municipal Power Agency, Power Supply System Revenue, Refunding, Series A,
MBIA Insured, 6.125%, 01/01/16 .............................................................. 2,080,980
----------
20,526,094
----------
Total Long Term Investments (Cost $1,561,576,153) ...................................... 1,659,282,171
----------
aShort Term Investments0.1%
500,000 Delta County Michigan Economic Development Corp., Environmental Improvement Revenue,
Refunding, Mead Escanaba Paper, Series C, Bank of Nova Scotia Insured, Daily VRDN and Put,
3.45%, 12/01/23 ............................................................................. 500,000
1,100,000 Massachusetts Health and Educational Facilities Authority Revenue, Capital Assets Program,
Series D, MBIA Insured, Daily VRDN and Put, 3.45%, 01/01/35 ................................. 1,100,000
----------
Total Short Term Investments (Cost $1,600,000) ......................................... 1,600,000
----------
Total Investments (Cost $1,563,176,153)98.7% ....................................... 1,660,882,171
Other Assets and Liabilities, Net1.3%............................................... 22,726,480
----------
Net Assets100.0% ................................................................... $1,683,608,651
==========
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,563,176,153 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 98,083,954
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (377,936)
----------
Net unrealized appreciation ................................................................ $ 97,706,018
==========
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Agency
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
GAC - Government Assistance Corp.
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Agency/Authority
HFAR - Housing Finance Agency Revenue
HFC - Housing Finance Corp.
HMR - Housing Mortgage Revenue
IDA - Industrial Development Authority
IDAR - Industrial Development Authority Revenue
IDB - Industrial Development Board
IDR - Industrial Development Revenue
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
PCR - Pollution Control Revenue
PUD - Public Utility District
RDA - Redevelopment Agency
RMR - Residential Mortgage Revenue
SFMR - Single Family Mortgage Revenue
UHSD - Unified High School District
USD - Unified School District
aVariable rate demand notes (VRDN's) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
bSee Note 1(i) regarding securities purchased on a when-issued basis.
cSee Note 1(c) regarding uninsured securities collateralized by U.S. government
securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Massachusetts Insured Tax-Free Income Fund (Note 1)
<S> <C> <C>
Long Term Investments 95.0%
$ 2,700,000 Ashburnham & Westminister, Regional School District, MBIA Insured, 6.00%, 12/15/13 ............ $ 2,792,718
Attleboro Municipal Purpose GO, AMBAC Insured, 6.00%,
1,045,000 07/01/11 .................................................................................. 1,105,255
1,045,000 07/01/12 .................................................................................. 1,095,818
685,000 07/01/13 .................................................................................. 718,312
755,000 07/01/14 .................................................................................. 788,892
Blackstone-Milville School District, AMBAC Insured, 6.50%,
705,000 05/01/08 .................................................................................. 762,740
750,000 05/01/09 .................................................................................. 807,870
795,000 05/01/10 .................................................................................. 854,466
11,730,000 Boston Hospital Revenue, Refunding, Series B, FHA, MBIA Insured, 5.75%, 02/15/23 .............. 11,751,114
Boston Water and Sewage Commission, General Revenue,
3,000,000 Series A, MBIA Insured, 7.25%, 11/01/06 ................................................... 3,194,640
1,400,000 cSeries A, Pre-Refunded, 7.10%, 11/01/19 .................................................. 1,527,834
1,095,000 Central Berkshire GO, School District, MBIA Insured, 7.25%, 06/01/08 .......................... 1,190,834
2,000,000 Fall River School Project, MBIA Insured, Pre-Refunded, 7.20%, 06/01/10 ........................ 2,251,620
1,650,000 Framingham Housing Authority Mortgage Revenue, Beaver Terrace Apartments, Series A,
GNMA Secured, 6.65%, 02/20/32................................................................. 1,691,597
Greenfield GO, MBIA Insured, 6.50,
500,000 10/15/08 .................................................................................. 541,060
500,000 10/15/09 .................................................................................. 538,905
1,000,000 Holyoke GO, School Project Loans, MBIA Insured, Pre-Refunded, 8.05%, 06/15/04 ................. 1,188,740
Hudson GO, MBIA Insured, 6.00%,
250,000 05/15/13 .................................................................................. 262,768
240,000 05/15/14 .................................................................................. 251,189
Lenox GO, Refunding, AMBAC Insured,
1,000,000 6.60%, 10/15/11 ........................................................................... 1,074,160
500,000 6.625%, 10/15/15 .......................................................................... 536,520
450,000 Leominster GO, Series 1990, MBIA Insured, Pre-Refunded, 7.50%, 04/01/09 ....................... 499,595
Lowell GO, AMBAC Insured, 5.50%,
3,070,000 12/15/13................................................................................... 3,070,000
3,255,000 12/15/14................................................................................... 3,236,447
825,000 12/15/15................................................................................... 823,655
Ludlow GO, School Project, Limited Tax, MBIA Insured,
210,000 7.30%, 11/01/07 ........................................................................... 250,081
210,000 7.30%, 11/01/08 ........................................................................... 250,814
210,000 7.40%, 11/01/09 ........................................................................... 253,079
4,000,000 Lynn Water and Sewer General Revenue, Series A, MBIA Insured, Pre-Refunded, 7.25%,
12/01/10 ..................................................................................... 4,478,800
2,000,000 Mansfield GO, AMBAC Insured, 6.70%, 01/15/11 .................................................. 2,170,080
Martha's Vineyard, Regional High School District No. 100, AMBAC Insured,
830,000 6.55%, 12/15/10 ........................................................................... 914,228
725,000 6.60%, 12/15/11 ........................................................................... 798,414
880,000 6.65%, 12/15/12 ........................................................................... 972,488
210,000 6.70%, 12/15/14 ........................................................................... 231,882
2,000,000 Mashpee GO, MBIA Insured, 5.50%, 02/01/17 ..................................................... 1,999,880
500,000 Mashpee Water District GO, MBIA Insured, 6.40%, 10/15/12 ...................................... 535,075
Massachusetts Bay Transportation Authority,
2,500,000 COP, MBIA Insured, 7.75%, 01/15/06 ........................................................ 3,025,000
3,000,000 cGeneral Transportation System, Series A, Pre-Refunded, 7.75%, 03/01/13 ................... 3,174,750
1,970,000 General Transportation System, Series B, AMBAC Insured 5.375%, 03/01/25 ................... 1,891,574
2,050,000 Massachusetts Education Loan Authority Revenue, Issue D, Series A, MBIA Insured, 7.25%, 01/01/09 2,166,666
Massachusetts GO,
$ 1,000,000 Commonwealth, Series A, FGIC Insured, Pre-Refunded, 7.25%, 03/01/09 ....................... $ 1,101,000
800,000 Commonwealth, Series C, AMBAC Insured, Pre-Refunded, 6.75%, 08/01/09 ...................... 889,416
1,000,000 Commonwealth, Series C, FSA Insured, Pre-Refunded, 7.00%, 12/01/10 ........................ 1,094,050
Massachusetts Health and Educational Facilities Authority Revenue,
750,000 Addison Gilbert, Series C, MBIA Insured, 5.75%, 07/01/23 .................................. 749,925
1,500,000 Bay State Medical Center, Refunding, Series D, FGIC Insured, 6.00%, 07/01/15 .............. 1,539,330
475,000 Bay State Medical Center, Series E, FSA Insured, 6.00%, 07/01/26 .......................... 482,757
1,250,000 Bentley College, Series I, MBIA Insured, 6.125%, 07/01/17 ................................. 1,284,325
2,000,000 Berkshire Health System, Series A, MBIA Insured, Pre-Refunded, 7.50%, 10/01/08 ............ 2,149,520
1,500,000 Berkshire Health System, Series A, MBIA Insured, Pre-Refunded, 6.75%, 10/01/19 ............ 1,566,855
5,500,000 Berkshire Health System, Series D, MBIA Insured, 6.00%, 10/01/19 .......................... 5,655,760
1,900,000 Beverly Hospital, Lot 1, Refunding, Series D, MBIA Insured, 7.30%, 07/01/13 ............... 2,051,031
4,000,000 Beverly Hospital, Lot 2, Series D, MBIA Insured, Pre-Refunded, 7.30%, 07/01/19 ............ 4,357,920
2,250,000 Boston College, Series J, FGIC Insured, 6.625%, 07/01/21 .................................. 2,417,580
500,000 Brigham and Women's Hospital, Series C, MBIA Insured, 7.00%, 06/01/18 ..................... 532,580
1,000,000 Cable Housing and Health Services, Series A, MBIA Insured, 5.25%, 07/01/23 ................ 945,450
2,200,000 Children's Hospital, Refunding, Series E, AMBAC Insured, 6.20%, 10/01/16 .................. 2,258,608
1,000,000 Community College Program, Series A, Connie Lee Insured, 6.50%, 10/01/09 .................. 1,084,250
3,250,000 Community College Program, Series A, Connie Lee Insured, 6.60%, 10/01/22 .................. 3,361,085
5,595,000 Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/18 ....................... 5,490,262
6,600,000 Cooley Dickinson Hospital, Series B, AMBAC Insured, 5.50%, 11/15/25 ....................... 6,413,946
1,000,000 Dana-Farber Cancer Institute, Series F, Refunding, FGIC Insured, 6.00%, 12/01/15 .......... 1,029,330
6,955,000 Emerson Hospital, Series D, FSA Insured, 5.80%, 08/15/18 .................................. 7,020,447
26,730,000 Lahey Clinic Medical Center, Series B, MBIA Insured, 5.375%, 07/01/23 ..................... 25,515,656
2,500,000 Massachusetts General Hospital, Refunding, Series F, AMBAC Insured, 6.00%, 07/01/15 ....... 2,568,900
11,465,000 Massachusetts General Hospital, Series F, AMBAC Insured, 6.25%, 07/01/20 .................. 11,785,332
5,400,000 Milton Hospital, Series B, MBIA Insured, 7.00%, 07/01/16 .................................. 5,838,696
6,500,000 Mt. Auburn Hospital, Series B-1, MBIA Insured, 6.30%, 08/15/24 ............................ 6,805,630
1,895,000 New England Medical Center Hospitals, Series D, AMBAC Insured, 6.875%, 04/01/22 ........... 2,070,250
4,030,000 Newton-Wellesley Hospital, Series D, MBIA Insured, Pre-Refunded, 7.00%, 07/01/15 .......... 4,482,811
1,300,000 Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 07/01/18 ........................ 1,325,922
6,750,000 Newton-Wellesley Hospital, Series E, MBIA Insured, 6.00%, 07/01/25 ........................ 6,858,270
1,250,000 Northeastern University, Series D, AMBAC Insured, 7.125%, 10/01/10 ........................ 1,377,988
3,900,000 Northeastern University, Series E, MBIA Insured, 6.55%, 10/01/22 .......................... 4,167,189
1,280,000 Refunding, McLean Hospital, Series C, FGIC Insured, 6.625%, 07/01/15 ...................... 1,385,702
890,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.55%, 07/01/12 ..................... 958,263
3,000,000 Stonehill College, Refunding, Series E, MBIA Insured, 6.60%, 07/01/20 ..................... 3,212,370
1,025,000 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.65%, 07/01/10 ................. 1,149,650
515,000 Stonehill College, Series D, AMBAC Insured, Pre-Refunded, 7.70%, 07/01/20 ................. 578,417
1,690,000 Stonehill College, Series F, AMBAC Insured, 5.75%, 07/01/26 ............................... 1,701,019
3,000,000 Suffolk University, Series B, Connie Lee Insured, 6.35%, 07/01/22 ......................... 3,089,790
5,000,000 Tufts University, FGIC Insured, 5.95%, 08/15/18 ........................................... 5,102,100
1,500,000 University Hospital, Series C, MBIA Insured, 7.25%, 07/01/19 .............................. 1,639,035
1,820,000 Wentworth Institute of Technology, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 04/01/10 . 2,015,395
3,000,000 Wheaton College, Series B, FSA Insured, Pre-Refunded, 7.25%, 07/01/19 ..................... 3,265,140
2,750,000 Worcester Polytech Institute, MBIA Insured, Pre-Refunded, 6.625%, 09/01/17 ................ 2,973,768
4,395,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue, Series D,
MBIA Insured, 6.125%, 07/01/19 ............................................................... 4,518,324
Massachusetts State GO,
2,335,000 Series B, AMBAC Insured, Pre-Refunded, 6.50%, 08/01/11 .................................... 2,572,796
1,665,000 Series B, AMBAC Insured, 6.50%, 08/01/11 .................................................. 1,798,966
1,145,000 Series B, MBIA Insured, Pre-Refunded, 6.50%, 08/01/11 ..................................... 1,261,607
855,000 Series B, MBIA Insured, 6.50%, 08/01/11 ................................................... 923,793
Massachusetts State HFA, Housing Revenue,
$ 1,975,000 Series 8, MBIA Insured, 7.70%, 06/01/17 ................................................... $ 2,052,381
1,500,000 SFMR, Series 18, MBIA Insured, 7.35%, 12/01/16 ............................................ 1,569,780
430,000c Massachusetts State HFA, MFHR, Section 8 Assisted, Series A, ETM, 7.00%, 04/01/21 ............. 496,474
Massachusetts State Industrial Finance Agency Revenue,
750,000 Babson College, Series A, MBIA Insured, 6.375%, 10/01/09 .................................. 809,445
3,105,000 Babson College, Series A, MBIA Insured, 6.50%, 10/01/22 ................................... 3,291,083
7,075,000 Brandeis University, Series C, MBIA Insured, 6.80%, 10/01/19 .............................. 7,496,033
1,000,000 Milton Academy, Series A, MBIA Insured, Pre-Refunded, 7.25%, 09/01/19 ..................... 1,093,130
2,010,000 Refunding, Combined Jewish Philanthropies, Series A, AMBAC Insured, 6.375%, 02/01/15 ...... 2,135,303
1,665,000 Saint Marks School Issue, MBIA Insured, 5.375%, 01/01/21 .................................. 1,607,408
2,720,000 bWorcester Polytech Institute, Refunding, MBIA Insured, 5.125%, 09/01/17 .................. 2,598,742
Massachusetts State Industrial Finance Agency Electrical Utility Revenue,
4,000,000 Nantucket Electric Company, Series A, AMBAC Insured, 5.8750%, 07/01/17 .................... 4,057,400
Massachusetts State Port Authority Revenue,
5,200,000 Series A, FGIC Insured, 7.50%, 07/01/20 ................................................... 5,662,696
2,500,000 Series A, MBIA Insured, 5.875%, 09/01/23 .................................................. 2,517,625
1,000,000 Series B, FSA Insured, 6.00%, 07/01/23 .................................................... 1,020,890
8,500,000 Massachusetts State Water Resources Authority Revenue, Refunding, Series B, MBIA Insured,
5.00%, 03/01/22 .............................................................................. 7,670,485
Melrose Municipal Purpose GO, MBIA Insured,
200,000 6.00%, 08/15/11 ........................................................................... 210,896
200,000 6.05%, 08/15/12 ........................................................................... 211,786
200,000 6.10%, 08/15/13 ........................................................................... 212,524
200,000 6.10%, 08/15/14 ........................................................................... 211,608
Millis School Project, GO, Unlimited Tax, AMBAC Insured, 7.40%,
270,000 05/01/06................................................................................... 295,205
270,000 05/01/07 .................................................................................. 294,786
270,000 05/01/08 .................................................................................. 294,370
Norfolk GO, AMBAC Insured, 6.00%,
450,000 01/15/10 .................................................................................. 469,706
425,000 01/15/11 .................................................................................. 442,230
375,000 01/15/12 .................................................................................. 392,895
300,000 01/15/13 .................................................................................. 314,316
North Andover Massachusetts GO, FGIC Insured, 5.50%,
850,000 01/15/14................................................................................... 855,823
420,000 01/15/15................................................................................... 421,054
300,000 North Andover Municipal Purpose, Limited Tax, MBIA Insured, 7.40%, 09/15/09 ................... 333,579
North Attleborough GO, Limited Tax, AMBAC Insured, Pre-Refunded,
125,000 7.15%, 06/01/08 ........................................................................... 138,031
125,000 7.20%, 06/01/09 ........................................................................... 138,218
850,000 North Attleborough, MBIA Insured, 5.70%, 01/15/16 ............................................. 860,226
1,500,000 Palmer GO, Refunding, MBIA Insured, 5.50%, 10/01/10 ........................................... 1,509,090
Peabody GO, Electric Light, AMBAC Insured,
500,000 6.75%, 08/01/05 ........................................................................... 548,060
750,000 6.85%, 08/01/06 ........................................................................... 821,895
500,000 6.90%, 08/01/07 ........................................................................... 546,825
555,000 6.95%, 08/01/08 ........................................................................... 606,904
1,000,000 Puerto Rico Commonwealth, Public Improvement, MBIA Insured, Pre-Refunded, 6.50%, 07/01/09 ..... 1,113,020
3,250,000 Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue, FSA Insured,
Refunding, Series X, 5.50%, 07/01/19 ......................................................... 3,200,438
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
$ 365,000 Series A, 7.80%, 10/15/21 ................................................................. $ 379,202
725,000 Series B, 7.65%, 10/15/22 ................................................................. 763,628
Quabbin Regional School District, GO, AMBAC Insured, 7.00%,
275,000 06/15/04................................................................................... 300,286
275,000 06/15/05................................................................................... 299,404
275,000 06/15/06................................................................................... 299,404
275,000 06/15/07................................................................................... 299,404
275,000 06/15/08................................................................................... 299,404
250,000 06/15/09................................................................................... 272,185
Rochester School GO, Lot B, MBIA Insured, 7.30%,
150,000 04/01/04................................................................................... 161,664
150,000 04/01/05................................................................................... 161,352
150,000 04/01/06................................................................................... 161,198
150,000 04/01/07................................................................................... 161,198
150,000 04/01/08................................................................................... 161,198
120,000 04/01/09................................................................................... 128,958
Salem GO,
425,000 AMBAC Insured, 6.70%, 08/15/05 ............................................................ 467,976
500,000 AMBAC Insured, 6.80%, 08/15/07 ............................................................ 551,485
3,000,000 Somerville Housing Authority Revenue, Clarendon Hill, GNMA Secured, 7.95%, 11/20/30 ....... 3,192,300
South Essex Sewer District,
330,000 AMBAC Insured, 6.25%, 11/01/11 ............................................................ 349,615
1,000,000 Series A, MBIA Insured, 5.25%, 06/15/24 ................................................... 956,640
2,800,000 Series B, MBIA Insured, Pre-Refunded, 7.00%, 06/01/24 ..................................... 3,249,792
2,375,000 Southbridge GO, AMBAC Insured, 6.375%, 01/01/12 ............................................... 2,524,293
Tyngsborough GO, School Project Loan, AMBAC Insured, Pre-Refunded, 6.90%,
600,000 05/15/09................................................................................... 674,298
600,000 05/15/10................................................................................... 674,298
2,000,000 Westfield School District GO, AMBAC Insured, Pre-Refunded, 7.10%, 12/15/08 .................... 2,230,928
Westford GO,
800,000 FGIC Insured, Pre-Refunded, 7.60%, 10/15/10 ............................................... 902,536
2,000,000 Refunding, AMBAC Insured, 5.45%, 10/15/10 ................................................. 2,031,440
Whately GO, AMBAC Insured,
215,000 6.20%, 01/15/07 ........................................................................... 229,665
215,000 6.30%, 01/15/08 ........................................................................... 230,102
200,000 6.40%, 01/15/10 ........................................................................... 214,096
Worcester GO, Refunding, MBIA Insured,
1,335,000 Series E, 6.00%, 10/01/15 ................................................................. 1,401,002
1,200,000 Series G, 5.30%, 07/01/15 ................................................................. 1,168,356
1,410,000 Worcester Municipal Purpose Loan, Series A, AMBAC Insured, 5.25%, 08/01/16 .................... 1,355,193
----------
Total Long Term Investments (Cost $299,230,951) ......................................... 314,862,626
----------
a Short Term Investments4.7%
9,600,000 Massachusetts Health and Educational Facilities Authority Revenue, Capital Assets Program,
Series D, MBIA Insured, Daily VRDN and Put, 3.45%, 01/01/35 .................................. 9,600,000
4,600,000 Massachusetts Health and Educational Facilities Authority Revenue, Capital Assets Program,
Series E, First National Bank of Chicago, Daily VRDN and Put, 3.45%, 01/01/35 ................ 4,600,000
$ 1,400,000 Massachusetts State Industrial Finance Agency Pollution Control Revenue, Refunding, New England
Power Company, Daily VRDN and Put, 3.40%, 10/01/22 ........................................... $ 1,400,000
----------
Total Short Term Investments (Cost $15,600,000).......................................... 15,600,000
----------
Total Investments (Cost $314,830,951)99.7% .......................................... 330,462,626
Other Assets and Liabilities, Net0.3% ............................................... 980,220
----------
Net Assets100.0% .................................................................... $331,442,846
==========
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $314,830,951 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 15,724,740
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (93,065)
----------
Net unrealized appreciation ................................................................. $ 15,631,675
==========
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
SFHR - Single Family Housing Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
bSee Note 1(i) regarding securities purchased on a when-issued basis.
cSee Note 1(c) regarding uninsured securities collateralized by U.S. government
securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Michigan Insured Tax-Free Income Fund (Note 1)
<S> <C> <C>
$ 4,165,000 Allegan Public School District, AMBAC Insured, 5.75%, 05/01/22 ............................... $ 4,193,280
1,325,000 Allegan Public School District GO, School Building and Site, AMBAC Insured, 5.875%, 05/01/18 . 1,359,225
Allendale Public School District, School Building, MBIA Insured,
2,000,000 5.875%, 05/01/14 .......................................................................... 2,059,000
3,750,000 6.00%, 05/01/24 ........................................................................... 3,916,425
1,925,000 Almont Community Schools, FGIC Insured, 5.50%, 05/01/26 ...................................... 1,857,163
1,665,000 Alpena Public Schools, MBIA Insured, 5.625%, 05/01/22 ........................................ 1,657,091
2,500,000 Anchor Bay School District, MBIA Insured, 5.50%, 05/01/26 .................................... 2,439,500
3,850,000 Avondale School District, AMBAC Insured, 5.75%, 05/01/22 ..................................... 3,870,213
1,625,000 Bath Community School District Refunding, FGIC Insured, 5.75%, 05/01/25 ...................... 1,631,045
3,100,000 Bay City Electric Utility Revenue, AMBAC Insured, 6.60%, 01/01/12 ............................ 3,314,954
375,000 Belding Area School, Series B, AMBAC Insured, Pre-Refunded, 6.15%, 05/01/13 .................. 410,940
Berkley City School District, FGIC Insured,
2,060,000 5.625%, 01/01/15 .......................................................................... 2,086,945
2,125,000 6.00%, 01/01/19 ........................................................................... 2,194,828
1,470,000 Big Rapids Public School District, Building and Site, FGIC Insured, 5.625%, 05/01/25 ......... 1,468,839
Brandon School District, FGIC Insured, 5.875%,
5,540,000 05/01/16................................................................................... 5,673,514
7,000,000 05/01/26................................................................................... 7,141,470
1,450,000 Breckenridge Community School District, AMBAC Insured, 5.75%, 05/01/23 ....................... 1,453,611
Breitung Township School District,
7,500,000 FSA Insured, Pre-Refunded, 7.20%, 05/01/19 ................................................ 8,146,350
2,935,000 MBIA Insured, 6.30%, 05/01/15 ............................................................. 3,088,002
5,250,000 Byron Center Public Schools, Refunding, MBIA Insured, 5.875%, 05/01/24 ....................... 5,348,070
Caledonia Community Schools,
3,750,000 AMBAC Insured, 6.625%, 05/01/14 ........................................................... 4,017,975
4,400,000 MBIA Insured, 5.85%, 05/01/22 ............................................................. 4,483,908
1,500,000 Refunding, AMBAC Insured, 5.50%, 05/01/22 ................................................. 1,479,765
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 ..................................... 1,370,909
875,000 Calumet School District GO, Laurium and Keweenah Public Schools, FSA Insured, 5.875%,
05/01/20 .................................................................................... 889,298
3,875,000 Cedar Springs Public School District, MBIA Insured, 5.875%, 05/01/24 ......................... 3,932,350
5,000,000 Central Michigan University Revenue, MBIA Insured, Pre-Refunded, 7.90%, 10/01/15 ............. 5,221,350
3,140,000 Chelsea School District, FGIC Insured, 5.875%, 05/01/25 ...................................... 3,178,496
Chippewa Valley School District, MBIA Insured, Pre-Refunded, 7.40%,
500,000 05/01/07................................................................................... 541,080
500,000 05/01/08 .................................................................................. 541,080
500,000 05/01/09................................................................................... 541,080
500,000 05/01/10 .................................................................................. 541,080
Coldwater Community Schools, MBIA Insured,
1,100,000 6.20%, 05/01/15 ........................................................................... 1,161,996
1,700,000 6.30%, 05/01/23 ........................................................................... 1,795,387
Dearborn EDC Revenue, Oakwood Obligation Group, Series A,
4,400,000 FGIC Insured, 5.875%, 11/15/25 ............................................................ 4,450,028
1,000,000 MBIA Insured, 5.25%, 08/15/21 ............................................................. 943,510
14,000,000 Detroit City School District, Series A, AMBAC Insured, 5.70%, 05/01/25 ....................... 13,940,360
Detroit Sewage Disposal System Revenue,
4,000,000 Refunding, MBIA Insured, 7.00%, 07/01/09 .................................................. 4,117,440
4,000,000 Refunding, Series B, MBIA Insured, 5.25%, 07/01/21 ........................................ 3,804,720
6,000,000 Detroit State Aid GO, AMBAC Insured, Pre-Refunded, 7.20%, 05/01/09 ........................... 6,495,960
Detroit Water Supply System Revenue, Pre-Refunded,
4,960,000 FGIC Insured, 7.125%, 07/01/10 ............................................................ 5,483,330
5,000,000 FGIC Insured, 6.25%, 07/01/12 ............................................................. 5,329,000
Detroit Water Supply System Revenue, Pre-Refunded, (cont.)
$ 3,500,000 FGIC Insured, 7.25%, 07/01/20 ............................................................. $ 3,882,690
5,475,000 MBIA Insured, 5.50%, 07/01/25 ............................................................. 5,328,982
DeWitt Public Schools, AMBAC Insured,
6,905,000 5.70%, 05/01/21 ........................................................................... 6,920,191
5,500,000 5.50%, 05/01/26 ........................................................................... 5,366,900
1,050,000 Dexter Community Schools, Refunding, AMBAC Insured, 5.70%, 05/01/14 .......................... 1,061,498
6,000,000 East Detroit School District, Refunding, FGIC Insured, 6.10%, 05/01/16 ....................... 6,281,460
1,250,000 East Lansing Building Authority, GO, Refunding, AMBAC Insured, 7.00%, 10/01/16 ............... 1,330,338
1,000,000 Eastern Michigan University Revenue, Refunding, AMBAC Insured, 6.375%, 06/01/14 .............. 1,071,260
Eaton Rapids Public Schools Building and Site, MBIA Insured,
2,435,000 5.50%, 05/01/20 ........................................................................... 2,394,116
2,000,000 5.625%, 05/01/25 .......................................................................... 1,984,460
Farmington Hills EDC Revenue, Botsford Continuing Care, Series A,
MBIA Insured,
1,000,000 5.70%, 02/15/15 ........................................................................... 1,007,500
1,000,000 5.75%, 02/15/25 ........................................................................... 1,002,210
10,140,000 Farmington Hills Hospital Finance Authority Revenue, Refunding, Botsford General Hospital,
Series A, MBIA Insured, 7.10%, 02/15/14 ..................................................... 10,927,675
2,000,000 Ferndale School District, Refunding, FGIC Insured, 5.375%, 05/01/21 .......................... 1,950,980
Ferris State College Revenue, AMBAC Insured,
1,000,000 6.15%, 10/01/14 ........................................................................... 1,055,080
1,000,000 6.25%, 10/01/19 ........................................................................... 1,052,750
Fowlerville Community School District,
1,000,000 MBIA Insured, 5.60%, 05/01/21 ............................................................. 999,910
2,150,000 Refunding, FGIC Insured, 5.75%, 05/01/20 .................................................. 2,177,714
2,345,000 Fremont Public Schools District, Series 95, FGIC Insured, 5.50%, 05/01/21 .................... 2,310,904
4,425,000 Gaylord Community Schools, Refunding, MBIA Insured, 5.625%, 05/01/21 ......................... 4,404,335
4,000,000 Gibraltar School District GO, FSA Insured, Pre-Refunded, 7.00%, 05/01/15 ..................... 4,240,920
1,015,000 Gogebic - Iron Wastewater Authority, Waste Water Treatment System Revenue, Refunding,
MBIA Insured, 5.95%, 01/01/15 ............................................................... 1,036,508
5,000,000 Grand Haven Area Public Schools, Refunding, MBIA Insured, 6.05%, 05/01/14 .................... 5,231,800
Grand Ledge Public School District, MBIA Insured,
6,750,000 5.375%, 05/01/24 .......................................................................... 6,502,275
10,000,000 Pre-Refunded, 6.60%, 05/01/24 ............................................................. 11,351,300
610,000 Grand Rapids Community College, MBIA Insured, 5.90%, 05/01/19 ................................ 624,671
7,500,000 Grand Rapids Downtown, Devauth Tax Increment Revenue, MBIA Insured, 6.875%, 06/01/24 ......... 8,280,525
3,850,000 Grand Rapids Sewer System Revenue Improvement, Refunding, MBIA Insured, 6.00%, 01/01/20 ...... 3,892,312
5,375,000 Grand Rapids Water Supply System Revenue, Pre-Refunded, FGIC Insured, 7.25%, 01/01/20 ........ 5,894,601
1,700,000 Grand Traverse County Building Authority, AMBAC Insured, 5.75%, 09/01/15 ..................... 1,730,345
Grand Traverse County Hospital Finance Authority Revenue, Series A, Refunding,
Munson Healthcare,
2,500,000 AMBAC Insured, 6.25%, 07/01/12 ............................................................ 2,653,250
7,900,000 AMBAC Insured, 6.25%, 07/01/22 ............................................................ 8,257,238
3,000,000 Gratiot County EDC, EDR, Masonic Home Project, AMBAC Insured, Pre-Refunded, 7.375%,
04/01/20 .................................................................................... 3,319,920
Greenville Public Schools Building, MBIA Insured, 5.75%,
1,850,000 05/01/19................................................................................... 1,870,813
1,050,000 05/01/24................................................................................... 1,058,075
5,100,000 Grosse Ile Township School District, Refunding, FGIC Insured, 6.00%, 05/01/22 ................ 5,232,090
2,175,000 Hale Area Schools, MBIA Insured, 5.60%, 05/01/22 ............................................. 2,140,222
4,715,000 Harrison Community Schools GO, AMBAC Insured, 6.25%, 05/01/13 ................................ 5,046,795
Haslett Public School District,
$ 4,000,000 FSA Insured, Pre-Refunded, 7.50%, 05/01/20 ................................................ $ 4,414,800
3,875,000 FSA Insured, Refunding, 6.625%, 05/01/19 .................................................. 4,160,975
3,900,000 MBIA Insured, 5.70%, 05/01/26 ............................................................. 3,911,583
Hastings School District, FGIC Insured, 5.625%,
1,000,000 05/01/15................................................................................... 1,001,830
3,425,000 05/01/18................................................................................... 3,414,211
2,000,000 Holland School District GO, Refunding, AMBAC Insured, 6.375%, 05/01/10 ....................... 2,131,860
8,775,000 Holly Area School District, FGIC Insured, 5.625%, 05/01/25 ................................... 8,768,068
Holt Public Schools Building and Site, MBIA Insured,
1,000,000 6.25%, 05/01/16 ........................................................................... 1,044,710
3,060,000 6.25%, 05/01/18 ........................................................................... 3,196,813
2,525,000 6.30%, 05/01/20 ........................................................................... 2,637,741
1,425,000 6.50%, 05/01/21 ........................................................................... 1,499,100
Hopkins Public Schools, FGIC Insured,
4,000,000 5.70%, 05/01/21 ........................................................................... 4,024,160
1,000,000 5.50%, 05/01/26............................................................................ 975,800
Houghton-Portage Township School District, Refunding,
2,000,000 AMBAC Insured, 6.00%, 05/01/14 ............................................................ 2,089,560
2,700,000 FSA Insured, Pre-Refunded, 7.00%, 05/01/17 ................................................ 2,862,621
3,475,000 Howell Public Schools, MBIA Insured, 5.60%, 05/01/21 ......................................... 3,483,271
750,000 Hudsonville Building Authority, Refunding, AMBAC Insured, 6.60%, 10/01/17 .................... 793,830
Hudsonville Public Schools GO, Refunding, Series B, FGIC Insured,
2,000,000 6.05%, 05/01/19 ........................................................................... 2,091,280
2,000,000 6.10%, 05/01/24 ........................................................................... 2,091,080
Huron Valley School District, FGIC Insured,
500,000 5.75%, 05/01/22 ........................................................................... 501,860
11,535,000 Refunding, 6.125%, 05/01/20 ............................................................... 11,964,217
6,800,000 Imlay City Community School District, Refunding, FSA Insured, 6.70%, 05/01/21 ................ 7,514,748
400,000 Jackson County GO, Series 1985, Pre-Refunded, 8.60%, 04/01/12 ................................ 429,792
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding and Improvement,
3,805,000 Borgess Medical Center, Series A, AMBAC Insured, 5.625%, 06/01/14 ......................... 3,809,338
2,500,000 Bronson Methodist, MBIA Insured, 5.75%, 05/15/16 .......................................... 2,522,350
28,940,000 Bronson Methodist, MBIA Insured, 5.875%, 05/15/26 ......................................... 29,304,065
5,000,000 Bronson Methodist, Series A, MBIA Insured, 6.25%, 05/15/12 ................................ 5,305,100
2,460,000 Bronson Methodist, Series A, MBIA Insured, 6.375%, 05/15/17 ............................... 2,601,868
1,000,000 Kelloggsville Public School District GO, FGIC Insured, 5.75%, 05/01/13 ....................... 1,021,860
Kenowa Hills Public Schools, MBIA Insured, 5.875%,
1,235,000 05/01/21................................................................................... 1,266,962
9,000,000 05/01/26................................................................................... 9,135,990
15,500,000 Kent Hospital Finance Authority, Health Care Revenue, Butterworth Health System, Series A, MBIA
Insured, 5.625%, 01/15/26 ................................................................... 15,291,835
Lake Linden-Hubbell Public Schools, FSA insured,
825,000 5.40%, 05/01/18 ........................................................................... 812,666
675,000 5.50%, 05/01/23 ........................................................................... 668,473
Lake Superior State University Revenue,
1,500,000 AMBAC Insured, 6.375%, 11/15/15 ........................................................... 1,612,620
2,135,000 MBIA Insured, 6.50%, 11/15/11 ............................................................. 2,285,347
3,500,000 Lakeshore Public Schools Berrien County, MBIA Insured, 5.70%, 05/01/22 ....................... 3,499,685
1,500,000 Lakeview Community School District GO, Refunding, MBIA Insured, 6.75%, 05/01/13 .............. 1,625,235
Lakewood Public Schools, MBIA Insured
3,300,000 5.375%, 05/01/20 .......................................................................... 3,187,437
2,200,000 5.75%, 05/01/22 ........................................................................... 2,216,918
$ 1,470,000 Lansing Building Authority, Refunding, MBIA Insured, 5.60%, 06/01/19 ......................... $ 1,460,607
3,500,000 Leslie Public Schools, Ingham and Jackson Counties, Refunding, Building and Site, AMBAC Insured,
6.00%, 05/01/25 ............................................................................. 3,612,455
Lincoln Park School District, FGIC Insured,
2,885,000 5.85%, 05/01/15 ........................................................................... 2,965,693
2,500,000 5.90%, 05/01/26 ........................................................................... 2,548,900
2,000,000 Livonia Public Schools, School District, Refunding, FGIC Insured, 5.50%, 05/01/21 ............ 1,945,140
Marquette City Hospital Finance Authority Revenue, Refunding, Marquette General Hospital,
5,000,000 Series C, AMBAC Insured, Pre-Refunded, 7.50%, 04/01/07 .................................... 5,436,600
4,525,000 Series D, FSA Insured, 5.875%, 04/01/11 ................................................... 4,702,154
5,225,000 Series D, FSA Insured, 6.10%, 04/01/19 .................................................... 5,429,350
1,100,000 Marysville Public School District, MBIA Insured, 5.75%, 05/01/22 ............................. 1,106,897
1,400,000 Mason Public Schools District, FGIC Insured, 5.40%, 05/01/21 ................................. 1,354,052
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 ........................................................................... 822,810
775,000 7.55%, 05/01/16 ........................................................................... 823,244
800,000 7.55%, 05/01/17 ........................................................................... 849,800
800,000 7.55%, 05/01/18 ........................................................................... 849,800
2,675,000 Menominee Area Public School District, Refunding, AMBAC Insured, 6.00%, 05/01/20 ............. 2,795,669
Michigan Higher Education Student Loan Authority Revenue, Series 8-A, MBIA Insured,
1,360,000 7.40%, 10/01/04 ........................................................................... 1,440,988
1,325,000 7.55%, 10/01/08 ........................................................................... 1,391,436
Michigan Municipal Bond Authority Revenue, Local Government Loan Program,
850,000 Series A, Group 15, AMBAC Insured, 7.60%, 05/01/09 ........................................ 910,554
3,790,000 Series C, MBIA Insured, 6.00%, 11/01/10 ................................................... 3,968,054
6,490,000 Series G, AMBAC Insured, 6.75%, 11/01/14 .................................................. 7,119,141
1,650,000 Series G, AMBAC Insured, 6.80%, 11/01/14 .................................................. 1,815,066
825,000 Series G, AMBAC Insured, 6.80%, 11/01/23 .................................................. 900,463
1,000,000 Wayne County Project, Series A, FGIC Insured, Pre-Refunded, 7.00%, 12/01/09 ............... 1,099,750
1,900,000 Michigan Public Power Agency Revenue, Refunding, Campbell Project, AMBAC Insured,
6.125%, 01/01/10 ............................................................................ 1,945,600
Michigan State Building Authority Revenue,
10,000,000 Detroit Regional Prisons, Series I, MBIA Insured, Pre-Refunded, 7.25%, 10/01/08 ........... 10,761,100
1,500,000 Refunding, Series I, AMBAC Insured, 6.25%, 10/01/20 ....................................... 1,553,745
4,645,000 Series II, MBIA Insured, 6.25%, 10/01/20 .................................................. 4,837,303
5,000,000 Series II, MBIA Insured, ETM, 7.40%, 04/01/01 ............................................. 5,295,400
Michigan State Comprehensive Transportation Revenue,
1,750,000 Refunding, Series 1988-II, FGIC Insured, 7.625%, 05/01/11 ................................. 1,848,893
4,500,000 Series A, MBIA Insured, 5.50%, 05/15/22 ................................................... 4,374,135
3,200,000 Michigan State HDA, Limited Obligation Revenue, Mercy Bellbrook Project, MBIA Insured,
Pre-Refunded, 8.00%, 04/01/07 ............................................................... 3,274,176
Michigan State HDA, MFHR, FGIC Insured,
4,780,000 Series A, 8.375%, 07/01/19 ................................................................ 4,963,313
4,415,000 Series A, 7.70%, 07/01/18 ................................................................. 4,635,706
2,880,000 Series A, 7.55%, 07/01/09 ................................................................. 3,007,411
2,945,000 Series A, 7.65%, 07/01/15 ................................................................. 3,065,333
Michigan State Hospital Finance Authority Revenue,
1,750,000 Crittenton Hospital, FGIC Insured, 6.75%, 03/01/20 ........................................ 1,840,755
3,960,000 Holland Community Hospital, AMBAC Insured, 5.60%, 01/01/21 ................................ 3,903,293
3,000,000 Holland Community Hospital, AMBAC Insured, 5.625, 01/01/28 ................................ 2,941,620
5,250,000 Mercy Health Services, AMBAC Insured, 5.375%, 08/15/26 .................................... 4,964,768
Michigan State Hospital Finance Authority Revenue, (cont.)
$ 3,500,000 MidMichigan Hospital, MBIA Insured, 6.625%, 06/01/10 ...................................... $ 3,691,310
9,020,000 Oakland General Hospital, AMBAC Insured, 7.00%, 07/01/15 .................................. 9,626,324
13,250,000 Oakwood Hospital, FGIC Insured, Pre-Refunded, 7.10%, 07/01/18 ............................. 14,637,805
10,000,000 Oakwood Hospital, Series B, FGIC Insured, Pre-Refunded, 7.20%, 11/01/15 ................... 11,098,900
2,075,000 Refunding, Sisters of Mercy Health Corp., MBIA Insured, 5.25%, 08/15/21 ................... 1,960,398
2,000,000 Refunding, Sisters of Mercy Health Corp., Series H, MBIA Insured, 7.50%, 08/15/07 ......... 2,084,700
4,900,000 Refunding, Sisters of Mercy Health Corp., Series H, MBIA Insured, 7.50%, 08/15/13 ......... 5,107,760
3,445,000 Refunding, St. John's Hospital, Series A, AMBAC Insured, 6.00%, 05/15/13 .................. 3,570,846
9,545,000 Refunding, St. John's Hospital, Series A, AMBAC Insured, 6.25%, 05/15/14 .................. 10,049,740
1,500,000 Sparrow Obligation Group, MBIA Insured, 6.50%, 11/15/11 ................................... 1,627,935
Michigan State Strategic Fund, Limited Obligation Revenue,
20,000,000 Refunding, Detroit Edison Co., FGIC Insured, 6.875%, 12/01/21 ............................. 21,588,400
5,000,000 Refunding, Detroit Edison Co., Series AA, FGIC Insured, 6.95%, 05/01/11 ................... 5,846,600
3,000,000 Refunding, Detroit Edison Co., Series BB, AMBAC Insured, 7.00%, 05/01/21 .................. 3,597,240
1,285,000 Refunding, Detroit Edison Co., Series BB, MBIA Insured, 6.05%, 10/01/23 ................... 1,330,952
10,250,000 Refunding, Detroit Edison Co., Series BB, MBIA Insured, 6.20%,08/15/25 .................... 10,714,428
5,540,000 Refunding, Detroit Edison Co., Series CC, FGIC Insured, 6.95%, 09/01/21 ................... 5,981,538
5,825,000 Refunding, Detroit Edison Co., Series CC, MBIA Insured, 6.05%, 10/01/23 ................... 6,033,302
1,800,000 St. John-Bon Secours Care Center, FGIC Insured, 7.90%, 11/15/16 ........................... 1,872,414
Michigan State Trunk Line,
2,765,000 Series A, FGIC Insured, 5.625%, 11/01/20 .................................................. 2,748,659
1,475,000 Series A, FGIC Insured, 5.50%, 10/01/21 ................................................... 1,432,387
6,000,000 Series A, FGIC Insured, 5.80%, 11/15/24 ................................................... 6,034,740
8,990,000 Series A, FGIC Insured, 5.625%, 11/01/26 .................................................. 8,867,916
1,400,000 Series B, Refunding, AMBAC Insured, 5.50%, 10/01/21 ....................................... 1,359,554
4,500,000 Series B, Refunding, MBIA Insured, 5.50%, 10/01/21 ........................................ 4,369,995
2,500,000 Monroe County EDC, Limited Obligation Revenue, Monroe Community Health Services,
MBIA Insured, Pre-Refunded, 7.00%, 09/01/21 ................................................. 2,808,725
Monroe County PCR, Detroit Edison Co.,
4,000,000 Series 1, MBIA Insured, 6.875%, 09/01/22 .................................................. 4,295,200
4,000,000 Series 1-B, MBIA Insured, 6.55%, 09/01/24 ................................................. 4,234,520
10,000,000 Series C, AMBAC Insured, 7.50%, 12/01/19 .................................................. 10,983,000
1,150,000 Series CC, MBIA Insured, 6.55%, 06/01/24 .................................................. 1,215,746
4,725,000 Morley-Stanwood Community Schools Building and Site, FGIC Insured, 5.625%, 05/01/21 .......... 4,678,412
Muskegon Public Schools, Series 95, FGIC Insured, 5.25%,
1,900,000 05/01/18................................................................................... 1,840,891
2,000,000 05/01/21................................................................................... 1,907,760
Northern Michigan University Revenue, AMBAC Insured,
1,715,000 5.60%, 12/01/13 ........................................................................... 1,728,326
1,000,000 6.55%, 12/01/14 ........................................................................... 1,088,420
4,500,000 Northview Public School District, Refunding, MBIA Insured, 5.80%, 05/01/21 ................... 4,573,530
1,000,000 Norway Electric Utilities System Revenue, Refunding, AMBAC Insured, 5.375%, 02/01/12 ......... 989,340
1,960,000 Novi Community School District, Building and Site, FGIC Insured, 5.30%, 05/01/21 ............. 1,852,768
4,750,000 Novi Community School District, FGIC Insured, 6.125%, 05/01/18 ............................... 4,936,248
3,500,000 Oakland Community College District, Washtenaw County, AMBAC Insured, 6.65%, 05/01/11 ......... 3,898,195
6,670,000 Oakland County EDC, EDR, FHA Mortgage Insured, Series A, FGIC Insured, 8.00%, 08/01/18 ....... 6,818,474
3,000,000 Okemos Public School District, Series I, MBIA Insured, Pre-Refunded, 6.90%, 05/01/11 ......... 3,337,890
2,270,000 Otsego Public School District Building and Site, FSA Insured, 6.625%, 05/01/16 ............... 2,439,501
3,500,000 Paw Paw Public School District Building and Site, FGIC Insured, 5.625%, 05/01/25 ............. 3,519,005
Petoskey Hospital Finance Authority Facilities Revenue, Refunding, Northern Michigan Hospital,
MBIA Insured,
$ 4,500,000 7.00%, 11/15/07 ........................................................................... $ 4,846,365
1,000,000 6.75%, 11/15/19 ........................................................................... 1,049,880
Plymouth-Canton Community School District,
4,000,000 Refunding, AMBAC Insured, 5.50%, 05/01/13 ................................................. 4,012,680
1,875,000 Refunding, AMBAC Insured, 5.50%, 05/01/17 ................................................. 1,872,581
3,500,000 Series C, FGIC Insured, 6.50%, 05/01/16 ................................................... 3,240,000
3,000,000 Series C, MBIA Insured, 6.50%, 05/01/16 ................................................... 3,780,000
1,305,000 Pontiac General Building Authority, Series 1991, Refunding, AMBAC Insured, 6.875%, 04/01/06 .. 1,419,318
Port Huron School District,
5,500,000 FSA Insured, Pre-Refunded, 7.25%, 05/01/15 ................................................ 6,078,325
4,500,000 Refunding, AMBAC Insured, 6.00%, 05/01/12 ................................................. 4,685,175
Portage Lake Water and Sewer Authority GO, Refunding, AMBAC Insured,
770,000 6.10%, 10/01/14 ........................................................................... 815,492
670,000 6.20%, 10/01/20 ........................................................................... 714,937
2,750,000 Portage Public Schools GO, MBIA Insured, 5.625%, 05/01/19 .................................... 2,752,420
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured,
500,000 ETM, 8.75%, 07/01/00 ...................................................................... 569,810
2,500,000 Pre-Refunded, 9.00%, 07/01/09 ............................................................. 3,173,700
Puerto Rico Commonwealth Public Improvement GO, MBIA Insured,
175,000 7.125%, 07/01/02 .......................................................................... 180,602
6,220,000 6.75%, 07/01/06 ........................................................................... 6,411,700
2,280,000 6.75%, 07/01/06 ........................................................................... 2,342,723
825,000 Pre-Refunded, 7.125%, 07/01/02 ............................................................ 848,942
10,875,000 Pre-Refunded, 6.60%, 07/01/13 ............................................................. 12,155,205
Puerto Rico Electric Power Authority Revenue, FSA Insured,
3,400,000 Refunding, Series U, 6.00%, 07/01/14 ...................................................... 3,532,430
7,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ................................................... 7,883,750
1,290,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series C, GNMA Insured, 6.85%, 10/15/23 .............. 1,356,899
8,700,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 07/01/14 .................. 9,473,082
14,090,000 Redford Unified School District No. 1, FGIC Insured, 6.00%, 05/01/22 ......................... 14,682,203
Rockford Public Schools GO, Refunding,
3,900,000 AMBAC Insured, 5.875%, 05/01/19 ........................................................... 3,987,516
3,150,000 FSA Insured, 5.875%, 05/01/19 ............................................................. 3,220,686
9,750,000 FSA Insured, Pre-Refunded, 7.375%, 05/01/19 ............................................... 10,725,488
1,850,000 MBIA Insured, 5.875%, 05/01/12 ............................................................ 1,903,632
1,925,000 MBIA Insured, 5.875%, 05/01/19 ............................................................ 1,968,197
Romulus Community Schools, Refunding, FGIC Insured, 5.75%,
690,000 05/01/13 .................................................................................. 706,615
1,200,000 05/01/17 .................................................................................. 1,220,184
5,435,000 05/01/22 .................................................................................. 5,508,590
5,000,000 Royal Oak Hospital Finance Authority Revenue, Refunding, MBIA Insured, 6.25%, 01/01/19 ....... 5,210,450
25,000 Saginaw City School District, Unlimited Tax, MBIA Insured, Pre-Refunded, 11.00%, 06/01/03 .... 25,937
Saginaw Hospital Finance Authority Revenue, St. Luke's Hospital Project,
5,325,000 Refunding, Series C, MBIA Insured, 6.875%, 07/01/14 ....................................... 5,684,810
2,000,000 Refunding, Series C, MBIA Insured, 6.75%, 07/01/17 ........................................ 2,123,260
1,000,000 Refunding, Series D, MBIA Insured, 6.50%, 07/01/11 ........................................ 1,068,480
3,875,000 Series B, MBIA Insured, 6.00%, 07/01/21 ................................................... 3,954,244
1,000,000 Saginaw Valley State University Revenue, MBIA Insured, 5.375%, 07/01/16 ...................... 968,960
1,350,000 Saranac Community School District Building and Site, MBIA Insured, 5.25%, 05/01/21 ........... 1,301,576
2,000,000 Sault Ste. Marie GO, Series 1990, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10 ............... 2,197,980
3,575,000 Schoolcraft Community School District, FGIC Insured, 5.75%, 05/01/21 ......................... 3,565,419
Shelby Charter Township Authority, AMBAC Insured, 5.75%,
$ 750,000 11/01/11 .................................................................................. $ 771,383
750,000 11/01/12 .................................................................................. 773,573
1,925,000 Shelby Public School District, Series 95, MBIA Insured, 5.625%, 05/01/21 ..................... 1,935,087
South Haven Public Schools, Refunding, FGIC Insured, 5.50%,
1,640,000 05/01/13 .................................................................................. 1,634,654
1,725,000 05/01/17 .................................................................................. 1,706,215
4,610,000 South Redford School District, FGIC Insured, 5.50%, 05/01/22 ................................. 4,523,424
7,745,000 St. Clair County EDC, PCR, Refunding, Detroit Edison Co., Series DD, AMBAC Insured,
6.05%, 08/01/24 ............................................................................. 8,029,319
St. John's Public Schools, FGIC Insured,
7,000,000 5.625%, 05/01/20 .......................................................................... 6,985,930
2,000,000 5.75%, 05/01/25 ........................................................................... 2,008,980
1,000,000 Sturgis Public School District, MBIA Insured, 6.10%, 05/01/18 ................................ 1,054,490
2,400,000 Three Rivers Community Schools, Building and Site, MBIA Insured, 6.00%, 05/01/23 ............. 2,517,456
4,550,000 Traverse City Area Public Schools, Building and Site, Series I, MBIA Insured, 5.70%, 05/01/20 4,587,993
Tri County Area School District, School Building and Site, MBIA Insured, Pre-Refunded, 6.875%,
1,850,000 05/01/11 .................................................................................. 2,048,894
2,325,000 05/01/16 .................................................................................. 2,574,961
2,365,000 University Revenues Medical Service Plan, MBIA Insured, 6.50%, 12/01/21 ...................... 2,496,423
1,000,000 Vestaburg Community Schools, Refunding, MBIA Insured, 5.50%, 05/01/26 ........................ 975,800
Vicksburg Community School District, Refunding, MBIA Insured, 5.625%,
2,175,000 05/01/12 .................................................................................. 2,199,599
1,000,000 05/01/20 .................................................................................. 1,004,130
2,500,000 Walled Lake Consolidated School District, Refunding, MBIA Insured, 5.50%, 05/01/22 ........... 2,466,275
Warren Consolidated School District, Refunding,
2,530,000 MBIA Insured, 5.50%, 05/01/21 ............................................................. 2,503,106
1,225,000 Series II, FGIC Insured, 5.375%, 05/01/14 ................................................. 1,210,717
2,000,000 Wayland Union School District, FGIC Insured, 6.75%, 05/01/24 ................................. 2,222,540
Wayne Charter County Airport Revenue, Detroit Metro Airport, MBIA Insured,
6,635,000 Pre-Refunded, 7.00%, 12/01/21 ............................................................. 7,488,261
1,000,000 Refunding, Sub Lien Detroit Metro, 5.25%, 12/01/21 ........................................ 944,410
300,000 Series B, 6.875%, 12/01/11 ................................................................ 322,911
2,000,000 Series B, 6.75%, 12/01/21 ................................................................. 2,162,500
Wayne County, Ecorse Creek Drain District, Pollution Abatement No. 1, AMBAC Insured,
500,000 7.40%, 11/01/04 ........................................................................... 524,220
500,000 7.50%, 11/01/05 ........................................................................... 524,375
490,000 7.50%, 11/01/06 ........................................................................... 513,888
450,000 7.50%, 11/01/07 ........................................................................... 471,938
10,585,000 Wayne County Airport Revenue, Series B, AMBAC Insured, 6.00%, 12/01/20 ....................... 10,774,895
2,275,000 Wayne-Westland Community School, Refunding, FGIC Insured, 6.10%, 05/01/13 .................... 2,393,073
West Ottawa Public School District, FGIC Insured,
2,355,000 5.60%, 05/01/21 ........................................................................... 2,351,703
12,100,000 5.60%, 05/01/26 ........................................................................... 11,995,819
6,630,000 Refunding, 6.00%, 05/01/20 ................................................................ 6,819,353
5,000,000 Western Michigan University Revenues, FGIC Insured, 6.25%, 11/15/12 .......................... 5,302,950
1,660,000 Western School District, Refunding, MBIA Insured, 5.50%, 05/01/20 ............................ 1,640,595
Western Townships Utilities Authority, Sewer Disposal System, Refunding, FSA Insured,
18,710,000 6.75%, 01/01/15 ........................................................................... 19,857,484
6,115,000 6.50%, 01/01/19 ........................................................................... 6,425,703
1,000,000 White Cloud Public Schools Refunding, Cap Guard, FSA insured, 5.50%, 05/01/20 ................ 989,590
4,900,000 Williamston Community School District Building and Site, MBIA Insured, 5.375%, 05/01/15 ...... 4,818,758
1,800,000 Williamston County GO, Refunding, AMBAC Insured, 6.90%, 11/01/17 ............................. 1,973,646
$ 1,800,000 Wyandotte City School District, Refunding, FSA insured, 5.625%, 05/01/13 ..................... $ 1,818,000
Wyandotte Electric Revenue, Refunding,
16,060,000 AMBAC Insured, Pre-Refunded, 7.875%, 10/01/17 ............................................. 16,768,728
9,980,000 MBIA Insured, 6.25%, 10/01/17 ............................................................. 10,602,852
Yale Public School District, School Building and Site, AMBAC Insured,
2,000,000 5.375%, 05/01/17 .......................................................................... 1,960,060
1,500,000 5.50%, 05/01/19 ........................................................................... 1,482,840
4,700,000 Ypsilanti School District, Refunding, FGIC Insured, 5.75%, 05/01/20 .......................... 4,728,294
Zeeland Public Schools, Refunding, Series B, MBIA Insured,
2,900,000 6.05%, 05/01/19 ........................................................................... 3,006,923
4,000,000 6.10%, 05/01/24 ........................................................................... 4,161,700
----------
Total Long Term Investments (Cost $1,054,920,018) ...................................... 1,112,834,468
----------
Total Investments (Cost $1,054,920,018)98.3% ....................................... 1,112,834,468
Other Assets and Liabilities, Net1.7% .............................................. 18,864,503
----------
Net Assets100.0% ................................................................ $1,131,698,971
==========
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,055,040,534 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 57,915,534
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (121,600)
----------
Net unrealized appreciation ................................................................ $ 57,793,934
==========
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
EDC - Economic Development Corp.
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Minnesota Insured Tax-Free Income Fund (Note 1)
<S> <C> <C>
Long Term Investments 99.7%
$ 2,295,000 Albany ISD No. 745, Series A, FSA Insured, 6.00%, 02/01/16 .................................... $ 2,370,689
2,100,000 Anoka County Resource Recovery Revenue, Northern States Power Co., AMBAC Insured, 7.15%,
12/01/08 ..................................................................................... 2,270,940
4,870,000 Becker GO, Refunding, Tax Increment, Series D, MBIA Insured, 6.25%, 08/01/15 .................. 5,116,568
Becker GO, Waste Water Treatment Facility, Series A, MBIA Insured,
625,000 5.90%, 02/01/12 ........................................................................... 642,775
610,000 5.95%, 02/01/15 ........................................................................... 626,964
290,000 Benson ISD No. 777 GO, FSA Insured, 6.00%, 02/01/15 ........................................... 296,444
2,685,000 Bloomington Health Care Facilities Revenue, Masonic Home Care Center, AMBAC Insured, 5.875%,
07/01/22 ..................................................................................... 2,712,548
3,500,000 Brainerd Health Care Facilities Revenue, Refunding, Benedictine Health-St. Joseph, Series D,
MBIA Insured, 5.875%, 02/15/13 ............................................................... 3,599,260
2,800,000 Buffalo ISD No. 877, FSA Insured, 6.15%, 02/01/18 ............................................. 2,920,596
2,105,000 Burnsville ISD, Series A, FSA Insured, 6.20%, 02/01/17 ........................................ 2,231,511
625,000 Byron ISD No. 531 GO, AMBAC Insured, 6.90%, 06/01/14 .......................................... 664,838
1,185,000 Champlin EDA, Housing Development, MBIA Insured, 5.625%, 02/01/26 ............................. 1,179,051
2,975,000 Chanhassen Apartments Project GO, Series B, AMBAC Insured, 6.20%, 01/01/25 .................... 3,096,053
3,500,000 Cold Spring ISD No. 750, Series A, FGIC Insured, 6.15%, 02/01/11 .............................. 3,719,835
3,000,000 bColumbia Heights ISD No. 013, FSA Insured, 5.50%, 02/01/23 ................................... 2,942,970
Dakota, Washington and Stearns County SFMR, Series 1990, GNMA Secured,
960,000 7.80%, 12/01/10 .......................................................................... 1,020,643
3,375,000 7.85%, 12/01/30 .......................................................................... 3,577,770
770,000 Dakota County Housing and Redevelopment Authority, SFMR, Refunding, GNMA Secured, 8.10%,
03/01/16 ..................................................................................... 803,133
1,040,000 Dilworth ISD No. 147, MBIA Insured, 6.00%, 02/01/15 ........................................... 1,069,546
1,940,000 Dover and Eyota ISD No. 533 GO, AMBAC Insured, 7.25%, 02/01/20 ................................ 1,988,442
Duluth EDA, Health Care Facilities Revenue, The Duluth Clinic, Ltd., AMBAC Insured,
2,880,000 6.20%, 11/01/12 ........................................................................... 3,059,712
5,405,000 6.30%, 11/01/22 ........................................................................... 5,692,384
1,120,000 Pre-Refunded, 6.20%, 11/01/12 ............................................................. 1,230,656
2,125,000 Pre-Refunded, 6.30%, 11/01/22 ............................................................. 2,348,508
3,000,000 Duluth EDA, Hospital Facilities Revenue, St. Lukes Hospital, Series A, Connie Lee Insured, 6.40%,
05/01/12 ..................................................................................... 3,110,070
3,500,000 Duluth EDA Tax Increment Revenue, Refunding, MBIA Insured, 7.25%, 08/01/08 .................... 3,721,025
4,420,000 Eagan MFMR, Refunding, Forest Ridge Apartments, MBIA Insured, 7.50%, 03/01/27 ................. 4,608,867
Eden Prairie ISD No. 272, Series A,
1,000,000 FGIC Insured, 5.45%, 02/01/08 ............................................................. 1,017,570
4,980,000 FSA Insured, 5.75%, 02/01/15 .............................................................. 5,061,821
2,000,000 Eden Prairie MFHR, Olympic Ridge, Refunding, Series A, GNMA Secured, 6.25%, 01/20/31 .......... 2,045,760
500,000 Eden Valley ISD No. 463, FSA Insured, 6.60%, 02/01/16 ......................................... 543,440
Elk River ISD No. 728 GO, FSA Insured,
4,000,000 6.40%, 02/01/22 ........................................................................... 4,285,560
650,000 Series A, 7.00%, 02/01/11 ................................................................. 691,028
1,345,000 Eveleth EDA, Housing Development, MBIA Insured, 5.80%, 07/01/25 ............................... 1,356,433
1,500,000 Faribault ISD No. 656, FSA Insured, 5.75%, 06/01/15 ........................................... 1,521,105
2,180,000 Ham Lake, Anoka County Housing, MBIA Insured, 6.10%, 01/01/26 ................................. 2,230,489
9,300,000 Hibbing Health Care Facilities Revenue, The Duluth Clinic, Ltd., FSA Insured, 5.00%, 11/01/25 . 8,325,174
4,030,000 Kenyon Wanamingo ISD No. 2172, MBIA Insured, 6.00%, 02/01/22 .................................. 4,175,805
Lake of the Woods, ISD No. 390, School Building, AMBAC Insured, 7.40%
325,000 02/01/18 .................................................................................. 341,702
350,000 02/01/19 .................................................................................. 367,987
375,000 02/01/20................................................................................... 394,271
Lakeville ISD No. 194,
$ 1,000,000 FGIC Insured, 5.40%, 02/01/13 ............................................................. $ 991,520
3,555,000 FGIC Insured, 5.60%, 02/01/18 ............................................................. 3,541,775
500,000 Series A, FGIC Insured, 7.00%, 02/01/14 ................................................... 527,230
2,105,000 Series C, FGIC Insured, 6.70%, 02/01/12 ................................................... 2,208,166
5,325,000 Series C, MBIA Insured, 5.125%, 02/01/13 .................................................. 5,125,739
Marshall County Utility Revenue, FSA Insured, 5.375%
750,000 01/01/14................................................................................... 746,243
825,000 01/01/15 .................................................................................. 816,074
1,565,000 Menahga ISD No. 821 GO, AMBAC Insured, 6.25%, 02/01/18 ........................................ 1,673,611
Minneapolis and St. Paul Housing and Redevelopment Authority, Health Care System Revenue,
Series A, MBIA Insured,
10,390,000 7.40%, 08/15/11 ........................................................................... 11,466,716
3,950,000 6.75%, 08/15/14 ........................................................................... 4,241,826
2,100,000 Minneapolis CDA, Tax Increment Revenue, Series 1990, MBIA Insured, 7.00%, 03/01/01 ............ 2,307,396
900,000 Minneapolis CDA and St. Paul Housing and Redevelopment Authority, Health Care Facilities Revenue,
Carondelet Community Hospitals, Inc., Series B, MBIA Insured, Pre-Refunded, 8.875%, 11/01/15 . 1,191,933
Minneapolis Hospital Facilities Revenue,
1,475,000 cLifeSpan, Inc., Series 1987-A, Pre-Refunded, 8.125%, 04/01/07 ............................ 1,509,323
4,450,000 cLifeSpan, Inc., Series 1987-A, Pre-Refunded, 8.125%, 04/01/17 ............................ 4,553,552
600,000 Refunding, Fairview Hospital and Healthcare, Series A, MBIA Insured, 6.50%, 01/01/11 ...... 647,814
7,815,000 Refunding, Fairview Hospital and Healthcare, Series B, MBIA Insured, 6.70%, 01/01/17 ...... 8,385,495
700,000 cRefunding, LifeSpan, Inc., Series 1987-B, Pre-Refunded, 9.125%, 12/01/14 ................. 741,783
915,000 cRefunding, LifeSpan, Inc., Series 1988-A, Pre-Refunded, 7.875%, 12/01/14 ................. 961,702
5,000,000 Minneapolis Special School District No. 001, Series A, MBIA Insured, 5.90%, 02/01/17 .......... 5,114,300
Minneapolis St. Paul Housing Finance Board, SFMR, GNMA Secured,
3,275,000 Phase VI, Series A, 8.30%, 08/01/21 ....................................................... 3,346,100
715,000 Series A, 8.375%, 11/01/17 ................................................................ 742,477
460,000 Series C, 8.875%, 11/01/18 ................................................................ 477,416
3,000,000 Minnesota State GO, Refunding, MBIA Insured, 5.40%, 08/01/09 .................................. 3,033,780
2,000,000 Minnesota State HFA, Housing Development, MFMR, Series 1988-A, FGIC Insured, 7.80%, 08/01/18 .. 2,044,360
1,000,000 Minnesota State HFA, MFHR, Series 1977-A, FGIC Insured, 6.375%, 02/01/20 ...................... 1,010,860
Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured,
1,460,000 5.90%, 08/01/15 ........................................................................... 1,472,979
3,130,000 5.95%, 02/01/18 ........................................................................... 3,157,732
3,680,000 6.00%, 02/01/22 ........................................................................... 3,726,331
Minnesota State HFA, SFMR,
2,175,000 Series 1986-B, FGIC Insured, 7.25%, 07/01/06 .............................................. 2,208,908
635,000 Series 1986-B, FGIC Insured, 7.25%, 07/01/16 .............................................. 642,779
375,000 Series 1986-C, FGIC Insured, 7.00%, 07/01/16 .............................................. 379,226
710,000 Series 1987-A, FGIC Insured, 8.50%, 02/01/17 .............................................. 727,530
205,000 Series 1987-D, FGIC Insured, 8.80%, 07/01/16 .............................................. 214,168
2,810,000 Series 1989-A, FGIC Insured, 8.00%, 07/01/29 .............................................. 2,933,415
3,430,000 Series 1989-D, AMBAC Insured, 7.30%, 07/01/09 ............................................. 3,580,886
1,450,000 Series 1992-I, MBIA Insured, 6.25%, 01/01/15 .............................................. 1,492,253
1,500,000 Series 1994-F, MBIA Insured, 6.30%, 07/01/25 .............................................. 1,547,925
2,750,000 Series G, AMBAC Insured, 6.25%, 07/01/26 .................................................. 2,812,645
3,940,000 Minnesota State Higher Educational Facilities Authority Revenue, Series 3, Connie Lee Insured,
6.50%, 01/01/17 .............................................................................. 4,138,497
Minnetonka MFHR,
350,000 Cedar Hills East Project, FGIC Insured, 7.40%, 12/01/07 ................................... 367,903
1,000,000 Cedar Hills East Project, FGIC Insured, 7.50%, 12/01/27 ................................... 1,025,550
2,720,000 Refunding, Brier Creek Project, Series A, GNMA Secured, 6.45%, 06/20/24 ................... 2,809,325
Monticello ISD No. 882 GO, Series 1991, FSA Insured, 6.80%,
$ 750,000 02/01/06 .................................................................................. $ 788,123
1,310,000 02/01/07 .................................................................................. 1,376,587
New Hope MFR, Refunding, North Ridge, Series A, GNMA Secured,
450,000 6.05%, 01/01/17 ........................................................................... 456,732
5,470,000 6.20%, 01/01/31 ........................................................................... 5,507,962
2,000,000 North St. Paul ISD No. 622, Maplewood, Series A, MBIA Insured, Pre-Refunded, 7.10%, 02/01/19 .. 2,306,640
5,475,000 Northeast Metropolitan ISD No. 916, FSA Insured, 5.80%, 01/01/16 .............................. 5,591,727
Northern Municipal Power Agency, Minnesota Electric System Revenue,
11,900,000 Refunding, Series A, AMBAC Insured, 6.00%, 01/01/19 ....................................... 11,976,160
4,200,000 Refunding, Series A, AMBAC Insured, 6.00%, 01/01/20 ....................................... 4,226,880
3,500,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/17 ......................... 3,762,815
9,500,000 Refunding, Series A, AMBAC Insured, Pre-Refunded, 7.40%, 01/01/18 ......................... 10,238,150
4,000,000 Refunding, Series A, MBIA Insured, 6.00%, 01/01/20 ........................................ 4,025,600
9,650,000 Refunding, Series B, AMBAC Insured, 5.50%, 01/01/18 ....................................... 9,450,052
1,500,000 Series B, AMBAC Insured, Pre-Refunded, 7.40%, 01/01/18 .................................... 1,616,550
8,090,000 Series C, AMBAC Insured, 6.125%, 01/01/20 ................................................. 8,370,804
2,000,000 Northfield College Facility Revenue, St. Olaf College Project, MBIA Insured, Pre-Refunded, 8.00%,
10/01/18...................................................................................... 2,125,360
3,350,000 Owatonna Public Utilities Commission, Public Utilities Revenue, Refunding, Series A, AMBAC Insured,
5.45%, 01/01/16 .............................................................................. 3,326,349
2,500,000 Perham ISD No. 549, FSA Insured, 5.375%, 02/01/14 ............................................. 2,471,150
Plymouth Health Facilities Revenue, Westhealth Project, Series A, FSA Insured,
1,600,000 6.25%, 06/01/16 ........................................................................... 1,667,008
1,815,000 6.125%, 06/01/24 .......................................................................... 1,865,675
7,205,000 Princeton Hospital Revenue, Fairview Hospital and Healthcare, Series C, MBIA Insured, 6.25%,
01/01/21 ..................................................................................... 7,516,544
Princeton ISD No. 477, Mille Lacs County,
1,000,000 Refunding, FGIC Insured, 6.30%, 02/01/17 .................................................. 1,041,550
2,540,000 Series A, FSA Insured, 5.375%, 02/01/17 ................................................... 2,513,837
Puerto Rico Commonwealth Public Improvement GO,
3,000,000 MBIA Insured, 6.50%, 07/01/23 ............................................................. 3,227,580
10,000,000 Series 1989-A, FGIC Insured, Pre-Refunded, 7.375%, 07/01/04 ............................... 10,889,000
1,515,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ............... 1,595,718
1,300,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 7.00%, 07/01/14 ................... 1,415,517
Robbinsdale Hospital Revenue, North Memorial Medical Center Project, AMBAC Insured,
6,450,000 Refunding, Pre-Refunded, 7.35%, 01/01/19 .................................................. 6,948,392
2,000,000 Refunding, Series A, 5.45%, 05/15/13 ...................................................... 2,002,440
1,000,000 Refunding, Series A, 5.55%, 05/15/19 ...................................................... 987,340
2,900,000 Series B, 5.45%, 05/15/13 ................................................................. 2,903,537
7,875,000 Series B, 5.50%, 05/15/23 ................................................................. 7,671,745
400,000 Rochester Hospital Facilities Revenue, Rochester Methodist Hospital Project, Refunding, FGIC
Insured, Pre-Refunded, 8.75%, 06/01/05 ....................................................... 404,996
Roseville ISD No. 623, Series A,
1,250,000 FGIC Insured, 6.00%, 02/01/23 ............................................................. 1,286,738
1,200,000 FSA Insured, 5.80%, 02/01/19 .............................................................. 1,219,692
2,470,000 FSA Insured, 5.85%, 02/01/24 .............................................................. 2,510,459
4,260,000 FSA Insured, 6.00%, 02/01/25 .............................................................. 4,447,483
1,750,000 Shakopee Public Utilities Commission Revenue, AMBAC Insured, 5.60%, 08/01/18 .................. 1,753,623
2,080,000 South Washington County ISD No. 833, Refunding, Series A, FGIC Insured, 6.125%, 06/01/10 ...... 2,157,750
Southern Minnesota Municipal Power Agency, Power Supply System Revenue,
5,000,000 Refunding, Series B, AMBAC Insured, 6.00%, 01/01/16 ....................................... 5,108,900
2,500,000 Series A, AMBAC Insured, 6.00%, 01/01/13 .................................................. 2,526,750
Southern Minnesota Municipal Power Agency, Power Supply System Revenue, (cont.)
$ 2,250,000 Series A, AMBAC Insured, 5.75%, 01/01/18 .................................................. $ 2,261,025
1,000,000 Series A, FGIC Insured, 5.75%, 01/01/18 ................................................... 1,004,900
5,975,000 Series A, MBIA Insured, 5.00%, 01/01/12 ................................................... 5,786,130
12,500,000 Series A, MBIA Insured, 6.00%, 01/01/13 ................................................... 12,633,750
8,865,000 Series A, MBIA Insured, 5.75%, 01/01/18 ................................................... 8,908,439
1,000,000 Series A, MBIA Insured, Pre-Refunded, 5.75%, 01/01/18 ..................................... 1,026,320
1,000,000 Series C, AMBAC Insured, 5.00% 01/01/17 ................................................... 921,880
St. Cloud Hospital Facilities Revenue, St. Cloud Hospital, AMBAC Insured,
2,000,000 Refunding, Series 1990-C, Pre-Refunded, AMBAC Insured, 7.00%, 07/01/07 .................... 2,244,040
1,350,000 Refunding, Series 1990-C, Pre-Refunded AMBAC Insured, 6.75%, 07/01/15 ..................... 1,501,551
2,165,000 Refunding, Series A, 5.00%, 07/01/15 ...................................................... 2,033,693
8,000,000 cSeries 1990-B, Pre-Refunded, 7.00%, 07/01/20 ............................................. 8,959,280
St. Francis ISD No. 015, Series A, FSA Insured,
1,500,000 6.35%, 02/01/13 ........................................................................... 1,630,530
5,465,000 6.375%, 02/01/16 .......................................................................... 5,925,863
St. Louis Park Health Care Facilities Revenue, Healthsystem of Minnesota-Obligated Group, Series A,
Refunding, AMBAC Insured, 5.20%
1,000,000 07/01/16................................................................................... 950,790
9,250,000 07/01/23................................................................................... 8,658,462
St. Louis Park Hospital Facilities Revenue, Refunding, Methodist Hospital Project, AMBAC Insured,
1,000,000 Series 1985-A, 7.25%, 07/01/15 ............................................................ 1,093,010
4,500,000 Series 1985-C, Pre-Refunded, 7.25%, 07/01/18 .............................................. 4,992,030
440,000 Series 1990-A,7.20%, 07/01/03 ............................................................. 480,256
500,000 Series 1990-A, 7.30%, 07/01/05 ............................................................ 555,440
4,115,000 Series 1990-A, 7.25%, 07/01/08 ............................................................ 4,497,735
1,350,000 Series 1990-C, Pre-Refunded, 7.25%, 07/01/08 .............................................. 1,497,609
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 ................................................. 3,952,204
1,000,000 St. Paul Housing and Redevelopment Authority Hospital Revenue, St. Paul-Ramsey Medical Center
Project, AMBAC Insured, 5.50%, 05/15/13 ...................................................... 1,005,140
5,105,000 St. Paul Housing and Redevelopment Authority Parking Revenue, Series A, FSA Insured, 5.75%,
08/01/13 ..................................................................................... 5,179,380
St. Paul ISD No. 625, Series C, MBIA Insured,
1,075,000 6.10%, 02/01/14 ........................................................................... 1,122,235
500,000 6.10%, 02/01/15 ........................................................................... 526,980
3,500,000 FSA Insured, 5.75%, 02/01/16 .............................................................. 3,564,260
St. Paul Port Authority, IDR, FGIC Insured,
190,000 Series 1985-K, 9.50%, 12/01/14 ............................................................ 194,400
5,000 Series K, 9.50% , 12/01/01 ................................................................ 5,106
5,000 Series K, 9.50%, 12/01/02 ................................................................. 5,177
8,000,000 St. Paul Sewer Revenue, Series A, AMBAC Insured, 8.00%, 12/01/08 .............................. 8,550,320
3,645,000 Stearns County Housing and Redevelopment Authority Lease Revenue, Refunding, Administration
Building Project, AMBAC Insured, 7.00%, 02/01/11 ............................................. 3,788,577
2,990,000 Stillwater ISD No. 834, GO, MBIA Insured, 5.75%, 02/01/15 ..................................... 3,037,212
2,915,000 Virginia, Governmental Housing Project, Refunding, MBIA Insured, 5.90%, 02/01/26 .............. 2,966,421
1,500,000 Waconia ISD No. 110, Carver County, Series A, FGIC Insured, 6.35%, 02/01/11 ................... 1,585,170
3,150,000 Wadena ISD No. 819, Refunding, AMBAC Insured, 5.60%, 02/01/20 ................................. 3,155,135
3,000,000 Washington County Housing and Redevelopment Authority, Jail Facility Revenue, MBIA Insured,
Unlimited Tax, Pre-Refunded, 7.00%, 02/01/12 ................................................. 3,333,630
165,000 Washington County SFRMR, Housing and Redevelopment Authority, City of Cottage Grove,
GNMA Secured, Series 1986, FGIC Insured, 7.60%, 12/01/11 ..................................... 165,290
Western Minnesota Municipal Power Agency, Power Supply Revenue, Refunding, Series A,
$ 2,745,000 AMBAC Insured, 5.50%, 01/01/12 ............................................................ $ 2,769,266
4,500,000 AMBAC Insured, 5.50%, 01/01/13 ............................................................ 4,521,465
5,425,000 MBIA Insured, 5.50%, 01/01/15 ............................................................. 5,425,760
2,000,000 Western Minnesota Municipal Power Agency, Transmission Project Revenue, Refunding,
AMBAC Insured, 6.75%, 01/01/16 ............................................................... 2,137,440
----------
Total Long Term Investments (Cost $464,097,918) ......................................... 485,458,402
----------
a Short Term Investments0.1%
100,000 Beltrami County Environmental Control Revenue, Northwood Panelboard Co. Project, Daily VRDN
and Put, 3.10%, 12/01/21 ..................................................................... 100,000
200,000 Beltrami County Environmental Control Revenue, Northwood Panelboard Co. Project, Daily VRDN
and Put, 3.15%, 07/01/25 ..................................................................... 200,000
----------
Total Short Term Investments (Cost $300,000) ............................................ 300,000
----------
Total Investments (Cost $464,397,918)99.8% .......................................... 485,758,402
Other Assets and Liabilities, Net0.2% .............................................. 1,212,741
----------
Net Assets100.0% .................................................................... $486,971,143
==========
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $464,398,912 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 21,875,472
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (515,982)
----------
Net unrealized appreciation ............................................................. $ 21,359,490
==========
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC -American Municipal Bond Assurance Corp.
CDA -Community Development Agency
EDA -Economic Development Authority
FGIC -Financial Guaranty Insurance Co.
FHA -Federal Housing Authority
FSA -Financial Security Assistance
HFC -Housing Finance Corp.
GNMA -Government National Mortgage Association
GO -General Obligation
HFA -Housing Finance Agency/Authority
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
SFMR -Single Family Mortgage Revenue
SFRMR -Single Family Residential Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
bSee Note 1(i) regarding securities purchased on a when-issued basis.
cSee Note 1(c) regarding uninsured securities collateralized by U.S. government
securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Ohio Insured Tax-Free Income Fund (Note 1)
<S> <C> <C>
Long Term Investments 98.5%
Akron Bath Copley Joint Township Hospital District Revenue, AMBAC Insured,
$ 1,000,000 Akron General Medical Center Project, 6.50%, 01/01/11 ....................................... $ 1,057,660
5,000,000 Akron General Medical Center Project, 6.50%, 01/01/19 ....................................... 5,284,750
2,000,000 Children's Hospital Medical Center, Pre-Refunded, 7.45%, 11/15/20 ........................... 2,254,420
500,000 Akron GO, Limited Tax, FGIC Insured, 7.50%, 09/01/05 .......................................... 587,115
3,660,000 Akron Sewer System Revenue, Refunding, MBIA Insured, 5.55%, 12/01/16 .......................... 3,668,455
1,000,000 Akron Waterworks System First Mortgage Revenue, FGIC Insured, 6.00%, 03/01/14 ................. 1,047,350
1,250,000 Allen County, Refunding, AMBAC Insured, 5.30%, 12/01/15 ....................................... 1,219,450
1,200,000 Allen County Sewer Revenue, MBIA Insured, 5.70%, 12/01/13 ..................................... 1,222,404
Archbold Area Local School District GO,
2,000,000 AMBAC Insured, 6.00%, 12/01/21 .............................................................. 2,103,120
600,000 Refunding, MBIA Insured, 5.90%, 12/01/11 .................................................... 612,588
1,075,000 Aurora City School District GO, Refunding and Improvement, FGIC Insured, 5.80%, 12/01/16 ...... 1,098,156
2,500,000 Avon Local School District, AMBAC Insured, 6.00%, 12/01/20 .................................... 2,593,925
8,375,000 Beavercreek Local School District GO, FGIC Insured, 5.70%, 12/01/20 ........................... 8,467,963
2,000,000 Bellefontaine School District GO, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.125%, 12/01/11 2,260,660
500,000 Belmont County Correctional Facility, MBIA Insured, 5.85%, 12/01/16 ........................... 511,960
1,450,000 Mbia Walnut Local School District, Delaware County Construction and Improvement, AMBAC Insured,
6.625%, 12/01/15 ............................................................................. 1,560,925
2,295,000 Brunswick City School District, AMBAC Insured, 6.90%, 12/01/12 ................................ 2,492,737
1,000,000 Butler County GO, AMBAC Insured, 5.75%, 12/01/16 .............................................. 1,024,050
Butler County Hospital Facilities Revenue, FGIC Insured,
2,150,000 Refunding and Improvement, Middletown Regional Hospital, 6.75%, 11/15/10 .................... 2,361,410
1,400,000 Series 1985-A, Pre-Refunded, 9.30%, 11/01/15 ................................................ 1,452,052
Butler County Waterworks Revenue, AMBAC Insured,
790,000 6.35%, 12/01/08 ............................................................................. 855,910
500,000 6.40%, 12/01/12 ............................................................................. 535,940
1,000,000 5.45%, 12/01/16 ............................................................................. 992,740
400,000 Cardington and Lincoln Local School District, MBIA Insured, 6.60%, 12/01/14 ................... 431,588
1,200,000 Celina Wastewater System Mortgage Revenue, FGIC Insured, 6.55%, 11/01/16 ...................... 1,273,008
2,265,000 Centerville GO, Capital Facilities, MBIA Insured, 5.65%, 12/01/18 ............................. 2,299,405
675,000 Chillicothe GO, Limited Tax, AMBAC Insured, 6.05%, 12/01/12 ................................... 703,694
1,000,000 Chillicothe Sanitary Sewer System First Mortgage Revenue, MBIA Insured, Pre-Refunded, 7.65%,
12/01/08 ..................................................................................... 1,092,350
Clermont County Hospital Facilities Revenue, Mercy Health System, Refunding, Provine of Cincinnati,
AMBAC Insured,
515,000 Series A, Pre-Refunded, 7.50%, 09/01/19 ..................................................... 581,620
1,750,000 Series B, 6.00%, 09/01/19 ................................................................... 1,789,638
1,500,000 Clermont County Road Improvement GO, AMBAC Insured, Pre-Refunded, 7.125%, 09/01/11 ............ 1,666,950
4,280,000 Clermont County Sewer System Revenue, AMBAC Insured, Pre-Refunded, 7.10%, 12/01/15 ............ 4,691,522
11,000,000 Clermont County Waterworks Revenue, Refunding, AMBAC Insured, 5.80%, 12/01/18 ................. 11,201,300
Cleveland Airport Systems Revenue, FGIC Insured,
3,000,000 Series A, 6.25%, 01/01/20 ................................................................... 3,144,630
985,000 Series B, 6.00%, 01/01/14 ................................................................... 1,023,848
1,450,000 Series B, 6.10%, 01/01/24 ................................................................... 1,515,178
2,000,000 Cleveland GO, Series 1994, MBIA Insured, 6.70%, 11/15/18 ...................................... 2,192,260
Cleveland Waterworks First Mortgage Revenue,
2,000,000 Refunding, Series F, AMBAC Insured, 6.25%, 01/01/16 ......................................... 2,096,900
15,000,000 Refunding and Improvement, Series H, MBIA Insured, 5.75%, 01/01/26 .......................... 15,010,500
1,000,000 Series F-92, AMBAC Insured, 6.25%, 01/01/15 ................................................. 1,050,200
1,000,000 Clinton-Massie Local School District, Refunding, Issue I, AMBAC Insured, 7.50%, 12/01/11 ...... 1,133,650
975,000 Columbus GO, Limited Tax, FGIC Insured, 9.50%, 04/15/03 ....................................... 1,232,264
1,530,000 Coshocton Sewer System GO, AMBAC Insured, 6.50%, 12/01/12 ..................................... 1,646,280
$ 1,650,000 Crestview Local School District GO, Construction and Improvement, AMBAC Insured, 6.65%, 12/01/14 $ 1,786,670
100,000 Cuyahoga County GO, Limited Tax, MBIA Insured, 9.375%, 10/01/04 ............................... 127,002
Cuyahoga County Hospital Revenue,
10,200,000 Metrohealth System Project, MBIA Insured, 6.00%, 02/15/19 ................................... 10,347,492
1,500,000 Refunding, Fairview General Hospital Project, AMBAC Insured, 5.50%, 08/15/19 ................ 1,469,655
1,000,000 Refunding and Improvements, Metro Health System Project, MBIA Insured, 5.625%, 02/15/17 ..... 1,000,390
Cuyahoga County Utility System Revenue, Refunding, Medical Center Company Project, Series B,
MBIA insured,
1,000,000 5.85%, 08/15/10 ............................................................................. 1,040,380
2,945,000 6.10%, 08/15/15 ............................................................................. 3,020,304
2,000,000 Dayton Airport Revenue, Refunding, AMBAC Insured, 5.25%,12/01/15 .............................. 1,937,240
1,395,000 Dayton Water System Mortgage Revenue, Refunding, MBIA Insured, 6.75%, 12/01/10 ................ 1,447,340
Defiance GO, MBIA Insured,
1,000,000 6.10%, 12/01/14 ............................................................................. 1,060,150
750,000 6.20%, 12/01/20 ............................................................................. 797,820
Delphos Sewer System Revenue, FSA Insured, Pre-Refunded,
450,000 7.20%, 09/01/10 ............................................................................. 501,170
1,100,000 7.25%, 09/01/20 ............................................................................. 1,226,852
2,000,000 Dover City School District, AMBAC Insured, 6.25%, 12/01/16 .................................... 2,105,120
1,625,000 Dover Municipal Electric System Revenue, FGIC Insured, 6.00%, 12/01/19 ........................ 1,686,701
1,100,000 Dover Waterworks Systems Revenue, AMBAC Insured, 6.00%, 12/01/13 .............................. 1,153,614
5,735,000 Dublin City School District, AMBAC Insured, 6.20%, 12/01/19 ................................... 6,073,537
1,390,000 Fairborn GO, Limited Tax, Series 1991, MBIA Insured, 7.00%, 10/01/11 .......................... 1,552,713
1,000,000 Fairfield City School District GO, FGIC Insured, 6.00%, 12/01/20 .............................. 1,040,550
2,500,000 Fostoria City School District GO, AMBAC Insured, 6.70%, 12/01/16 .............................. 2,713,175
2,000,000 Franklin County Hospital Revenue, Refunding and Improvement, Riverside United Hospital, MBIA
Insured, Pre-Refunded, 7.25%, 05/15/20 ....................................................... 2,215,420
5,150,000 Granville Exempted Village School District, Unlimited Tax, AMBAC Insured,
Pre-Refunded, 7.15%, 12/01/15 ................................................................ 5,941,143
2,100,000 Green County Water System Revenue, Series A, FGIC Insured, 6.125%, 12/01/21 ................... 2,205,084
Green Local School District GO, Summit County, FGIC Insured,
2,800,000 5.875%, 12/01/14 ............................................................................ 2,886,576
5,150,000 5.90%, 12/01/19 ............................................................................. 5,299,299
Hamilton City Electric System Mortgage Revenue, FGIC Insured,
18,450,000 Refunding, Series A, 6.00%, 10/15/23 ........................................................ 18,992,984
2,340,000 Series B, 6.30%, 10/15/25 ................................................................... 2,472,818
9,500,000 Series B, Pre-Refunded, 8.00%, 10/15/22 ..................................................... 10,296,005
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 ....................................... 2,143,000
Hamilton County Hospital Facilities Revenue,
990,000 Christ Hospital, Series 1987, FGIC Insured, Pre-Refunded, 8.375%, 01/01/07 .................. 1,047,935
3,650,000 Refunding, Bethesda Hospital, Series A, AMBAC Insured, 6.25%, 01/01/12 ...................... 3,874,147
3,010,000 Hamilton County Sewer System Revenue, Series A, Refunding, FGIC Insured, 6.05%, 12/01/15 ...... 3,157,550
3,040,000 Hamilton Wastewater System Revenue, Series A, FSA Insured, 5.90%, 10/15/21 .................... 3,094,963
4,665,000 Hamilton Waterworks Mortgage Revenue, Series A, MBIA Insured, 6.30%, 10/15/21 ................. 4,924,654
500,000 Hillard School District, Refunding, FGIC Insured, 6.55%, 12/01/05 ............................. 565,620
Hudson Local School District,
2,750,000 Refunding, FGIC Insured, 5.60%, 12/15/14 .................................................... 2,776,290
3,350,000 Series A, FGIC Insured, Pre-Refunded, 7.10%, 12/15/13 ....................................... 3,743,056
1,000,000 Indian Lake Local School District GO, Construction and Improvement, FGIC Insured, 5.375%, 12/01/23 972,950
1,000,000 Indian Valley Local School District GO, AMBAC Insured, 5.75%, 12/01/19 ........................ 1,018,350
Jackson Local School District, Stark and Summit Counties School Building, Construction and
Improvement, MBIA Insured,
$ 2,750,000 5.40%, 12/01/13 ............................................................................. $ 2,761,605
3,560,000 5.50%, 12/01/21 ............................................................................. 3,571,890
500,000 Jackson Waterworks Revenue, AMBAC Insured, 5.60%, 12/01/18 .................................... 502,440
1,195,000 Kent State University Revenues, AMBAC Insured, 6.45%, 05/01/12 ................................ 1,279,463
1,000,000 Kettering City School District, FGIC Insured, 5.25%, 12/01/22 ................................. 953,800
Lake County Hospital Improvement Revenue, Lake Hospital System, Inc., Series B and C,
AMBAC Insured,
1,940,000 7.875%, 01/01/05 ............................................................................ 2,001,867
2,185,000 8.00%, 01/01/13 ............................................................................. 2,252,997
1,000,000 Lake Local School District, Stark County, AMBAC Insured, 6.25%, 12/01/09 ...................... 1,081,050
3,200,000 Lakota Local District GO, AMBAC Insured, 6.125%, 12/01/17 ..................................... 3,357,312
795,000 Lebanon Electric Revenue Mortgage, AMBAC Insured, 5.60%, 12/01/16 ............................. 790,222
Liberty Benton Local School District, AMBAC Insured,
2,000,000 6.00%, 12/01/15 ............................................................................. 2,095,940
2,045,000 6.10%, 12/01/19 ............................................................................. 2,142,628
Lucas County GO, Limited Tax, FGIC Insured, 8.00%,
120,000 12/01/06 .................................................................................... 145,612
110,000 12/01/08..................................................................................... 135,263
120,000 12/01/09 .................................................................................... 148,580
220,000 12/01/10..................................................................................... 272,516
Lucas County Hospital Revenue, MBIA Insured,
5,000,000 Promedica Healthcare Obligation, Refunding, 5.75%,11/15/14 .................................. 5,110,600
4,000,000 St. Vincent Medical Center, Series B, Refunding, 5.25%, 08/15/20 ............................ 3,768,600
4,140,000 St. Vincent Medical Center, Series C, 5.25%, 08/15/22 ....................................... 3,891,186
3,200,000 The Toledo Hospital, Pre-Refunded, 7.50%, 11/15/14 .......................................... 3,455,040
Mahoning County GO, Bridge Improvement, AMBAC Insured,
1,500,000 Limited Tax, 7.20%, 12/01/09 ................................................................ 1,625,730
1,500,000 Unlimited Tax, 7.15%, 12/01/04 .............................................................. 1,634,145
Mahoning County Hospital Facilities Revenue, MBIA Insured,
5,000,000 Western Reserve Care, 5.50%, 10/15/25 ....................................................... 4,880,000
2,000,000 Youngstown Hospital, Inc. Project, Series B, 7.00%, 10/15/08 ................................ 2,178,540
2,500,000 Mansfield Hospital Improvement Revenue, Mansfield General Hospital Project, AMBAC Insured,
6.70%, 12/01/09 .............................................................................. 2,728,850
1,000,000 Marietta City School District, Series B, AMBAC Insured, 5.75%, 12/01/07 ....................... 1,052,140
500,000 Marietta Sewer System Mortgage Revenue, MBIA Insured, 7.50%, 11/01/07 ......................... 521,115
3,875,000 Marietta Water Revenue, AMBAC Insured, 5.95%, 12/01/21 ........................................ 3,976,641
1,000,000 Marysville Exempted Village School District GO, MBIA Insured, 5.75%, 12/01/23 ................. 1,014,040
Marysville Water Systems, Refunding, AMBAC Insured,
1,000,000 5.40%, 12/01/13 ............................................................................. 990,130
1,500,000 5.50%, 12/01/18 ............................................................................. 1,486,710
1,935,000 Mason Sewer Systems Revenue, FGIC Insured, 6.00%, 12/01/19 .................................... 2,010,736
Massillon City School District GO, AMBAC Insured, Pre-Refunded,
1,500,000 Series 1, 7.10%, 12/01/11 ................................................................... 1,644,225
1,000,000 Unlimited Tax, 7.20%, 12/01/11 .............................................................. 1,119,830
2,755,000 Maumee Hospital Revenue, Refunding, Saint Luke's Hospital Project, AMBAC Insured, 5.80%,
12/01/14 ..................................................................................... 2,833,132
3,000,000 Medina City School District, FGIC Insured, 6.20%, 12/01/18 .................................... 3,167,340
Mentor Exempted Village School District, MBIA Insured,
1,000,000 5.375%, 12/01/11 ............................................................................ 1,002,330
2,000,000 6.625%, 12/01/13 ............................................................................ 2,158,260
2,040,000 Pre-Refunded, 7.40%, 12/01/11 ............................................................... 2,251,854
Miami County Hospital Facilities Revenue, Upper Valley Medical Center, Nursing Care, Inc.,
$ 525,000 Series A, MBIA Insured, Pre-Refunded, 8.375%, 05/01/13 ...................................... $ 539,448
1,340,000 Series B, MBIA Insured, 6.50%, 05/01/21 ..................................................... 1,416,594
1,500,000 Refunding and Improvements, Center B, MBIA Insured, 5.625%, 05/15/19 ........................ 1,502,940
1,500,000 Middleburg Heights Hospital Revenue, Refunding, Southwest General Health Center, FSA Insured,
5.75%, 08/15/21 .............................................................................. 1,511,115
Montgomery County Hospital Facilities Revenue, Kettering Medical Center, MBIA Insured,
15,000,000 7.40%, 04/01/09 ............................................................................. 16,170,900
2,000,000 5.50%, 04/01/26 ............................................................................. 1,951,740
5,000,000 Pre-Refunded, 7.50%, 04/01/14 ............................................................... 5,441,850
Montgomery County Revenue, Series A,
1,600,000 Refunding, Miami Valley Hospital, AMBAC Insured, 6.25%, 11/15/12 ............................ 1,692,800
3,250,000 Refunding, Miami Valley Hospital, AMBAC Insured, 6.25%, 11/15/16 ............................ 3,423,810
1,780,000 Sisters of Charity Health Care, AMBAC Insured, 6.25%, 05/15/14 .............................. 1,875,212
1,565,000 Sisters of Charity Health Care, MBIA Insured, 6.625%, 05/15/21 .............................. 1,657,930
Muskingum County GO, AMBAC Insured,
1,000,000 County Office Building Improvement, 7.20%, 12/01/10 ......................................... 1,101,880
1,695,000 Justice Center Improvement, 6.375%, 12/01/17 ................................................ 1,808,158
1,000,000 Napoleon City School District GO, AMBAC Insured, 5.375%, 12/01/18 ............................. 974,270
1,110,000 New Lexington HDC, Mortgage Revenue, Refunding, Lincoln Park, Series A, MBIA Insured, FHA
Insured, 5.85%, 01/01/21 ..................................................................... 1,116,072
2,000,000 New Philadelphia City School District, School and Improvement, AMBAC Insured, 6.25%, 12/01/17 . 2,108,600
1,500,000 New Richmond Exempted Village School District GO, AMBAC Insured, 7.125%, 09/01/09 ............. 1,596,390
1,000,000 Newark Water System, AMBAC Insured, 6.00%, 12/01/18 ........................................... 1,047,640
3,800,000 North Olmsted GO, AMBAC Insured, 6.25%, 12/15/12 .............................................. 4,034,726
1,000,000 North Ridgeville GO, AMBAC Insured, 5.125%, 12/01/13 .......................................... 967,720
2,900,000 North Ridgeville GO, City School District, AMBAC Insured, 6.30%, 12/01/17 ..................... 3,089,428
1,000,000 Northeastern Local School District, Clark County Improvement, FGIC Insured, 5.55%, 12/01/18 ... 1,005,900
1,090,000 Northridge Local School District, Licking, Knox and Del Counties Improvement, FSA Insured, 5.75%,
12/01/18 ..................................................................................... 1,117,097
2,000,000 Northwest Local School District, Scioto County, AMBAC Insured, 7.05%, 12/01/14 ................ 2,197,180
1,000,000 Norwalk Waterworks System Revenue, Series 1990, AMBAC Insured, Pre-Refunded, 7.20%, 04/01/15 .. 1,104,710
Ohio Capital Corp. for Housing Mortgage Revenue, Refunding, MBIA Insured,
2,000,000 6.35%, 07/01/22 ............................................................................. 2,051,520
4,215,000 6.90%, 07/01/24 ............................................................................. 4,358,057
3,500,000 Series J, 6.50%, 01/01/25 ................................................................... 3,593,415
1,625,000 Westview Apartments, Series A, 6.125%, 01/01/15 ............................................. 1,668,859
2,565,000 Westview Apartments, Series A, 6.25%, 01/01/23 .............................................. 2,623,251
770,000 Ohio HFA, MFHR, Northridge Apartments, FGIC Insured, 10.35%, 12/01/25 ......................... 833,386
Ohio HFA, SFMR, GNMA Secured,
3,975,000 Series A, 7.65%, 03/01/29 ................................................................... 4,185,556
965,000 Series B, 7.40%, 09/01/15 ................................................................... 1,019,802
2,505,000 Series C, 8.00%, 09/01/08 ................................................................... 2,647,910
2,410,000 Series C, 8.125%, 03/01/20 .................................................................. 2,528,042
2,185,000 Series C, 7.85%, 09/01/21 ................................................................... 2,337,535
1,295,000 Series D, 7.50%, 09/01/13 ................................................................... 1,375,549
4,690,000 Series D, 7.05%, 09/01/16 ................................................................... 4,885,057
3,730,000 Series I, 7.60%, 09/01/16 ................................................................... 3,967,526
Ohio Municipal Electric Generation Agency, AMBAC Insured,
13,000,000 Joint Venture, 5.625%, 02/15/16 ............................................................. 13,078,000
7,680,000 Joint Venture 5, Certificates of Beneficial Interest, 5.375%, 02/15/24 ...................... 7,461,581
Ohio State Air Quality Development Authority Revenue,
$ 4,000,000 Columbus Southern Power, Series A, FGIC Insured, 6.375%, 12/01/20 ........................... $ 4,230,640
5,000,000 Refunding, Cincinnati Gas & Electric, MBIA Insured, 5.45%, 01/01/24 ......................... 4,855,550
1,230,000 Refunding, JMG Funding, L.P., AMBAC Insured, 6.375%, 01/01/29 ............................... 1,297,023
15,245,000 Refunding, JMG Funding, L.P., AMBAC Insured, 6.375%, 04/01/29 ............................... 16,075,700
1,000,000 Refunding, PCR, FGIC Insured, 7.45%, 03/01/16 ............................................... 1,098,550
5,400,000 Refunding, PCR, Ohio Edison, Series B, AMBAC Insured, 5.625%, 11/15/29 ...................... 5,363,496
7,000,000 Refunding, PCR, Pennsylvania Power Co., AMBAC Insured, 6.45%, 05/01/27 ...................... 7,392,560
13,000,000 Ohio State Building Authority, Adult Correctional Facility, Series A, MBIA Insured, 6.125%, 10/01/13 13,756,330
1,100,000 Ohio State Department of Transportation, COP, Panhandle Rail Line Project, Series A, FSA Insured,
6.50%, 04/15/12 .............................................................................. 1,180,817
Ohio State Higher Educational Facility Commission Revenue,
2,500,000 Dayton University Project, FGIC Insured, 7.25%, 12/01/12 .................................... 2,762,575
1,300,000 Dayton University Project, FGIC Insured, 5.80%, 12/01/14 .................................... 1,334,892
1,725,000 Dayton University Project, FGIC Insured, 6.75%, 12/01/15 .................................... 1,876,317
1,135,000 Northern University Project, FGIC Insured, Pre-Refunded, 7.30%, 05/15/10 .................... 1,239,057
1,000,000 Wittenberg University Project, FGIC Insured, 7.85%, 06/01/07 ................................ 1,028,870
1,500,000 Xavier University Project, MBIA Insured, Pre-Refunded, 7.625%, 11/01/08 ..................... 1,592,340
Ohio State Turnpike Commission, Turnpike Revenue, Series A,
1,000,000 FGIC Insured, 5.75%, 02/15/24 ............................................................... 999,950
5,400,000 MBIA Insured, 5.50%, 02/15/26 ............................................................... 5,284,980
2,420,000 Ohio State Water Development Authority, PCR Facilities, Refunding, PA Power Co. Project, AMBAC
Insured, 6.15%, 08/01/23 ..................................................................... 2,519,728
Ohio State Water Development Authority Revenue,
20,000 AMBAC Insured, 9.375%, 12/01/18 ............................................................. 20,547
6,250,000 Fresh Water Service, AMBAC Insured, 5.90%, 12/01/21 ......................................... 6,418,438
1,000,000 Refunding and Improvement, AMBAC Insured, 5.50%, 12/01/11 ................................... 1,010,570
4,450,000 Refunding and Improvement, Pure Water, AMBAC Insured, 5.50%, 12/01/18 ....................... 4,421,654
4,000,000 Refunding, Cincinnate Gas, Series A, MBIA Insured, 5.45%, 01/01/24 .......................... 3,916,840
5,000,000 Refunding, Dayton Power, Series A, AMBAC Insured, 6.40%, 08/15/27 ........................... 5,265,400
2,000,000 Series I, AMBAC Insured, ETM, 7.00%, 12/01/09 ............................................... 2,321,920
Olentangy Local School District GO,
375,000 MBIA Insured, 7.75%, 12/01/08 ............................................................... 467,595
375,000 MBIA Insured, 7.75%, 12/01/09 ............................................................... 469,234
375,000 MBIA Insured, 7.75%, 12/01/10 ............................................................... 470,126
1,000,000 MBIA Insured, 6.35%, 12/01/17 ............................................................... 1,065,070
Olmsted Falls Local School District, FGIC Insured,
1,000,000 7.05%, 12/15/11 ............................................................................. 1,118,180
1,500,000 5.85%, 12/15/17 ............................................................................. 1,543,710
2,500,000 Orrville Electric System Mortgage Revenue, Refunding, Series A and B, AMBAC Insured, 7.50%,
12/01/10 ..................................................................................... 2,669,250
4,100,000 Orrville Sewer System Revenue, Improvement Mortgage, MBIA Insured, 7.875%, 12/01/12 ........... 4,285,443
1,150,000 Orrville Water Systems Improvement Revenue, MBIA Insured, 6.125%, 12/01/18 .................... 1,209,720
1,500,000 Ottawa County GO, Catawba Isle, AMBAC Insured, 7.00%, 09/01/11 ................................ 1,647,135
1,950,000 Ottawa County Sewer System Revenue, Refunding, Danbury Project, AMBAC Insured, 5.50%,
10/01/14 ..................................................................................... 1,960,686
Painesville Township Local School District GO, Lake County, FGIC Insured,
3,240,000 5.625%, 12/01/09 ............................................................................ 3,314,844
4,490,000 5.65%, 12/01/15 ............................................................................. 4,548,235
2,000,000 Perrysburg Exempted Village School District, AMBAC Insured, 6.00%, 12/01/15 ................... 2,102,420
1,000,000 Pickerington Local School District GO, Refunding, AMBAC Insured, 5.55%, 12/01/07 .............. 1,045,670
Puerto Rico Commonwealth GO,
$ 4,000,000 FSA Insured, 5.40%, 07/01/25 ................................................................ $ 3,914,480
2,000,000 Refunding, MBIA Insured, 5.75%, 07/01/24 .................................................... 2,030,920
5,000,000 Puerto Rico PBA Revenue Guaranteed, Government Facilities, Series A,
AMBAC Insured, 5.50%, 07/01/21................................................................ 4,999,550
11,000,000 Puerto Rico Port Authority Revenue, Series D, FGIC Insured, 6.00%, 07/01/21 ................... 11,191,070
Revere Local School District, AMBAC Insured,
2,000,000 5.25%, 12/01/16 ............................................................................. 1,937,720
1,600,000 6.00%, 12/01/16 ............................................................................. 1,670,544
1,300,000 Reynoldsburg City School District, FGIC Insured, 6.55%, 12/01/17 .............................. 1,394,614
1,200,000 Rural Lorain County Water Authority, Water Resource Revenue, Refunding, AMBAC Insured,
Pre-Refunded, 7.70%, 10/01/08 ................................................................ 1,294,296
600,000 Saint Mary's Electric System Mortgage Revenue, AMBAC Insured, 6.65%, 12/01/11 ................. 651,540
750,000 Saint Mary's Waterworks Revenue, AMBAC Insured, 6.65%, 12/01/11 ............................... 814,425
2,000,000 Salem GO, AMBAC Insured, 6.50%, 12/01/06 ...................................................... 2,245,280
1,000,000 South Euclid Lyndhurst City School District, FGIC Insured, 5.30%, 12/01/14 .................... 976,320
700,000 South Range Local School District, MBIA Insured, 6.15%, 12/01/18 .............................. 743,127
South-Western City School District of Ohio, Franklin and Pickway Counties, FGIC Insured, ETM, 7.875%,
490,000 12/01/03..................................................................................... 583,595
550,000 12/01/04 .................................................................................... 664,120
600,000 12/01/06 .................................................................................... 739,488
600,000 12/01/07 .................................................................................... 727,962
Southwest Regional Water District, Water Revenue, MBIA Insured, 6.00%,
1,000,000 12/01/15 .................................................................................... 1,037,210
700,000 12/01/20 .................................................................................... 723,380
1,125,000 Springboro Water Systems Revenue, Refunding, AMBAC Insured, 5.45%, 12/01/18 ................... 1,105,211
Springfield City School District, Clark County, AMBAC Insured, Pre-Refunded,
1,220,000 6.40%, 12/01/12 ............................................................................. 1,361,459
1,000,000 6.60%, 12/01/12 ............................................................................. 1,113,920
2,775,000 Stark County GO, Refunding, AMBAC Insured, 5.70%, 11/15/17 .................................... 2,810,770
8,500,000 Stark County Sanitary Sewer System Revenue, Series A, MBIA Insured, Pre-Refunded, 7.75%,
11/15/18 ..................................................................................... 9,212,045
1,000,000 Stark County Sewer District Improvement Bonds, FGIC Insured, 5.80%, 12/01/16 .................. 1,024,720
2,075,000 Steubenville City School District, Series A, AMBAC Insured, 6.20%, 12/01/17 ................... 2,210,041
1,750,000 Struthers City School District, AMBAC Insured, 6.50%, 12/01/14 ................................ 1,895,688
Summit County GO, Limited Tax, AMBAC Insured,
595,000 Building Improvement, Pre-Refunded, 8.00%, 12/01/07 ......................................... 625,910
315,000 Capital Improvement, Pre-Refunded, 8.00%, 12/01/07 .......................................... 331,364
3,530,000 County Jail Improvement, Pre-Refunded, 7.85%, 12/01/08 ...................................... 3,837,287
720,000 Justice Facilities, Pre-Refunded, 8.00%, 12/01/07 ........................................... 757,404
400,000 Refunding, Series B, 6.95%, 08/01/08 ........................................................ 440,420
610,000 Sewer System Improvement, Pre-Refunded, 8.00%, 12/01/07 ..................................... 641,690
450,000 Water System Improvement, Pre-Refunded, 8.00%, 12/01/07 ..................................... 473,378
1,750,000 Sylvania City School District, FGIC Insured, 5.75%, 12/01/22 .................................. 1,783,793
Toledo GO, Limited Tax,
3,715,000 AMBAC Insured, 5.95%, 12/01/15 .............................................................. 3,861,074
1,000,000 AMBAC Insured, 6.00%, 12/01/16 .............................................................. 1,046,250
500,000 FGIC Insured, 7.375%, 12/01/00 .............................................................. 547,290
400,000 FGIC Insured, 7.375%, 12/01/02 .............................................................. 445,788
650,000 FGIC Insured, 7.375%, 12/01/03 .............................................................. 729,430
650,000 FGIC Insured, 7.375%, 12/01/04 .............................................................. 740,389
650,000 FGIC Insured, 7.375%, 12/01/05 .............................................................. 746,233
Toledo GO, Limited Tax, (cont.)
$ 625,000 FGIC Insured, 7.375%, 12/01/06 .............................................................. $ 722,594
4,500,000 MBIA Insured, 6.50%, 12/01/11 ............................................................... 4,872,285
Toledo Sewerage System Mortgage Revenue, Series 1988-B, MBIA Insured,
2,320,000 7.75%, 11/15/17 ............................................................................. 2,490,010
3,680,000 Pre-Refunded, 7.75%, 11/15/17 ............................................................... 3,988,274
Trumbull County Hospital Revenue, FGIC Insured,
1,000,000 Refunding and Improvement, Series A, FGIC Insured, 6.25%, 11/15/12 .......................... 1,060,580
2,000,000 Refunding, Series B, FGIC Insured, 6.90%, 11/15/12 .......................................... 2,176,480
4,000,000 Twinsburg City School District, FSA Insured, 6.70%, 12/01/11 .................................. 4,321,960
University of Cincinnati, MBIA Insured,
1,600,000 COP, 6.75%, 12/01/09 ........................................................................ 1,731,408
1,630,000 General Receipt, Series W, 5.85%, 06/01/16 .................................................. 1,679,193
6,990,000 University of Puerto Rico Revenue, Series M, MBIA Insured, 5.25%, 06/01/25 .................... 6,769,466
University of Toledo General Receipt,
2,000,000 FGIC Insured, 5.30%, 06/01/18 ............................................................... 1,925,820
5,500,000 Refunding, FGIC Insured, Series A, 5.90%, 06/01/20 .......................................... 5,577,770
5,000,000 Upper Arlington County School District, MBIA Insured, 5.25%, 12/01/22 ......................... 4,815,200
1,000,000 Urbana Wastewater Treatment Plant GO, AMBAC Insured, 7.05%, 12/01/11 .......................... 1,116,670
1,400,000 Valley Local School District, AMBAC Insured, 7.00%, 12/01/13 .................................. 1,542,856
1,250,000 Warren County Sewer System Revenue, Series A, FGIC Insured, Pre-Refunded, 7.20%, 12/01/15 ..... 1,399,788
2,000,000 Warren County Waterworks District Revenue, Refunding, FGIC Insured, 5.45%, 12/01/15 ........... 1,992,840
Warren GO,
2,415,000 MBIA Insured, 6.65%, 11/01/12 ............................................................... 2,651,163
1,015,000 Refunding, AMBAC Insured, 5.50%, 11/15/13 ................................................... 1,018,380
1,800,000 Wausen Exempt Village School District, Refunding and School Improvements, MBIA Insured, 5.50%,
12/01/17 ..................................................................................... 1,777,896
1,800,000 Wayne Local School District, Warren County, AMBAC Insured, 6.10%, 12/01/24 .................... 1,898,478
5,000,000 Westerville, Minerva Park and Blendon Joint Township Hospital District Revenue, Refunding,
St. Ann's Hospital, Series B, AMBAC Insured, ETM, 7.00%, 09/15/12 ............................ 5,375,100
2,000,000 Wilmington City School District, FGIC Insured, 6.30%, 12/01/14 ................................ 2,121,640
Wilmington Sewer System Revenue, Refunding, First Mortgage, MBIA Insured,
1,085,000 5.20%, 02/15/13 ............................................................................. 1,059,687
1,170,000 5.30%, 02/15/18 ............................................................................. 1,141,066
Wilmington Water Revenue, First Mortgage System,AMBAC Insured,
1,275,000 5.90%, 06/15/14 ............................................................................. 1,311,911
2,510,000 6.00%, 06/15/21 ............................................................................. 2,586,505
500,000 Woodmore Local School District, Refunding, AMBAC Insured, 5.65%, 12/01/08 ..................... 520,940
8,700,000 Wooster City School District, AMBAC Insured, 6.50%, 12/01/17 .................................. 9,698,151
2,350,000 Worthington City School District, Refunding, FGIC Insured, 6.375%, 12/01/12 ................... 2,499,742
2,250,000 Youngstown State University, General Receipts, AMBAC Insured, 6.00%, 12/15/16 ................. 2,354,760
----------
Total Long Term Investments (Cost $666,733,087) ......................................... 703,283,629
----------
a Short Term Investments
300,000 Ohio State Air Quaility Development Authority Revenue, Refunding, Series A, Daily VRDN, 3.45%,
09/01/30 (Cost $300,000) ..................................................................... 300,000
----------
Total Investments (Cost $667,033,087)98.5% .......................................... 703,583,629
Other Assets and Liabilities, Net1.5% ............................................... 10,562,046
----------
Net Assets100.0% .................................................................... $714,145,675
==========
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $667,033,087 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 37,307,906
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (757,364)
----------
Net unrealized appreciation ................................................................. $ 36,550,542
==========
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDN's) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
February 28, 1997
<TABLE>
<CAPTION>
Franklin Franklin Franklin
Arizona InsuredFlorida Insured Franklin Massachusetts
Tax-Free Tax-Free Insured Tax-Free Insured Tax-Free
Income Fund Income Fund Income Fund Income Fund
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost ......................................... $37,568,563 $73,817,016 $1,563,176,153 $314,830,951
========== ========== ============ ===========
At value ................................................... 38,978,654 75,845,228 1,660,882,171 330,462,626
Cash ........................................................ 265,285 128,956 1,418,023 259,202
Receivables:
Interest ................................................... 395,424 1,272,463 25,670,225 4,100,371
Investment securities sold ................................. -- 1,397,571 -- 14,527,851
Capital shares sold ........................................ 106,652 46,738 936,460 294,118
From affiliates ............................................ 18,766 -- -- --
---------- ---------- ----------- ------------
Total assets ........................................... 39,764,781 78,690,956 1,688,906,879 349,644,168
---------- ---------- ----------- -----------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery .......................................... -- -- -- 14,822,564
When-issued basis (Note 1) ................................ -- 1,381,482 1,480,159 2,609,140
Distributions payable to shareholders ...................... 56,099 108,990 2,530,020 473,442
Capital shares repurchased ................................. -- 200 271,258 76,202
Distribution fees .......................................... 4,628 5,788 243,783 50,725
Management fees ............................................ 4,597 9,805 652,267 145,135
Shareholder servicing costs ................................ 1,195 2,351 50,820 8,380
Accrued expenses and other liabilities ...................... 5,134 5,441 69,921 15,734
---------- ---------- ----------- ------------
Total liabilities ...................................... 71,653 1,514,057 5,298,228 18,201,322
---------- ---------- ----------- ------------
Net assets, at value ......................................... $39,693,128 $77,176,899 $1,683,608,651 $331,442,846
========== ========== ============ ===========
Net assets consist of:
Undistributed net investment income.......................... $ 87,718 $ 50,649 $ 20,740 $--
Accumulated distributions in excess of net investment income. -- -- -- (36,705)
Net unrealized appreciation on investments................... 1,410,091 2,028,212 97,706,018 15,631,675
Accumulated net realized gain (loss) from investments........ (433,159) (1,409,515) (36,722) 1,252,824
Class I capital shares....................................... 38,628,478 76,507,553 1,564,453,139 308,247,323
Class II capital shares...................................... -- -- 21,465,476 6,347,729
---------- ---------- ----------- ------------
Net assets, at value.......................................... $39,693,128 $77,176,899 $1,683,608,651 $331,442,846
========== ========== ============ ===========
Class I shares:
Net assets, at value......................................... $39,693,128 $77,176,899 $1,662,087,488 $325,064,588
========== ========== ============ ===========
Shares outstanding........................................... 3,831,399 7,728,681 136,753,285 28,162,462
========== ========== ============ ===========
Net asset value per share*................................... $10.36 $9.99 $12.15 $11.54
========== ========== ============ ===========
Maximum offering price per share (100/95.75 of
net asset value per share).................................. $10.82 $10.43 $12.69 $12.05
========== ========== ============ ===========
Class II shares:
Net assets, at value......................................... -- -- $ 21,521,163 $ 6,378,258
========== ========== ============ ===========
Shares outstanding........................................... -- -- 1,762,895 550,431
========== ========== ============ ===========
Net asset value per share*................................... -- -- $12.21 $11.59
========== ========== ============ ===========
Maximum offering price per share (100/99 of
net asset value per share).................................. -- -- $12.33 $11.71
========== ========== ============ ===========
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Assets and Liabilities (cont.)
February 28, 1997
Franklin Franklin Franklin
Michigan Insured Minnesota Insured Ohio Insured
Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund
------------ ------------ -----------
<S> <C> <C> <C>
Assets:
Investments in securities:
At identified cost ...................................................... $1,054,920,018 $464,397,918 $667,033,087
============ =========== ============
At value ................................................................ 1,112,834,468 485,758,402 703,583,629
Cash ..................................................................... 886,087 62,942 25,227
Receivables:
Interest ................................................................ 19,760,045 5,036,719 11,460,682
Capital shares sold ..................................................... 947,179 252,302 744,609
------------ ----------- ------------
Total assets ........................................................ 1,134,427,779 491,110,365 715,814,147
------------ ----------- ------------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1) ............................................. -- 2,978,548 --
Distributions payable to shareholders ................................... 1,661,664 701,539 1,032,418
Capital shares repurchased .............................................. 353,782 139,033 153,936
Distribution fees ....................................................... 181,455 62,240 110,042
Management fees ......................................................... 445,104 203,511 288,554
Shareholder servicing costs ............................................. 36,500 17,000 26,809
Accrued expenses and other liabilities ................................... 50,303 37,351 56,713
------------ ----------- ------------
Total liabilities ................................................... 2,728,808 4,139,222 1,668,472
------------ ----------- ------------
Net assets, at value ...................................................... $1,131,698,971 $486,971,143 $714,145,675
============ =========== ============
Net assets consist of:
Undistributed net investment income ...................................... $ -- $ 263,020 $--
Accumulated distributions in excess of net investment income ............. (213,723) -- (258,857)
Net unrealized appreciation on investments ............................... 57,914,450 21,360,484 36,550,542
Accumulated net realized gain (loss) from investments .................... 4,579,103 (543,789) (1,061,531)
Class I capital shares ................................................... 1,049,358,894 461,054,122 663,224,434
Class II capital shares .................................................. 20,060,247 4,837,306 15,691,087
------------ ----------- ------------
Net assets, at value ...................................................... $1,131,698,971 $486,971,143 $714,145,675
============ =========== ============
Class I shares:
Net assets, at value ..................................................... $1,111,536,560 $482,127,643 $698,359,656
============ =========== ============
Shares outstanding ....................................................... 92,589,471 40,157,975 57,279,612
============ =========== ============
Net asset value per share* ............................................... $12.00 $12.01 $12.19
============ =========== ============
Maximum offering price per share (100/95.75 of net asset value per share) $12.53 $12.54 $12.73
============ =========== ============
Class II shares:
Net assets, at value ..................................................... $ 20,162,411 $ 4,843,500 $ 15,786,019
============ =========== ============
Shares outstanding ....................................................... 1,670,727 402,074 1,289,184
============ =========== ============
Net asset value per share* ............................................... $12.07 $12.05 $12.24
============ =========== ============
Maximum offering price per share (100/99 of net asset value per share) ... $12.19 $12.17 $12.36
============ =========== ============
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Operations
for the year ended February 28, 1997
Franklin Franklin Franklin
Arizona Insured Florida Insured Franklin Massachusetts
Tax-Free Tax-Free Insured Tax-Free Insured Tax-Free
Income Fund Income Fund Income Fund Income Fund
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Investment income:
Interest ..................................................... $2,164,362 $4,078,027 $106,225,193 $19,219,368
---------- --------- ----------- -----------
Expenses:
Management fees (Note 5) ..................................... 238,269 447,534 7,848,890 1,649,833
Distribution fees- Class I (Note 5) .......................... 35,403 64,396 1,283,229 246,840
Distribution fees- Class II (Note 5) ......................... -- -- 96,714 30,167
Shareholder servicing costs (Note 5) ......................... 9,878 19,051 438,123 86,046
Reports to shareholders ...................................... 9,985 11,483 270,988 52,937
Insurance (Note 1) ........................................... 6,156 -- 2,476 3,979
Registration and filing fees ................................. 4,160 7,475 65,735 18,322
Professional fees ............................................ 1,963 2,773 43,493 8,754
Custodian fees ............................................... 812 687 15,917 3,109
Trustees' fees and expenses .................................. 504 913 22,113 4,015
Other ........................................................ 18,572 15,027 141,766 34,482
Management fees waived by manager (Note 5) ................... (229,060) (320,923) -- --
---------- --------- ----------- -----------
Total expenses .......................................... 96,642 248,416 10,229,444 2,138,484
---------- --------- ----------- -----------
Net investment income ................................... 2,067,720 3,829,611 95,995,749 17,080,884
---------- --------- ----------- -----------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) ..................................... (5,619) (119,240) 189,172 4,857,234
Net unrealized depreciation .................................. (10,776) (44,777) (14,843,798) (7,367,674)
---------- --------- ----------- -----------
Net realized and unrealized loss on investments ............... (16,395) (164,017) (14,654,626) (2,510,440)
---------- --------- ----------- -----------
Net increase in net assets resulting from operations .......... $2,051,325 $3,665,594 $ 81,341,123 $14,570,444
========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Operations (cont.)
for the year ended February 28, 1997
Franklin Franklin Franklin
Michigan Insured Minnesota Insured Ohio Insured
Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund
---------- ----------- ------------
<S> <C> <C> <C>
Investment income:
Interest ................................................................... $ 68,766,547 $29,867,279 $42,294,708
---------- ----------- ------------
Expenses:
Management fees (Note 5) ................................................... 5,284,581 2,439,817 3,391,314
Distribution fees- Class I (Note 5) ........................................ 887,960 375,064 545,317
Distribution fees- Class II (Note 5) ....................................... 84,610 17,834 69,578
Shareholder servicing costs (Note 5) ....................................... 362,861 157,654 228,677
Reports to shareholders .................................................... 207,399 93,860 127,555
Insurance (Note 1) ......................................................... 47,063 74,267 25,873
Registration and filing fees ............................................... 20,199 19,931 5,409
Professional fees .......................................................... 29,153 13,186 18,499
Custodian fees ............................................................. 11,112 4,039 6,730
Trustees' fees and expenses ................................................ 14,617 6,333 9,082
Other ...................................................................... 67,407 36,323 74,318
---------- ----------- ------------
Total expenses ........................................................ 7,016,962 3,238,308 4,502,352
---------- ----------- ------------
Net investment income ................................................. 61,749,585 26,628,971 37,792,356
---------- ----------- ------------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) ................................................... 4,589,908 (540,028) 4,543,907
Net unrealized depreciation ................................................ (11,934,831) (4,659,743) (5,685,110)
---------- ----------- ------------
Net realized and unrealized loss on investments ............................. (7,344,923) (5,199,771) (1,141,203)
---------- ----------- ------------
Net increase in net assets resulting from operations ........................ $ 54,404,662 $21,429,200 $36,651,153
========== =========== ============
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended February 28, 1997 and February 29, 1996
Franklin Arizona Insured Franklin Florida Insured
Tax-Free Income Fund Tax-Free Income Fund
--------- ------------ ---------- ----------
1997 1996 1997 1996
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .............................................. $ 2,067,720 $ 1,635,250 $ 3,829,611 $ 3,071,572
Net realized gain (loss) from security transactions ................ (5,619) 8,518 (119,240) 29,740
Net unrealized appreciation (depreciation) on investments .......... (10,776) 1,489,428 (44,777) 2,612,156
--------- --------- --------- ----------
Net increase in net assets resulting from operations .......... 2,051,325 3,133,196 3,665,594 5,713,468
Distributions to shareholders from undistributed
net investment income (Note 7) ..................................... (2,055,948) (1,604,164) (3,811,701) (3,052,806)
Increase in net assets from capital share transactions (Note 2) ..... 1,498,955 15,875,305 7,739,653 20,076,187
--------- --------- --------- ----------
Net increase in net assets .................................... 1,494,332 17,404,337 7,593,546 22,736,849
Net assets:
Beginning of year .................................................. 38,198,796 20,794,459 69,583,353 46,846,504
--------- --------- --------- ----------
End of year ........................................................ $39,693,128 $38,198,796 $77,176,899 $69,583,353
========= ========= ========== =========
Undistributed net investment income included in net assets:
Beginning of year .................................................. $ 75,946 $ 44,860 $ 32,739 $ 13,973
========= ========= ========== =========
End of year ........................................................ $ 87,718 $ 75,946 $ 50,649 $ 32,739
========= ========= ========== =========
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the years ended February 28, 1997 and February 29, 1996
Franklin Insured Franklin Massachusetts Insured
Tax-Free Income Fund Tax-Free Income Fund
--------------------- --------------------------
1997 1996 1997 1996
------------ ----------- -------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ...................................... $ 95,995,749 $ 98,442,242 $ 17,080,884 $ 16,730,715
Net realized gain (loss) from security transactions ........ 189,172 12,703,972 4,857,234 (82,430)
Net unrealized appreciation (depreciation) on investments .. (14,843,798) 29,657,448 (7,367,674) 8,199,260
------------ ----------- ---------- ----------
Net increase in net assets resulting from operations .. 81,341,123 140,803,662 14,570,444 24,847,545
Distributions to shareholders from:
Undistributed net investment income (Note 7):
Class I ................................................... (96,336,110) (98,929,211) (17,006,052) (16,888,337)
Class II .................................................. (757,108) (130,554) (230,919) (62,237)
In excess of net investment income:
Class I ................................................... -- -- (36,375) --
Class II .................................................. -- -- (330) --
Increase (decrease) in net assets from capital
share transactions (Note 2) ................................ (13,829,944) (11,787,371) 29,858,539 8,059,652
------------ ----------- ---------- ----------
Net increase (decrease) in net assets ................. (29,582,039) 29,956,526 27,155,307 15,956,623
Net assets:
Beginning of year .......................................... 1,713,190,690 1,683,234,164 304,287,539 288,330,916
------------ ----------- ---------- ----------
End of year ................................................ $1,683,608,651 $1,713,190,690 $331,442,846 $304,287,539
============ =========== ========== ==========
Undistributed net investment income (accumulated distributions
in excess of net investment income) included in net assets:
Beginning of year ......................................... $ 1,118,209 $ 1,735,732 $ 156,087 $ 375,946
============ =========== ========== ==========
End of year ............................................... $ 20,740 $ 1,118,209 $ (36,705) $ 156,087
============ =========== ========== ==========
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the years ended February 28, 1997 and February 29, 1996
Franklin Michigan Insured Franklin Minnesota Insured Franklin Ohio Insured
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
---------------------- ----------------------- -------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................. $ 61,749,585 $ 61,052,303 $ 26,628,971 $ 27,026,738 $ 37,792,356 $ 37,353,056
Net realized gain (loss) from
security transactions ................ 4,589,908 2,392,717 (540,028) 596,366 4,543,907 2,896,481
Net unrealized appreciation (depreciation)
on investments ....................... (11,934,831) 27,527,016 (4,659,743) 9,650,802 (5,685,110) 15,182,787
----------- ----------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations ....... 54,404,662 90,972,036 21,429,200 37,273,906 36,651,153 55,432,324
Distributions to shareholders from:
Undistributed net investment
income (Note 7):
Class I ............................. (61,003,949) (61,725,372) (26,722,891) (27,066,218) (37,223,762) (37,736,610)
Class II ............................ (634,617) (105,454) (132,990) (17,666) (514,622) (95,312)
In excess of net investment income:
Class I .............................. (213,723) (113,681) -- -- (258,857) (56,788)
Class II ............................. -- -- -- -- -- --
Increase (decrease) in net assets from
capital share transactions (Note 2) ... 17,009,127 55,393,011 (893,357) 3,166,929 23,623,314 21,780,231
----------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease)
in net assets ................... 9,561,500 84,420,540 (6,320,038) 13,356,951 22,277,226 39,323,845
Net assets:
Beginning of year ..................... 1,122,137,471 1,037,716,931 493,291,181 479,934,230 691,868,449 652,544,604
----------- ----------- ---------- ---------- ---------- ----------
End of year ........................... $1,131,698,971 $1,122,137,471 $486,971,143 $493,291,181 $714,145,675 $691,868,449
=========== =========== ========== ========== ========== ==========
Undistributed net investment income
(accumulated distributions in excess of net
investment income) included in net assets:
Beginning of year .................... $ (111,019) $ 781,185 $ 489,930 $ 547,076 $ (53,972) $ 481,682
=========== =========== ========== ========== ========== ==========
End of year .......................... $ (213,723) $ (111,019) $ 263,020 $ 489,930 $ (258,857) $ (53,972)
=========== =========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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-eight separate funds. This
report pertains only to the seven Funds (the Funds) included in the accompanying
financial statements. Each fund seeks to provide tax-free income. 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.
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 date of
the bonds or notes). Such a right to resell is commonly known as a "put". In
determining the weighted average to maturity of the Fund's portfolio, municipal
bonds and notes as to which the Fund holds a put will be deemed to mature on the
last day on which the put may be exercised.
c. Insurance:
Each long-term municipal security in the Trust is insured as to the scheduled
payments of interest and principal by either a mutual fund Portfolio Insurance
Policy, a Secondary Market Insurance Policy, a New Issue Insurance Policy or
collateral guaranteed by an agency of the U.S. government. The providers of
secondary market and new issue insurance are rated "AAA" by Standard & Poor's.
Premiums for a mutual fund Portfolio Insurance Policy or a Secondary Market
Insurance Policy are paid from the Trust's assets. Premiums for a mutual fund
Portfolio Insurance Policy (effective only so long as the Trust is in existence,
Financial Guaranty (the insurer) remains in business and the municipal security
insured under the policy continues to be held by the Trust) will reduce the
current income on the portfolio by the amount thereof. Premiums paid by the
Trust for a Secondary Market Insurance Policy (effective so long as the security
so insured is outstanding and the insurer remains in business) are added to the
cost basis of the municipal security insured and are not considered an expense
of the Trust. Premiums for a New Issue Insurance Policy (effective so long as
the security so insured is outstanding and the insurer remains in business) are
paid in advance by the insured security issuer or by another third party prior
to acquisition of the security by the Trust and are not considered an expense of
the Trust.
d. Income Taxes:
The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to shareholders which will be sufficient to relieve the
Funds from income and excise taxes. Each Fund is treated as a separate entity in
the determination of compliance with the Internal Revenue Code.
e. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Original issue discount and
premium are amortized as required by the Internal Revenue Code. The Funds
normally declare dividends from their net investment income daily and distribute
monthly. Daily allocations of net investment income will commence on the day
following the receipt of an investor's funds. Dividends are normally declared
each day the New York Stock Exchange is open for business and are equal to an
amount per day set from time to time by the Board, and are payable to
shareholders of record at the beginning of business on the ex-dividend date.
Once each month dividends are reinvested in additional shares of the Funds, or
paid in cash as requested by the shareholders.
Realized and unrealized gains or losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale transactions.
g. Expense Allocation:
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.
h. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
i. Securities Purchased on a When-Issued Basis or Delayed Delivery Basis:
The Funds may trade securities on a when-issued or delayed delivery basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Funds will
generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Funds have set aside sufficient investment
securities as collateral for these purchase commitments.
2. TRUST SHARES
At February 28, 1997, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in each of the Fund's shares for
the years ended February 28, 1997 and February 29, 1996 were as follows:
<TABLE>
<CAPTION>
Franklin Arizona Insured Franklin Florida Insured Franklin Insured
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------ -------------------- -----------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
1997
Shares sold ............................... 1,063,087 $ 10,804,634 2,159,414 $ 21,306,582 15,746,969 $ 190,229,186
Shares issued in reinvestment of distributions 84,472 860,990 134,268 1,324,324 3,354,125 40,515,344
Shares redeemed ........................... (1,004,299) (10,166,669) (1,507,044) (14,891,253) (21,353,609) (257,913,352)
-------- ---------- --------- ---------- ---------- -----------
Net increase (decrease) .................... 143,260 $ 1,498,955 786,638 $ 7,739,653 (2,252,515) $ (27,168,822)
======== ========== ========= ========== ========== ===========
1996
Shares sold ............................... 1,838,731 $ 18,660,198 3,201,678 $ 31,841,843 18,183,582 $ 221,183,747
Shares issued in reinvestment of distributions 70,984 721,684 103,904 1,024,348 3,371,851
41,020,750
Shares redeemed ........................... (344,498) (3,506,577) (1,278,505) (12,790,004) (23,198,817) (282,118,466)
-------- ---------- --------- ----------- ---------- ----------
Net increase (decrease) .................... 1,565,217 $ 15,875,305 2,027,077 $ 20,076,187 (1,643,384) $ (19,913,969)
======== ========== ========= =========== ========== ==========
2. TRUST SHARES (cont.)
Franklin Arizona Insured Franklin Florida Insured Franklin Insured
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------------- --------------------- ---------------------
Class II Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1997
Shares sold ............................... -- -- -- -- 1,172,093 $14,208,657
Shares issued in reinvestment of distributions -- -- -- -- 39,161 475,591
Shares redeemed ........................... -- -- -- -- (110,718) (1,345,370)
-------- ---------- --------- ----------- --------- -----------
Net increase ............................... -- -- -- -- 1,100,536 $13,338,878
======== ========== ========= =========== ========= ===========
1996*
Shares sold ............................... -- -- -- -- 678,420 $ 8,323,669
Shares issued in reinvestment of distributions -- -- -- -- 5,942 73,170
Shares redeemed ........................... -- -- -- -- (22,003) (270,241)
-------- ---------- --------- ----------- --------- -----------
Net increase ............................... -- -- -- -- 662,359 $ 8,126,598
======== ========== ========= =========== ========= ===========
Franklin Massachusetts Franklin Michigan Insured
Insured Tax-Free Income Fund Tax-Free Income Fund
------------------- ---------------------
Class I Shares: Shares Amount Shares Amount
-------- ---------- --------- -----------
<S> <C> <C> <C> <C>
1997
Shares sold ............................... 4,567,263 $ 52,464,615 7,814,075 $ 93,018,944
Shares issued in reinvestment of distributions 640,639 7,340,858 2,519,009 30,001,284
Shares redeemed ........................... (2,926,859) (33,560,457) (10,033,049) (119,411,654)
-------- ---------- --------- -----------
Net increase ............................... 2,281,043 $ 26,245,016 300,035$ 3,608,574
======== ========== ========= ===========
1996
Shares sold ............................... 2,824,888 $32,667,342 9,709,057 $ 116,368,142
Shares issued in reinvestment of distributions 616,949 7,118,850 2,481,201 29,703,331
Shares redeemed ........................... (2,990,203) (34,460,747) (8,123,578) (97,338,156)
-------- ---------- --------- -----------
Net increase ............................... 451,634 $ 5,325,445 4,066,680 $ 48,733,317
======== ========== ========= ===========
Franklin Massachusetts Franklin Michigan Insured
Insured Tax-Free Income Fund Tax-Free Income Fund
------------------- ---------------------
Class II Shares: Shares Amount Shares Amount
-------- ---------- --------- -----------
<S> <C> <C> <C> <C>
1997
Shares sold ............................... 316,475 $ 3,638,171 1,155,661 $ 13,825,406
Shares issued in reinvestment of distributions 15,223 175,286 36,857 441,821
Shares redeemed ........................... (17,305) (199,934) (72,368) (866,674)
-------- ---------- --------- -----------
Net increase ............................... 314,393 $ 3,613,523 1,120,150 $ 13,400,553
======== ========== ========= ===========
1996*
Shares sold ............................... 231,785 $ 2,684,668 562,131 $ 6,801,007
Shares issued in reinvestment of distributions 4,367 50,866 6,207 75,384
Shares redeemed ........................... (114) (1,327) (17,761) (216,697)
-------- ---------- --------- -----------
Net increase ............................... 236,038 $ 2,734,207 550,577 $ 6,659,694
======== ========== ========= ===========
2. TRUST SHARES (cont.)
Franklin Minnesota Insured Franklin Ohio Insured
Tax-Free Income Fund Tax-Free Income Fund
------------------- ---------------------
Class I Shares: Shares Amount Shares Amount
-------- ---------- --------- -----------
<S> <C> <C> <C> <C>
1997
Shares sold ............................... 3,044,882 $ 36,326,513 5,875,366 $ 70,906,972
Shares issued in reinvestment of distributions1,139,291 13,599,170 1,470,891 17,763,260
Shares redeemed ........................... (4,566,009) (54,507,062) (6,187,100) (74,675,905)
-------- ---------- --------- -----------
Net increase (decrease) .................... (381,836)$ (4,581,379) 1,159,157 $ 13,994,327
======== ========== ========= ===========
1996
Shares sold ............................... 3,441,478 $ 41,593,853 5,527,081 $ 67,055,359
Shares issued in reinvestment of distributions1,131,910 13,654,723 1,462,685 17,716,211
Shares redeemed ........................... (4,417,279) (53,230,931) (5,705,470) (69,053,439)
-------- ---------- --------- -----------
Net increase ............................... 156,109 $ 2,017,645 1,284,296 $ 15,718,131
======== ========== ========= ===========
Franklin Minnesota Insured Franklin Ohio Insured
Tax-Free Income Fund Tax-Free Income Fund
------------------- ---------------------
Class II Shares: Shares Amount Shares Amount
-------- ---------- --------- -----------
1997
Shares sold ............................... 335,271 $ 4,021,564 868,125 $ 10,536,543
Shares issued in reinvestment of distributions 7,301 87,474 29,854 362,556
Shares redeemed ........................... (35,169) (421,016) (105,328) (1,270,112)
-------- ---------- --------- -----------
Net increase ............................... 307,403 $ 3,688,022 792,651 $ 9,628,987
======== ========== ========= ===========
1996*
Shares sold ............................... 99,039 $ 1,202,330 491,956 $ 6,005,927
Shares issued in reinvestment of distributions 952 11,610 5,067 62,185
Shares redeemed ........................... (5,320) (64,656) (490) (6,012)
-------- ---------- --------- -----------
Net increase ............................... 94,671 $ 1,149,284 496,533 $ 6,062,100
======== ========== ========= ===========
*For the period May 1, 1995 to February 29, 1996
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 28, 1997, for tax purposes, the Funds had accumulated net realized
gains or capital loss carryovers as follows:
Franklin
Massachusetts Franklin Michigan
Insured Tax-Free Insured Tax-Free
Income Fund Income Fund
---------- ------------
<S> <C> <C>
Accumulated net realized gains ................................................................ $1,252,824 $4,699,619
========== ============
Franklin
Franklin ArizonaFranklin Florida Franklin Minnesota Franklin Ohio
Insured Tax-FreeInsured Tax-FreeInsured Tax-FreeInsured Tax-FreeInsured Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
----------- ----------- ------------ ----------- ----------
Capital loss carryovers
<S> <C> <C> <C> <C> <C> <C>
expiring in: 2002 ............................ $ 21,282 $ 16,913 $ -- $ -- $ --
2003............................... 394,514 1,225,446 37,322 2,767 1,061,531
2004............................... -- -- -- -- --
2005............................... 17,363 167,156 -- 540,028 --
----------- ----------- ---------- --------- -----------
$433,159 $1,409,515 $37,322 $542,795 $1,061,531
=========== =========== ========== ========= ===========
For income tax purposes, the aggregate cost of securities is higher (and
unrealized appreciation is lower) than for financial reporting purposes at
February 28, 1997, by $120,516 in the Franklin Michigan Insured Tax-Free Income
Fund and $994 in the Franklin Minnesota Insured Tax-Free Income Fund.
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended February 28, 1997 were as follows:
Franklin Franklin
Franklin Arizona Franklin Florida Franklin MassachusettsFranklin Michigan Minnesota Franklin Ohio
Insured Tax-Free Insured Tax-Free Insured Tax-Free Insured Tax-FreeInsured Tax-Free Insured Tax-Free Insured 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.... $8,277,407 $28,922,211 $309,416,253 $105,387,130 $331,764,589 $69,239,189 $114,097,943
Sales........ $6,785,133 $23,380,368 $354,951,787 $ 88,271,634 $337,058,818 $77,615,034 $102,761,480
</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
Under an agreement with Advisers, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Funds. The fee
is paid by Advisers and computed monthly based on average daily net assets. It
is not a separate expense of the Funds.
Advisers agreed in advance to waive management fees for the Franklin Arizona
Insured Tax-Free Income Fund and the Franklin Florida Insured Tax-Free Income
Fund, as noted in the Statement of Operations.
b. Shareholder Services Agreement:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the year ended February 28, 1997, aggregated $1,302,290, of which $1,229,275 was
paid to Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Funds reimburse Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to a maximum of 0.10% per
annum for Class I and 0.65% per annum for Class II, if applicable, of the
average daily net assets of such class of all the Funds, for costs incurred in
the promotion, offering and marketing of the Funds' shares. The Plans do not
permit nor require payments of excess costs after termination. Fees incurred by
the Funds under the Plans aggregated $3,737,112 for the year ended February 28,
1997.
In its capacity as underwriter for the shares of the Funds, Distributors
receives commissions on sales of the Funds' shares of beneficial interest.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Funds, and as such are not expenses of the Funds. Distributors may
also make payments, out of its own resources, to the dealers for certain sales
of the Funds' shares. Commissions received by Distributors and the amounts paid
to other dealers and any applicable contingent deferred sales charges for the
year ended February 28, 1997 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 FundIncome Fund Income Fund Income Fund Income Fund Income Fund Income Fund
-------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total commissions received ................. $325,449 $471,751 $3,657,762 $ 998,112 $3,033,444 $1,063,873 $2,398,850
Paid to other dealers ...................... $305,987 $450,601 $3,667,465 $1,127,538 $3,004,175 $1,061,048 $2,383,756
Contingent deferred sales charges .......... $-- $ -- $ 6,263 $ 1,328 $ 7,786 $ 2,804 $ 9,688
</TABLE>
d. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, FT Services and Investor Services, all wholly-owned
subsidiaries of Franklin Resources, Inc.
6. CREDIT RISK
All of the Funds' investments are in the securities of issuers within their
respective states and U.S. territories and possessions. Such concentration may
subject the Funds more significantly to economic changes occurring within those
states and U.S. territories and possessions.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period by Fund are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
-------------------------------------------- ----------------------------
Net Distri- Distri- Net Net Ratio of Ratio of Net
Net Asset Net Realized & butions butions Asset Assets Expenses Investment
Year Value at Invest-Unrealized Total From From Net From Total Value at End of to Average Income Portfolio
Ended Beginning ment Gain (Loss) Investment InvestmentCapital Distri- at End Total Period Net Assets to Average Turnover
Feb.28 of PeriodIncome on SecuritiesOperations Income Gains butions of Period Return++(in 000's)(See Note 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
1997 10.36 .55 .003 .553 (.553) -- (.553) 10.36 5.55 39,693 .25 5.45 18.27
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
1997 10.02 .53 (.032) .498 (.528) -- (.528) 9.99 5.17 77,177 .35 5.36 32.23
Franklin Insured Tax-Free Income Fund:
Class I Shares:
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
1997 12.27 .69 (.114) .576 (.696) -- (.696) 12.15 4.88 1,662,087 .60 5.68 18.66
Class II Shares:
19962 11.98 .54 .322 .862 (.532) -- (.532) 12.31 7.32 8,152 1.18* 5.21* 13.52
1997 12.31 .62 (.095) .525 (.625) -- (.625) 12.21 4.42 21,521 1.17 5.10 18.66
Franklin Massachusetts Insured Tax-Free Income Fund:
Class I Shares:
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
1997 11.65 .63 (.098) .532 (.642)3 -- (.642) 11.54 4.75 325,065 .68 5.51 29.22
Class II Shares:
19962 11.36 .50 .323 .823 (.493) -- (.493) 11.69 7.36 2,759 1.26* 5.06* 10.29
1997 11.69 .57 (.094) .476 (.576)3 -- (.576) 11.59 4.22 6,378 1.25 4.96 29.22
Franklin Michigan Insured Tax-Free Income Fund:
Class I Shares:
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
1997 12.09 .66 (.089) .571 (.661)4 -- (.661) 12.00 4.90 1,111,537 .62 5.52 30.03
Class II Shares:
19962 11.77 .51 .369 .879 (.509) -- (.509) 12.14 7.58 6,683 1.20* 5.03* 9.38
1997 12.14 .59 (.069) .521 (.591) -- (.591) 12.07 4.44 20,162 1.19 4.94 30.03
7. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
-------------------------------------------- --------------------------
Net Distri- Distri- Net Net Ratio of Ratio of Net
Net Asset Net Realized & butions butions Asset Assets Expenses Investment
Year Value at Invest-Unrealized Total From From Net From Total Value at End of to Average Income Portfolio
Ended Beginning ment Gain (Loss) Investment InvestmentCapital Distri- at End Total Period Net Assets to Average Turnover
Feb.28 of PeriodIncome on SecuritiesOperations Income Gains butions of Period Return++(in 000's)(See Note 5)+Net Assets Rate
Franklin Minnesota Insured Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
1997 12.14 .65 (.120) .530 (.660) -- (.660) 12.01 4.54 482,128 .66 5.47 14.40
Class II Shares:
19962 11.89 .50 .281 .781 (.501) -- (.501) 12.17 6.67 1,152 1.25* 4.94* 17.72
1997 12.17 .59 (.123) .467 (.587) -- (.587) 12.05 3.98 4,844 1.23 4.87 14.40
Franklin Ohio Insured Tax-Free Income Fund:
Class I Shares:
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)3 -- (.687) 12.22 8.66 685,783 .64 5.58 11.47
1997 12.22 .66 (.029) .631 (.661)5 -- (.661) 12.19 5.35 698,360 .64 5.43 14.95
Class II Shares:
19962 11.90 .52 .351 .871 (.511) -- (.511) 12.26 7.43 6,085 1.22* 4.99* 11.47
1997 12.26 .59 (.022) (.568) (.588) -- (.588) 12.24 4.79 15,786 1.20 4.80 14.95
</TABLE>
*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
$.002.
5Includes distributions in excess of net investment income in the amount of
$.005.
++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, Advisers agreed in advance to waive a portion of
its management fees and to make payments of other expenses incurred by the Funds
listed below. Had such action not been taken, the ratio of expenses to average
net assets would have been as follows:
Ratio of Expenses to
Average Net Assets
-------------
Franklin Arizona Insured Tax-Free Income Fund
19941............................................ 0.83%*
1995............................................. 0.96
1996............................................. 0.86
1997............................................. 0.86
Franklin Florida Insured Tax-Free Income Fund
19941............................................ 0.83*
1995............................................. 0.88
1996............................................. 0.82
1997............................................. 0.80
Each fund hereby designates 100% of the distributions paid from net investment
income for the taxable year ended February 28, 1997, as exempt-interest
dividends per Section 852(b)(5) of the Internal Revenue Code.
FRANKLIN TAX-FREE TRUST
Report of Independent Accountants
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 (seven of which are included in
this report), including each Fund's statement of investments in securities and
net assets, as of February 28, 1997, and the related statements of operations
for the year then ended, statement 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 presented. 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 include confirmation of securities owned as of
February 28, 1997, by correspondence with custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement preparation.
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 28, 1997, 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 their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
April 4, 1997
Franklin Tax-Free Trust (Alabama Series) Annual Report February 28, 1997.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM 304
(a)OF REGULATION S-T)
GRAPHIC MATERIAL (1)
The following line graph compares the Federal Funds Rate to the Consumer Price
Index - Year over Year change from 3/31/94 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fed Funds CPI
<S> <C> <C>
Mar-94 2.50% 3.50%
Apr-94 2.40% 3.75%
May-94 2.30% 4.25%
Jun-94 2.50% 4.25%
Jul-94 2.80% 4.25%
Aug-94 2.90% 4.75%
Sep-94 3.00% 4.75%
Oct-94 2.60% 4.75%
Nov-94 2.70% 5.50%
Dec-94 2.70% 5.50%
Jan-95 2.80% 5.50%
Feb-95 2.90% 6.00%
Mar-95 2.90% 6.00%
Apr-95 3.10% 6.00%
May-95 3.20% 6.00%
Jun-95 3.00% 6.00%
Jul-95 2.80% 5.75%
Aug-95 2.60% 5.75%
Sep-95 2.50% 5.75%
Oct-95 2.80% 5.75%
Nov-95 2.60% 5.75%
Dec-95 2.50% 5.50%
Jan-96 2.70% 5.25%
Feb-96 2.70% 5.25%
Mar-96 2.80% 5.25%
Apr-96 2.90% 5.25%
May-96 2.90% 5.25%
Jun-96 2.80% 5.25%
Jul-96 3.00% 5.25%
Aug-96 2.90% 5.25%
Sep-96 3.00% 5.25%
Oct-96 3.00% 5.25%
Nov-96 3.30% 5.25%
Dec-96 3.30% 5.25%
Jan-97 3.00% 5.25%
Feb-97 3.00% 5.25%
</TABLE>
GRAPHIC MATERIAL (2)
This bar chart shows the percentage of insured vs. Non-insured bonds issued
during the following years: 1994 (37% insured, 63% non-insured), 1995 (43%
insured, 57% non-insured), 1996 (47% insured, 53% non-insured).
GRAPHIC MATERIAL (3)
This bar chart shows new long-term municipal bond issuance from 1987 through
1996 in terms of billion: 1987/$105 billion; 1988/$117.3 billion; 1989/$125
billion; 1990/$127.8 billion; 1991/$172.4 billion; 1992/$234.7 billion;
1993/$292.2 billion; 1994/$164.8 billion; 1995/$160.3 billion; 1996/$183.5
billion.
GRAPHIC MATERIAL (4)
This bar chart shows the comparison between the fund's distribution rate of
5.10% and the taxable equivalent rate of 8.94%.
GRAPHIC MATERIAL (5)
The following line graph hypothetically compares the performance of the fund's
shares to the Lehman Brothers Municipal Bond Index and the Consumer Price Index
(CPI), based on a $10,000 investment from 4/30/93 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
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 $10,047 $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 $10,757
3/29/96 $11,227 $11,794 $10,813
4/30/96 $11,189 $11,761 $10,855
5/31/96 $11,184 $11,757 $10,876
6/28/96 $11,348 $11,885 $10,882
7/31/96 $11,445 $11,993 $10,903
8/30/96 $11,417 $11,990 $10,924
9/30/96 $11,651 $12,158 $10,959
10/31/96 $11,783 $12,296 $10,994
11/29/96 $12,031 $12,521 $11,015
12/31/96 $11,957 $12,468 $11,015
1/31/97 $11,953 $12,492 $11,050
2/28/97 $12,064 $12,607 $11,084
Total Return 20.64% 26.07% 10.84%
</TABLE>
GRAPHIC MATERIAL (6)
This bar chart shows the comparison between the fund's distribution rate of
5.06% and the taxable equivalent rate of 8.38%.
GRAPHIC MATERIAL (7)
The following line graph hypothetically compares the performance of the fund's
shares to the Lehman Brothers Municipal Bond Index and the Consumer Price Index
(CPI), based on a $10,000 investment from 4/30/93 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
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 $10,757
3/29/96 $10,863 $11,794 $10,813
4/30/96 $10,812 $11,761 $10,855
5/31/96 $10,816 $11,757 $10,876
6/28/96 $10,978 $11,885 $10,882
7/31/96 $11,084 $11,993 $10,903
8/30/96 $11,076 $11,990 $10,924
9/30/96 $11,296 $12,158 $10,959
10/31/96 $11,392 $12,296 $10,994
11/29/96 $11,603 $12,521 $11,015
12/31/96 $11,539 $12,468 $11,015
1/31/97 $11,509 $12,492 $11,050
2/28/97 $11,629 $12,607 $11,084
Total Return 16.29% 26.07% 10.84%
</TABLE>
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.39% and the taxable equivalent rate of 8.92%.
GRAPHIC MATERIAL (9)
The following line graph hypothetically compares the performance of the fund's
Class I shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 3/1/87 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/87 9,578 10,000 10,000
3/31/87 9,450 9,894 10,045
4/30/87 8,818 9,397 10,099
5/31/87 8,610 9,350 10,135
6/30/87 8,887 9,625 10,170
7/31/87 8,936 9,723 10,197
8/31/87 8,970 9,745 10,251
9/30/87 8,490 9,385 10,304
10/31/87 8,559 9,418 10,331
11/30/87 8,905 9,664 10,340
12/31/87 9,059 9,804 10,340
1/31/88 9,487 10,153 10,367
2/29/88 9,591 10,261 10,394
3/31/88 9,333 10,142 10,438
4/30/88 9,369 10,219 10,493
5/31/88 9,405 10,189 10,528
6/30/88 9,600 10,338 10,574
7/31/88 9,672 10,405 10,618
8/31/88 9,718 10,414 10,663
9/30/88 9,925 10,603 10,734
10/31/88 10,207 10,790 10,770
11/30/88 10,098 10,690 10,778
12/31/88 10,219 10,799 10,797
1/31/89 10,423 11,023 10,850
2/28/89 10,331 10,897 10,895
3/31/89 10,328 10,871 10,958
4/30/89 10,560 11,129 11,029
5/31/89 10,775 11,360 11,092
6/30/89 10,915 11,515 11,119
7/31/89 11,008 11,671 11,146
8/31/89 10,957 11,557 11,163
9/30/89 10,896 11,522 11,199
10/31/89 11,000 11,663 11,253
11/30/89 11,144 11,867 11,280
12/31/89 11,239 11,964 11,298
1/31/90 11,147 11,908 11,414
2/28/90 11,273 12,014 11,468
3/31/90 11,270 12,018 11,531
4/30/90 11,166 11,931 11,549
5/31/90 11,427 12,191 11,576
6/30/90 11,526 12,298 11,639
7/31/90 11,719 12,480 11,683
8/31/90 11,436 12,299 11,790
9/30/90 11,523 12,307 11,889
10/31/90 11,695 12,530 11,961
11/30/90 11,941 12,781 11,987
12/31/90 11,977 12,838 11,987
1/31/91 12,173 13,010 12,059
2/28/91 12,252 13,123 12,077
3/31/91 12,299 13,128 12,095
4/30/91 12,476 13,304 12,113
5/31/91 12,557 13,422 12,150
6/30/91 12,551 13,409 12,185
7/31/91 12,720 13,573 12,203
8/31/91 12,824 13,752 12,238
9/30/91 12,996 13,930 12,292
10/31/91 13,078 14,056 12,311
11/30/91 13,071 14,095 12,346
12/31/91 13,336 14,398 12,355
1/31/92 13,386 14,431 12,374
2/29/92 13,402 14,436 12,418
3/31/92 13,441 14,441 12,481
4/30/92 13,549 14,570 12,499
5/31/92 13,751 14,742 12,516
6/30/92 13,931 14,990 12,562
7/31/92 14,438 15,439 12,588
8/31/92 14,240 15,288 12,623
9/30/92 14,266 15,387 12,658
10/31/92 14,030 15,237 12,703
11/30/92 14,367 15,509 12,721
12/31/92 14,562 15,668 12,712
1/31/93 14,759 15,849 12,774
2/28/93 15,187 16,423 12,819
3/31/93 15,092 16,249 12,864
4/30/93 15,192 16,413 12,900
5/31/93 15,256 16,505 12,918
6/30/93 15,517 16,781 12,936
7/31/93 15,542 16,802 12,936
8/31/93 15,855 17,152 12,972
9/30/93 16,032 17,347 12,999
10/31/93 16,056 17,380 13,052
11/30/93 16,006 17,227 13,062
12/31/93 16,287 17,591 13,062
1/31/94 16,441 17,791 13,097
2/28/94 16,118 17,331 13,141
3/31/94 15,599 16,625 13,186
4/30/94 15,664 16,767 13,205
5/31/94 15,769 16,912 13,214
6/30/94 15,715 16,809 13,259
7/31/94 15,966 17,117 13,294
8/31/94 16,007 17,177 13,348
9/30/94 15,857 16,924 13,384
10/31/94 15,652 16,623 13,393
11/30/94 15,394 16,322 13,410
12/31/94 15,703 16,681 13,410
1/31/95 16,068 17,158 13,464
2/28/95 16,449 17,658 13,518
3/31/95 16,585 17,861 13,563
4/30/95 16,624 17,882 13,607
5/31/95 16,998 18,453 13,635
6/30/95 16,913 18,292 13,662
7/31/95 16,996 18,466 13,662
8/31/95 17,150 18,700 13,697
9/30/95 17,233 18,818 13,725
10/31/95 17,445 19,091 13,770
11/30/95 17,687 19,408 13,760
12/31/95 17,844 19,594 13,751
1/31/96 17,943 19,743 13,832
2/29/96 17,869 19,609 13,876
3/29/96 17,693 19,358 13,948
4/30/96 17,648 19,304 14,003
5/31/96 17,675 19,296 14,029
6/28/96 17,852 19,506 14,038
7/31/96 17,969 19,684 14,064
8/30/96 17,996 19,680 14,091
9/30/96 18,217 19,955 14,136
10/31/96 18,379 20,181 14,181
11/29/96 18,632 20,550 14,208
12/31/96 18,582 20,464 14,208
1/31/97 18,608 20,503 14,254
2/28/97 18,741 20,691 14,298
Total Return 87.41% 106.91% 42.98%
</TABLE>
GRAPHIC MATERIAL (10)
This bar chart shows the comparison between the fund's Class II distribution
rate of 4.95% and the taxable equivalent rate of 8.20%.
GRAPHIC MATERIAL (11)
The following line graph hypothetically compares the performance of the fund's
Class II shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 5/1/95 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
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 $10,610 $10,966 $10,198
3/29/96 $10,502 $10,825 $10,251
4/30/96 $10,478 $10,795 $10,291
5/31/96 $10,489 $10,791 $10,310
6/28/96 $10,589 $10,908 $10,316
7/31/96 $10,662 $11,008 $10,336
8/30/96 $10,665 $11,005 $10,356
9/30/96 $10,790 $11,159 $10,389
10/31/96 $10,880 $11,286 $10,422
11/29/96 $11,024 $11,492 $10,442
12/31/96 $10,989 $11,444 $10,442
1/31/97 $10,999 $11,466 $10,475
2/28/97 $11,081 $11,571 $10,508
Total Return 10.81% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (12)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.18% and the taxable equivalent rate of 9.74%.
GRAPHIC MATERIAL (13)
The following line graph hypothetically compares the performance of the fund's
Class I shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 3/1/87 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/87 9,572 10,000 10,000
3/31/87 9,517 9,894 10,045
4/30/87 8,947 9,397 10,099
5/31/87 8,672 9,350 10,135
6/30/87 8,872 9,625 10,170
7/31/87 9,005 9,723 10,197
8/31/87 9,070 9,745 10,251
9/30/87 8,525 9,385 10,304
10/31/87 8,540 9,418 10,331
11/30/87 8,844 9,664 10,340
12/31/87 9,045 9,804 10,340
1/31/88 9,472 10,153 10,367
2/29/88 9,607 10,261 10,394
3/31/88 9,398 10,142 10,438
4/30/88 9,426 10,219 10,493
5/31/88 9,454 10,189 10,528
6/30/88 9,620 10,338 10,574
7/31/88 9,648 10,405 10,618
8/31/88 9,712 10,414 10,663
9/30/88 9,899 10,603 10,734
10/31/88 10,134 10,790 10,770
11/30/88 10,048 10,690 10,778
12/31/88 10,162 10,799 10,797
1/31/89 10,343 11,023 10,850
2/28/89 10,265 10,897 10,895
3/31/89 10,245 10,871 10,958
4/30/89 10,439 11,129 11,029
5/31/89 10,664 11,360 11,092
6/30/89 10,801 11,515 11,119
7/31/89 10,910 11,671 11,146
8/31/89 10,819 11,557 11,163
9/30/89 10,778 11,522 11,199
10/31/89 10,867 11,663 11,253
11/30/89 11,008 11,867 11,280
12/31/89 11,089 11,964 11,298
1/31/90 10,985 11,908 11,414
2/28/90 11,097 12,014 11,468
3/31/90 11,097 12,018 11,531
4/30/90 10,982 11,931 11,549
5/31/90 11,213 12,191 11,576
6/30/90 11,308 12,298 11,639
7/31/90 11,488 12,480 11,683
8/31/90 11,275 12,299 11,790
9/30/90 11,253 12,307 11,889
10/31/90 11,394 12,530 11,961
11/30/90 11,621 12,781 11,987
12/31/90 11,654 12,838 11,987
1/31/91 11,863 13,010 12,059
2/28/91 11,918 13,123 12,077
3/31/91 11,973 13,128 12,095
4/30/91 12,140 13,304 12,113
5/31/91 12,219 13,422 12,150
6/30/91 12,231 13,409 12,185
7/31/91 12,401 13,573 12,203
8/31/91 12,504 13,752 12,238
9/30/91 12,653 13,930 12,292
10/31/91 12,745 14,056 12,311
11/30/91 12,745 14,095 12,346
12/31/91 12,990 14,398 12,355
1/31/92 13,048 14,431 12,374
2/29/92 13,044 14,436 12,418
3/31/92 13,076 14,441 12,481
4/30/92 13,191 14,570 12,499
5/31/92 13,367 14,742 12,516
6/30/92 13,568 14,990 12,562
7/31/92 14,011 15,439 12,588
8/31/92 13,826 15,288 12,623
9/30/92 13,846 15,387 12,658
10/31/92 13,585 15,237 12,703
11/30/92 13,926 15,509 12,721
12/31/92 14,133 15,668 12,712
1/31/93 14,328 15,849 12,774
2/28/93 14,738 16,423 12,819
3/31/93 14,734 16,249 12,864
4/30/93 14,843 16,413 12,900
5/31/93 14,890 16,505 12,918
6/30/93 15,129 16,781 12,936
7/31/93 15,163 16,802 12,936
8/31/93 15,443 17,152 12,972
9/30/93 15,593 17,347 12,999
10/31/93 15,626 17,380 13,052
11/30/93 15,569 17,227 13,062
12/31/93 15,800 17,591 13,062
1/31/94 15,966 17,791 13,097
2/28/94 15,709 17,331 13,141
3/31/94 15,183 16,625 13,186
4/30/94 15,217 16,767 13,205
5/31/94 15,304 16,912 13,214
6/30/94 15,270 16,809 13,259
7/31/94 15,494 17,117 13,294
8/31/94 15,528 17,177 13,348
9/30/94 15,370 16,924 13,384
10/31/94 15,198 16,623 13,393
11/30/94 14,957 16,322 13,410
12/31/94 15,228 16,681 13,410
1/31/95 15,612 17,158 13,464
2/28/95 15,999 17,658 13,518
3/31/95 16,119 17,861 13,563
4/30/95 16,182 17,882 13,607
5/31/95 16,503 18,453 13,635
6/30/95 16,438 18,292 13,662
7/31/95 16,546 18,466 13,662
8/31/95 16,684 18,700 13,697
9/30/95 16,793 18,818 13,725
10/31/95 16,990 19,091 13,770
11/30/95 17,203 19,408 13,760
12/31/95 17,373 19,594 13,751
1/31/96 17,454 19,743 13,832
2/29/96 17,402 19,609 13,876
3/29/96 17,230 19,358 13,948
4/30/96 17,162 19,304 14,003
5/31/96 17,200 19,296 14,029
6/28/96 17,344 19,506 14,038
7/31/96 17,474 19,684 14,064
8/30/96 17,496 19,680 14,091
9/30/96 17,699 19,955 14,136
10/31/96 17,857 20,181 14,181
11/29/96 18,109 20,550 14,208
12/31/96 18,050 20,464 14,208
1/31/97 18,084 20,503 14,254
2/28/97 18,228 20,691 14,298
Total Return 82.28% 106.91% 42.98%
</TABLE>
GRAPHIC MATERIAL (14)
This bar chart shows the comparison between the fund's Class II distribution
rate of 4.77% and the taxable equivalent rate of 8.97%.
GRAPHIC MATERIAL (15)
The following line graph hypothetically compares the performance of the fund's
Class II shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 5/1/95 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
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 $10,618 $10,966 $10,198
3/29/96 $10,501 $10,825 $10,251
4/30/96 $10,464 $10,795 $10,291
5/31/96 $10,481 $10,791 $10,310
6/28/96 $10,564 $10,908 $10,316
7/31/96 $10,647 $11,008 $10,336
8/30/96 $10,646 $11,005 $10,356
9/30/96 $10,774 $11,159 $10,389
10/31/96 $10,855 $11,286 $10,422
11/29/96 $11,002 $11,492 $10,442
12/31/96 $10,961 $11,444 $10,442
1/31/97 $10,977 $11,466 $10,475
2/28/97 $11,068 $11,571 $10,508
Total Return 10.68% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (16)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.27% and the taxable equivalent rate of 9.13%.
GRAPHIC MATERIAL (17)
The following line graph hypothetically compares the performance of the fund's
Class I shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 3/1/87 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/87 9,573 10,000 10,000
3/31/87 9,474 9,894 10,045
4/30/87 8,885 9,397 10,099
5/31/87 8,641 9,350 10,135
6/30/87 8,888 9,625 10,170
7/31/87 9,011 9,723 10,197
8/31/87 9,092 9,745 10,251
9/30/87 8,560 9,385 10,304
10/31/87 8,601 9,418 10,331
11/30/87 8,882 9,664 10,340
12/31/87 9,071 9,804 10,340
1/31/88 9,506 10,153 10,367
2/29/88 9,634 10,261 10,394
3/31/88 9,445 10,142 10,438
4/30/88 9,477 10,219 10,493
5/31/88 9,510 10,189 10,528
6/30/88 9,687 10,338 10,574
7/31/88 9,711 10,405 10,618
8/31/88 9,771 10,414 10,663
9/30/88 9,951 10,603 10,734
10/31/88 10,207 10,790 10,770
11/30/88 10,115 10,690 10,778
12/31/88 10,238 10,799 10,797
1/31/89 10,418 11,023 10,850
2/28/89 10,352 10,897 10,895
3/31/89 10,325 10,871 10,958
4/30/89 10,527 11,129 11,029
5/31/89 10,778 11,360 11,092
6/30/89 10,925 11,515 11,119
7/31/89 11,003 11,671 11,146
8/31/89 10,936 11,557 11,163
9/30/89 10,878 11,522 11,199
10/31/89 10,968 11,663 11,253
11/30/89 11,128 11,867 11,280
12/31/89 11,209 11,964 11,298
1/31/90 11,119 11,908 11,414
2/28/90 11,231 12,014 11,468
3/31/90 11,233 12,018 11,531
4/30/90 11,133 11,931 11,549
5/31/90 11,392 12,191 11,576
6/30/90 11,529 12,298 11,639
7/31/90 11,697 12,480 11,683
8/31/90 11,459 12,299 11,790
9/30/90 11,471 12,307 11,889
10/31/90 11,622 12,530 11,961
11/30/90 11,869 12,781 11,987
12/31/90 11,892 12,838 11,987
1/31/91 12,077 13,010 12,059
2/28/91 12,155 13,123 12,077
3/31/91 12,201 13,128 12,095
4/30/91 12,367 13,304 12,113
5/31/91 12,446 13,422 12,150
6/30/91 12,438 13,409 12,185
7/31/91 12,596 13,573 12,203
8/31/91 12,687 13,752 12,238
9/30/91 12,847 13,930 12,292
10/31/91 12,940 14,056 12,311
11/30/91 12,931 14,095 12,346
12/31/91 13,196 14,398 12,355
1/31/92 13,244 14,431 12,374
2/29/92 13,235 14,436 12,418
3/31/92 13,272 14,441 12,481
4/30/92 13,402 14,570 12,499
5/31/92 13,616 14,742 12,516
6/30/92 13,815 14,990 12,562
7/31/92 14,312 15,439 12,588
8/31/92 14,120 15,288 12,623
9/30/92 14,155 15,387 12,658
10/31/92 13,913 15,237 12,703
11/30/92 14,238 15,509 12,721
12/31/92 14,420 15,668 12,712
1/31/93 14,602 15,849 12,774
2/28/93 15,018 16,423 12,819
3/31/93 14,980 16,249 12,864
4/30/93 15,077 16,413 12,900
5/31/93 15,163 16,505 12,918
6/30/93 15,413 16,781 12,936
7/31/93 15,411 16,802 12,936
8/31/93 15,714 17,152 12,972
9/30/93 15,901 17,347 12,999
10/31/93 15,975 17,380 13,052
11/30/93 15,896 17,227 13,062
12/31/93 16,163 17,591 13,062
1/31/94 16,304 17,791 13,097
2/28/94 15,976 17,331 13,141
3/31/94 15,462 16,625 13,186
4/30/94 15,564 16,767 13,205
5/31/94 15,639 16,912 13,214
6/30/94 15,581 16,809 13,259
7/31/94 15,817 17,117 13,294
8/31/94 15,853 17,177 13,348
9/30/94 15,674 16,924 13,384
10/31/94 15,467 16,623 13,393
11/30/94 15,219 16,322 13,410
12/31/94 15,529 16,681 13,410
1/31/95 15,882 17,158 13,464
2/28/95 16,277 17,658 13,518
3/31/95 16,412 17,861 13,563
4/30/95 16,449 17,882 13,607
5/31/95 16,836 18,453 13,635
6/30/95 16,733 18,292 13,662
7/31/95 16,828 18,466 13,662
8/31/95 16,981 18,700 13,697
9/30/95 17,076 18,818 13,725
10/31/95 17,286 19,091 13,770
11/30/95 17,541 19,408 13,760
12/31/95 17,682 19,594 13,751
1/31/96 17,794 19,743 13,832
2/29/96 17,716 19,609 13,876
3/29/96 17,519 19,358 13,948
4/30/96 17,496 19,304 14,003
5/31/96 17,488 19,296 14,029
6/28/96 17,675 19,506 14,038
7/31/96 17,817 19,684 14,064
8/30/96 17,808 19,680 14,091
9/30/96 18,042 19,955 14,136
10/31/96 18,201 20,181 14,181
11/29/96 18,498 20,550 14,208
12/31/96 18,430 20,464 14,208
1/31/97 18,438 20,503 14,254
2/28/97 18,584 20,691 14,298
Total Return 85.84% 106.91% 42.98%
</TABLE>
GRAPHIC MATERIAL (18)
This bar chart shows the comparison between the fund's Class II distribution
rate of 4.73% and the taxable equivalent rate of 8.20%.
GRAPHIC MATERIAL (19)
The following line graph hypothetically compares the performance of the fund's
Class II shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 5/1/95 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
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 $10,549 $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 $10,639 $10,966 $10,198
3/29/96 $10,513 $10,825 $10,251
4/30/96 $10,495 $10,795 $10,291
5/31/96 $10,494 $10,791 $10,310
6/28/96 $10,591 $10,908 $10,316
7/31/96 $10,671 $11,008 $10,336
8/30/96 $10,670 $11,005 $10,356
9/30/96 $10,805 $11,159 $10,389
10/31/96 $10,895 $11,286 $10,422
11/29/96 $11,066 $11,492 $10,442
12/31/96 $11,020 $11,444 $10,442
1/31/97 $11,019 $11,466 $10,475
2/28/97 $11,109 $11,571 $10,508
Total Return 11.09% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (20)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.17% and the taxable equivalent rate of 9.35%.
GRAPHIC MATERIAL (21)
The following line graph hypothetically compares the performance of the fund's
Class I shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 3/1/87 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/87 9,578 10,000 10,000
3/31/87 9,486 9,894 10,045
4/30/87 8,899 9,397 10,099
5/31/87 8,662 9,350 10,135
6/30/87 8,894 9,625 10,170
7/31/87 9,029 9,723 10,197
8/31/87 9,100 9,745 10,251
9/30/87 8,592 9,385 10,304
10/31/87 8,615 9,418 10,331
11/30/87 8,846 9,664 10,340
12/31/87 9,046 9,804 10,340
1/31/88 9,501 10,153 10,367
2/29/88 9,651 10,261 10,394
3/31/88 9,468 10,142 10,438
4/30/88 9,508 10,219 10,493
5/31/88 9,522 10,189 10,528
6/30/88 9,685 10,338 10,574
7/31/88 9,717 10,405 10,618
8/31/88 9,775 10,414 10,663
9/30/88 9,967 10,603 10,734
10/31/88 10,215 10,790 10,770
11/30/88 10,130 10,690 10,778
12/31/88 10,245 10,799 10,797
1/31/89 10,405 11,023 10,850
2/28/89 10,346 10,897 10,895
3/31/89 10,334 10,871 10,958
4/30/89 10,553 11,129 11,029
5/31/89 10,773 11,360 11,092
6/30/89 10,919 11,515 11,119
7/31/89 11,000 11,671 11,146
8/31/89 10,939 11,557 11,163
9/30/89 10,888 11,522 11,199
10/31/89 10,980 11,663 11,253
11/30/89 11,131 11,867 11,280
12/31/89 11,214 11,964 11,298
1/31/90 11,132 11,908 11,414
2/28/90 11,246 12,014 11,468
3/31/90 11,252 12,018 11,531
4/30/90 11,198 11,931 11,549
5/31/90 11,433 12,191 11,576
6/30/90 11,550 12,298 11,639
7/31/90 11,708 12,480 11,683
8/31/90 11,500 12,299 11,790
9/30/90 11,476 12,307 11,889
10/31/90 11,637 12,530 11,961
11/30/90 11,860 12,781 11,987
12/31/90 11,866 12,838 11,987
1/31/91 12,040 13,010 12,059
2/28/91 12,099 13,123 12,077
3/31/91 12,148 13,128 12,095
4/30/91 12,324 13,304 12,113
5/31/91 12,417 13,422 12,150
6/30/91 12,410 13,409 12,185
7/31/91 12,576 13,573 12,203
8/31/91 12,655 13,752 12,238
9/30/91 12,823 13,930 12,292
10/31/91 12,914 14,056 12,311
11/30/91 12,906 14,095 12,346
12/31/91 13,155 14,398 12,355
1/31/92 13,202 14,431 12,374
2/29/92 13,195 14,436 12,418
3/31/92 13,255 14,441 12,481
4/30/92 13,360 14,570 12,499
5/31/92 13,557 14,742 12,516
6/30/92 13,731 14,990 12,562
7/31/92 14,194 15,439 12,588
8/31/92 13,986 15,288 12,623
9/30/92 13,987 15,387 12,658
10/31/92 13,742 15,237 12,703
11/30/92 14,073 15,509 12,721
12/31/92 14,264 15,668 12,712
1/31/93 14,444 15,849 12,774
2/28/93 14,840 16,423 12,819
3/31/93 14,805 16,249 12,864
4/30/93 14,914 16,413 12,900
5/31/93 14,985 16,505 12,918
6/30/93 15,214 16,781 12,936
7/31/93 15,224 16,802 12,936
8/31/93 15,480 17,152 12,972
9/30/93 15,638 17,347 12,999
10/31/93 15,685 17,380 13,052
11/30/93 15,608 17,227 13,062
12/31/93 15,831 17,591 13,062
1/31/94 15,967 17,791 13,097
2/28/94 15,673 17,331 13,141
3/31/94 15,224 16,625 13,186
4/30/94 15,273 16,767 13,205
5/31/94 15,386 16,912 13,214
6/30/94 15,336 16,809 13,259
7/31/94 15,554 17,117 13,294
8/31/94 15,604 17,177 13,348
9/30/94 15,442 16,924 13,384
10/31/94 15,225 16,623 13,393
11/30/94 14,969 16,322 13,410
12/31/94 15,269 16,681 13,410
1/31/95 15,638 17,158 13,464
2/28/95 16,009 17,658 13,518
3/31/95 16,138 17,861 13,563
4/30/95 16,173 17,882 13,607
5/31/95 16,508 18,453 13,635
6/30/95 16,420 18,292 13,662
7/31/95 16,511 18,466 13,662
8/31/95 16,658 18,700 13,697
9/30/95 16,763 18,818 13,725
10/31/95 16,952 19,091 13,770
11/30/95 17,157 19,408 13,760
12/31/95 17,306 19,594 13,751
1/31/96 17,385 19,743 13,832
2/29/96 17,294 19,609 13,876
3/29/96 17,104 19,358 13,948
4/30/96 17,069 19,304 14,003
5/31/96 17,077 19,296 14,029
6/28/96 17,245 19,506 14,038
7/31/96 17,385 19,684 14,064
8/30/96 17,363 19,680 14,091
9/30/96 17,575 19,955 14,136
10/31/96 17,728 20,181 14,181
11/29/96 17,956 20,550 14,208
12/31/96 17,903 20,464 14,208
1/31/97 17,939 20,503 14,254
2/28/97 18,079 20,691 14,298
Total Return 80.79% 106.91% 42.98%
</TABLE>
GRAPHIC MATERIAL (22)
This bar chart shows the comparison between the fund's Class II distribution
rate of 4.37% and the taxable equivalent rate of 7.90%.
GRAPHIC MATERIAL (23)
The following line graph hypothetically compares the performance of the fund's
Class II shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 5/1/95 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 $9,900 $10,000 $10,000
5/31/95 $10,105 $10,319 $10,020
6/30/95 $10,046 $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 $10,547 $10,966 $10,198
3/29/96 $10,426 $10,825 $10,251
4/30/96 $10,399 $10,795 $10,291
5/31/96 $10,382 $10,791 $10,310
6/28/96 $10,496 $10,908 $10,316
7/31/96 $10,576 $11,008 $10,336
8/30/96 $10,567 $11,005 $10,356
9/30/96 $10,682 $11,159 $10,389
10/31/96 $10,770 $11,286 $10,422
11/29/96 $10,904 $11,492 $10,442
12/31/96 $10,867 $11,444 $10,442
1/31/97 $10,882 $11,466 $10,475
2/28/97 $10,969 $11,571 $10,508
Total Return 9.69% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (24)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.18% and the taxable equivalent rate of 9.27%.
GRAPHIC MATERIAL (25)
The following line graph hypothetically compares the performance of the fund's
Class I shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 3/1/87 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/87 9,574 10,000 10,000
3/31/87 9,452 9,894 10,045
4/30/87 8,844 9,397 10,099
5/31/87 8,622 9,350 10,135
6/30/87 8,872 9,625 10,170
7/31/87 8,990 9,723 10,197
8/31/87 9,058 9,745 10,251
9/30/87 8,507 9,385 10,304
10/31/87 8,553 9,418 10,331
11/30/87 8,831 9,664 10,340
12/31/87 9,005 9,804 10,340
1/31/88 9,459 10,153 10,367
2/29/88 9,600 10,261 10,394
3/31/88 9,416 10,142 10,438
4/30/88 9,444 10,219 10,493
5/31/88 9,480 10,189 10,528
6/30/88 9,669 10,338 10,574
7/31/88 9,697 10,405 10,618
8/31/88 9,753 10,414 10,663
9/30/88 9,936 10,603 10,734
10/31/88 10,202 10,790 10,770
11/30/88 10,111 10,690 10,778
12/31/88 10,242 10,799 10,797
1/31/89 10,410 11,023 10,850
2/28/89 10,355 10,897 10,895
3/31/89 10,328 10,871 10,958
4/30/89 10,528 11,129 11,029
5/31/89 10,767 11,360 11,092
6/30/89 10,912 11,515 11,119
7/31/89 10,991 11,671 11,146
8/31/89 10,925 11,557 11,163
9/30/89 10,879 11,522 11,199
10/31/89 10,959 11,663 11,253
11/30/89 11,108 11,867 11,280
12/31/89 11,189 11,964 11,298
1/31/90 11,092 11,908 11,414
2/28/90 11,214 12,014 11,468
3/31/90 11,216 12,018 11,531
4/30/90 11,136 11,931 11,549
5/31/90 11,392 12,191 11,576
6/30/90 11,519 12,298 11,639
7/31/90 11,709 12,480 11,683
8/31/90 11,506 12,299 11,790
9/30/90 11,531 12,307 11,889
10/31/90 11,682 12,530 11,961
11/30/90 11,886 12,781 11,987
12/31/90 11,933 12,838 11,987
1/31/91 12,129 13,010 12,059
2/28/91 12,175 13,123 12,077
3/31/91 12,212 13,128 12,095
4/30/91 12,389 13,304 12,113
5/31/91 12,470 13,422 12,150
6/30/91 12,464 13,409 12,185
7/31/91 12,633 13,573 12,203
8/31/91 12,726 13,752 12,238
9/30/91 12,898 13,930 12,292
10/31/91 12,992 14,056 12,311
11/30/91 12,985 14,095 12,346
12/31/91 13,239 14,398 12,355
1/31/92 13,288 14,431 12,374
2/29/92 13,267 14,436 12,418
3/31/92 13,303 14,441 12,481
4/30/92 13,431 14,570 12,499
5/31/92 13,617 14,742 12,516
6/30/92 13,794 14,990 12,562
7/31/92 14,274 15,439 12,588
8/31/92 14,084 15,288 12,623
9/30/92 14,095 15,387 12,658
10/31/92 13,855 15,237 12,703
11/30/92 14,201 15,509 12,721
12/31/92 14,404 15,668 12,712
1/31/93 14,609 15,849 12,774
2/28/93 15,058 16,423 12,819
3/31/93 15,056 16,249 12,864
4/30/93 15,141 16,413 12,900
5/31/93 15,213 16,505 12,918
6/30/93 15,485 16,781 12,936
7/31/93 15,496 16,802 12,936
8/31/93 15,782 17,152 12,972
9/30/93 15,955 17,347 12,999
10/31/93 15,990 17,380 13,052
11/30/93 15,924 17,227 13,062
12/31/93 16,202 17,591 13,062
1/31/94 16,366 17,791 13,097
2/28/94 16,003 17,331 13,141
3/31/94 15,431 16,625 13,186
4/30/94 15,507 16,767 13,205
5/31/94 15,621 16,912 13,214
6/30/94 15,565 16,809 13,259
7/31/94 15,813 17,117 13,294
8/31/94 15,850 17,177 13,348
9/30/94 15,647 16,924 13,384
10/31/94 15,401 16,623 13,393
11/30/94 15,157 16,322 13,410
12/31/94 15,477 16,681 13,410
1/31/95 15,880 17,158 13,464
2/28/95 16,285 17,658 13,518
3/31/95 16,417 17,861 13,563
4/30/95 16,440 17,882 13,607
5/31/95 16,851 18,453 13,635
6/30/95 16,735 18,292 13,662
7/31/95 16,815 18,466 13,662
8/31/95 16,994 18,700 13,697
9/30/95 17,074 18,818 13,725
10/31/95 17,281 19,091 13,770
11/30/95 17,533 19,408 13,760
12/31/95 17,701 19,594 13,751
1/31/96 17,797 19,743 13,832
2/29/96 17,692 19,609 13,876
3/29/96 17,482 19,358 13,948
4/30/96 17,460 19,304 14,003
5/31/96 17,496 19,296 14,029
6/28/96 17,695 19,506 14,038
7/31/96 17,836 19,684 14,064
8/30/96 17,827 19,680 14,091
9/30/96 18,088 19,955 14,136
10/31/96 18,260 20,181 14,181
11/29/96 18,553 20,550 14,208
12/31/96 18,486 20,464 14,208
1/31/97 18,493 20,503 14,254
2/28/97 18,637 20,691 14,298
Total Return 86.37% 106.91% 42.98%
</TABLE>
GRAPHIC MATERIAL (26)
This bar chart shows the comparison between the fund's Class II distribution
rate of 4.80% and the taxable equivalent rate of 8.59%.
GRAPHIC MATERIAL (27)
The following line graph hypothetically compares the performance of the fund's
Class II shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 5/1/95 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
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 $10,623 $10,966 $10,198
3/29/96 $10,492 $10,825 $10,251
4/30/96 $10,474 $10,795 $10,291
5/31/96 $10,490 $10,791 $10,310
6/28/96 $10,595 $10,908 $10,316
7/31/96 $10,692 $11,008 $10,336
8/30/96 $10,682 $11,005 $10,356
9/30/96 $10,823 $11,159 $10,389
10/31/96 $10,929 $11,286 $10,422
11/29/96 $11,098 $11,492 $10,442
12/31/96 $11,052 $11,444 $10,442
1/31/97 $11,051 $11,466 $10,475
2/28/97 $11,131 $11,571 $10,508
Total Return 11.31% 15.71% 5.08%
</TABLE>
Amendment to the Franklin Tax-Free Trust Annual Report Dated February 28, 1997
This amendment reflects changes to the Franklin Texas Tax-Free Income Fund
within the Franklin Tax-Free Trust Annual Report for the period ended February
28, 1997:
As Printed Correct Page
1-year average annual total return 1.45% 1.36% 70,71
1-year cumulative total return 5.91% 5.82% 71
Additionally, the Maryland tax rate for the Franklin Maryland Tax-Free Income
Fund should have been 44.1% on pages 45 and 47. Therefore, the following taxable
equivalent rates have changed:
As Printed Correct Page
Class I taxable equivalent distribution rate 9.48% 9.43% 45,47
Class I taxable equivalent yield 8.38% 8.34% 47
Class II taxable equivalent distribution rate 8.65% 8.60% 48,50
Class II taxable equivalent yield 7.55% 7.51% 50
Please keep this amendment with the annual report for future reference. If you
have any questions, please contact Franklin Templeton Fund Information at
1-800/342-5236.
FRANKLIN TAX-FREE TRUST
Annual Report
February 28, 1997
Franklin Alabama Tax-Free Income Fund
Franklin Florida Tax-Free Income Fund
Franklin Georgia Tax-Free Income Fund
Franklin Kentucky Tax-Free Income Fund
Franklin Lousinana Tax-Free Income Fund
Franklin Maryland Tax-Free Income Fund
Franklin Missouri Tax-Free Income Fund
Franklin North Carolina Tax-Free Income Fund
Franklin Texas Tax-Free Income Fund
Franklin Virginia Tax-Free Income Fund
Table of Contents Page
Message from the Chairman 1
Special Feature:
Q&A with the Municipal Bond Department 3
Fund Reports
Franklin Alabama
Tax-Free Income Fund 6
Franklin Florida
Tax-Free Income Fund 14
Franklin Georgia
Tax-Free Income Fund 22
Franklin Kentucky
Tax-Free Income Fund 30
Franklin Louisiana
Tax-Free Income Fund 35
Franklin Maryland
Tax-Free Income Fund 43
Franklin Missouri
Tax-Free Income Fund 51
Franklin North Carolina
Tax-Free Income Fund 59
Franklin Texas
Tax-Free Income Fund 67
Franklin Virginia
Tax-Free Income Fund 75
Glossary of Investment Terms 83
Statement of Investments 84
Financial Statements 130
Notes to Financial Statements 138
Report of Independent Auditors 146
MESSAGE FROM THE CHAIRMAN
April 15, 1997
Dear Shareholder:
It's a pleasure to bring you the Franklin Tax-Free Trust's annual report for
the period ended February 28, 1997.
Interest rates fluctuated within a relatively narrow range during this
12-month reporting period, as investors reacted to various U.S. economic
reports. The 30-year U.S. Treasury bond, for example, yielded 6.48% at the
beginning of the Trust's fiscal year yielding 6.48%. By August 31, 1996, the
yield on this bellwether issue had jumped to 7.13% following reports of a
strong gross domestic product growth rate in the second quarter. Many
investors anticipated that the Federal Reserve Board (the Fed) would raise
interest rates to help cool the economy. Instead, the Fed opted to allow the
market to determine interest rates. When the economy appeared to be slowing
down in late summer, interest rates began to fall. At the close of the period
on February 28, 1997, 30-year Treasuries were yielding 6.80%.* A range of
less than three-quarters of one percent over the year is considered
relatively narrow by recent standards.
*Source: Micropal.
For the year under review, fixed-income mutual funds lived in the shadow of a
very exciting and alluring stock market: large amounts of capital poured into
equity mutual funds in 1996, and the Dow Jones Industrial Average(R) set an
unprecedented 44 record high closings -- including closing above the 7000
point mark for the first time on February 13, 1997. It was rewarding,
however, to see that our shareholders didn't give into this "siren song" and,
in fact, demonstrated professional investment discipline by keeping some
balance in their portfolios' allocation of assets.
The November 1996 election results were well-received, and Federal Reserve
Chairman Alan Greenspan's ever vigilant position on inflation has been
reassuring, both domestically and to our foreign trading partners. Most
recently, Mr. Greenspan warned investors against becoming too euphoric in
feeling the markets will continue to rise. Of particular concern to some
observers are labor costs and the strength of the dollar.
We will continue to manage our funds for maximum tax-free income and stable
share value. It is important to remember that financial markets always have
been -- and probably always will be -- subject to fluctuation. No one can
predict the future performance of the securities markets, but history has
shown that, over the long term, stocks and bonds have delivered impressive
results when income is left to compound. For this reason, we encourage you to
review your investment program periodically with your investment
representative, and focus on your continuing long-term goals.
As a Franklin Templeton fund shareholder, you receive the benefits of
professional management and dedicated service. If you have any questions
concerning the funds in the Franklin Tax-Free Trust, we welcome the
opportunity to answer them.
We appreciate your support, welcome new shareholders, and look forward to
serving your investment needs in the years ahead.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
-- Celebrating 50 Years --
This year marks 50 years of business for Franklin Templeton. Over these
years, we have experienced profound changes in technology, regulations and
customer expectations within the mutual fund industry. As one of the largest
mutual fund families, we're proud to be an innovative industry leader,
providing people like you with an opportunity to invest in companies and
governments around the globe. We thank you for your past support and look
forward to serving your investment needs in the years ahead.
SPECIAL FEATURE: Q&A WITH THE MUNICIPAL BOND DEPARTMENT
Tom Kenny, director of Franklin's Municipal Bond Department, and portfolio
managers Don Duerson, Sheila Amoroso and Bernie Schroer discuss some issues
facing the municipal bond market.
1997 marks the start of a second presidential term for Bill Clinton. Do
you think his re-election was good news for the markets?
Tom Kenny: Market participants do not like uncertainty, so they appear
comfortable with the re-election of a Democratic president and a Republican
Congress. Alan Greenspan's reappointment as Federal Reserve Board Chairman
was also positive for the markets.
Why is that?
Tom: His monetary policy is designed to encourage low inflation with moderate
growth, which he has been able to accomplish.
Sheila Amoroso: We expect at least the first two quarters of 1997 to be
similar to 1996 with regard to growth and inflation, though it is difficult
to predict.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Alan Greenspan maintained a relatively neutral stance on monetary policy
throughout most of 1996. Do you see this carrying over into 1997?
Bernie Schroer: Possibly. As you know, we do not try to predict where rates
will be in the future. But, I think Greenspan will continue to look for signs
of above-trend growth, and will probably focus on wages and commodity prices.
At this point, wage inflation is moderate and companies do not feel they can
raise prices.
Don Duerson: The "threat" of higher rates seems to be sufficient to control
market expectations. Also, the recent strength of the dollar should have a
moderating effect on the economy by slowing export growth while keeping
import price inflation under control.
Floods in the Western U.S.: What impact do you see this having on state
finances, bond issuance, and bond ratings?
Sheila: Historically, very few bond issues are affected negatively by natural
disasters. At worst, some types of issues may be called and paid off from
insurance proceeds. Bond ratings are generally long term in nature and are
usually not affected by such short-term events. Most of the repair costs are
covered by insurance companies, the Federal Emergency Management Agency, and
state disaster relief funds.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Bernie: Generally, these disasters create an increase in construction
activity, however, which can contribute to increased economic growth in those
affected areas. The states of California, Oregon and Washington are leading
the country in economic growth and shouldn't be adversely affected by the
floods.
What kinds of bonds are you purchasing
for your funds?
Don: We try to choose bonds whose coupons provide higher income with lower
volatility than, for example, deep discount bonds with lower coupons. We feel
that the best relative value in the market today is in the insured sector.
The narrow quality spreads in the market are due to the low interest-rate
environment and the increase in volume of insured issues in the market. Close
to 50% of new issues came to market insured, taking more spread out of the
market.
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. Because
interest rates have been relatively low for most of the 1990s, investor
demand has increased for higher-yielding, lower-quality securities, which
drives the prices of these securities higher. This results in lower relative
yield differentials between lower-quality issues and AAA-rated insured bonds.
When this happens, it makes more sense for us to buy insured bonds.
Do you plan on changing your investment strategy in 1997?
Tom: Franklin employs a long-term "buy and hold" strategy, and our major
objective for the tax-free funds is to pay out high tax-free income. Our
portfolio managers don't speculate on the market by trying to predict future
interest rates. We use a consistent and disciplined long-term relative value
strategy toward meeting our objectives, and we plan on maintaining this
approach.
FRAKNLIN'S MUNICIPAL TRADING DESK PICTURE OMITTED
FRANKLIN ALABAMA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and Alabama
state personal income taxes through a portfolio consisting primarily of
Alabama municipal bonds.*
*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.
State Update
Alabama's economy grew faster than the rest of the nation as a whole during
most of the last ten years as it diversified away from manufacturing and
attracted new companies into the state. Several high-technology businesses,
as well as other new entrants to the state, were enticed by Alabama's
comprehensive transportation facilities and low cost-structure. In the last
six years, over $15 billion in outside capital investments was made by
companies such as Mercedes Benz. Although the state continues to have a per
capita personal income rate that is below average, these developments have
helped propel the growth of personal income to outpace the national average.+
+Source: Standard & Poor's State Review, 5/13/96.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Based in part on Alabama's expanding and diversifying economy, conservative
financial management, and low debt burden, Standard & Poor's(R), a national
credit rating agency, has rated its general obligation bonds AA.++
++This does not indicate Standard & Poor's rating of the fund.
Portfolio Notes
During the one-year reporting period, we continued to pursue our strategy of
investing for high levels of current ncome. Our holdings of pre-refunded
bonds decreased slightly as we continued to sell these securities. It is
advantageous to sell pre-refunded bonds as they approach five years to their
call date, and we are continually looking for opportunities to realize the
maximum gain possible on these bonds. Proceeds from these sales have been
invested in current coupon bonds, which we believe will be strong sources of
future tax-free income for the fund.
Franklin Alabama Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 31.5%
Hospitals 20.0%
General Obligation 12.9%
Industrial 11.0%
City 7.2%
Housing 6.5%
County 5.7%
Pre-Refunded 5.1%
Transportation 4.1%
Education 3.2%
Other Revenue 3.1%
Health Care 1.8%
Certificates of Participation .8%
For a complete list of portfolio holdings, please see page 84.
Performance Summary
Class I
The Franklin Alabama Tax-Free Income Fund - Class I share price, as measured
by net asset value, ended unchanged at $11.73 for the period from February
29, 1996, through February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 5.39%,
based on an annualization of the current, monthly dividend of 5.5 cents
($.055) per share and the maximum offering price of $12.25 on February 28,
1997. This double tax-free rate is generally higher than the after-tax return
on a comparable taxable investment. For example, an investor in the maximum
combined federal and Alabama state personal income tax bracket of 42.6% would
need to earn 9.39% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Alabama Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97*
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 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 or pay for
future investments. 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 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Alabama Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(9/01/87)
Cumulative Total Return1 5.84% 42.23% 108.39%
Average Annual Total Return2 1.35% 6.37% 7.54%
Distribution Rate3 5.39%
Taxable Equivalent Distribution Rate4 9.39%
30-Day Standardized Yield5 4.79%
Taxable Equivalent Yield4 8.34%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.5 cent per share monthly
dividend and the maximum offering price of $12.25 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin Alabama Tax-Free Income Fund - Class II share price, as measured
by net asset value, increased by one cent, from $11.77 on February 29, 1996,
to $11.78 on February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 4.94%,
based on an annualization of the current, monthly dividend of 4.90 cents
($.049) per share, plus an annual dividend adjustment of +.03 cent, and the
offering price of $11.90 on February 28, 1997. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable
investment. For example, an investor in the maximum combined federal and
Alabama state personal income tax bracket of 42.6% would need to earn 8.61%
from a taxable investment to match the fund's tax-free distribution rate.
Franklin Alabama Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 2/28/97*
Dividend
Month per Share
March 4.91 cents
April 4.93 cents
May 4.93 cents
June 4.93 cents
July 4.92 cents
August 4.92 cents
September 4.92 cents
October 4.93 cents
November 4.93 cents
December 4.93 cents
January 4.90 cents
February 4.90 cents
Total 59.05 cents
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 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 or pay for future investments. 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 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Alabama Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 5.28% 13.59%
Average Annual Total Return2 3.23% 6.64%
Distribution Rate3 4.94%
Taxable Equivalent Distribution Rate4 8.61%
30-Day Standardized Yield5 4.35%
Taxable Equivalent Yield4 7.58%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.90 cent per share monthly
dividend, plus an annual dividend adjustment of +.03 cent, and the offering
price of $11.90 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
FRANKLIN FLORIDA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal tax through
a portfolio consisting primarily of Florida municipal bonds.* In addition,
the fund's shares are free from Florida's annual intangibles tax.
*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.
State Update
During the fiscal year ended February 28, 1997, Florida's general obligation
bonds maintained a rating of AA from Standard & Poor's(R), a national rating
agency.+ This high rating reflects Standard & Poor's assessment of Florida's
expanding service-based economy, moderate debt level and sound financial
management.
+This does not indicate Standard & Poor's rating of the fund.
Florida enjoyed a prosperous year and continued to be one of the fastest
growing states in the nation in terms of population, employment and income
growth. Strong growth in the state's service and trade sectors, as well as
construction, helped reduce Florida's economic reliance on tourism and
agriculture. The state's economic and population growth have placed
increasing demands on the state government, escalating its debt. The debt
level remains moderate, however, and most of it is payable from specified
taxes. We maintain a positive outlook regarding the state and its debt.
GRAPHIC MATERIAL 9 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Portfolio Notes
During the one-year reporting period, the percentage of pre-refunded bonds in
the portfolio grew. As a result, the overall quality of the portfolio
increased, with a greater percentage of the bonds rated AAA. We took
advantage of the higher value realized from these pre-refunded bonds, by
selling them as they approached five years to their call dates. Proceeds from
their sales were invested in current coupon bonds with good call protection,
which we believe will be strong sources of future tax-free income for the
fund. We focused our new purchases on higher grade bonds (rated AA or better)
because the yields on BBB rated bonds were not high enough to compensate for
the additional risk. We hope to realize the full value of the securities we
are selling and to increase the future income of the fund.
Franklin Florida Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 24.0%
Pre-Refunded 18.8%
Transportation 11.6%
Hospitals 8.9%
Other Revenue 8.2%
Housing 7.3%
Special Assessment 5.7%
Certificates of Participation 5.4%
General Obligation 2.8%
Health Care 2.0%
Education 2.0%
Industrial 1.9%
Sales Tax 1.4%
For a complete list of portfolio holdings, please see page 88.
Performance Summary
Class I
The Franklin Florida Tax-Free Income Fund - Class I share price, as measured
by net asset value, decreased 10 cents, from $11.69 on February 29, 1996, to
$11.59 on February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 5.65%,
based on an annualization of the current, monthly dividend of 5.7 cents
($.057) per share and the maximum offering price of $12.10 on February 28,
1997. This tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum
federal income tax bracket of 39.6% would need to earn 9.35% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Florida Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97+
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
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 10 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 or pay for
future investments. 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 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Florida Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(9/01/87)
Cumulative Total Return1 5.20% 41.81% 112.91%
Average Annual Total Return2 .72% 6.31% 7.79%
Distribution Rate3 5.65%
Taxable Equivalent Distribution Rate4 9.35%
30-Day Standardized Yield5 4.78%
Taxable Equivalent Yield4 7.91%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.7 cent per share monthly
dividend and the maximum offering price of $12.10 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin Florida Tax-Free Income Fund - Class II share price, as measured
by net asset value, decreased nine cents, from $11.76 on February 29, 1996,
to $11.67 on February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 5.33%,
based on an annualization of the current, monthly dividend of 5.22 cents
($.0522) per share, plus an annual dividend adjustment of +.23 cents, and the
offering price of $11.79 on February 28, 1997. This tax-free rate is
generally higher than the after-tax return on a comparable taxable
investment. For example, an investor in the maximum federal personal income
tax bracket of 39.6% would need to earn 8.82% from a taxable investment to
match the fund's tax-free distribution rate.
Franklin Florida Tax-Free Income Fund - Class II
Dividend Distributions 2/29/96 - 2/28/97+
Dividend
Month per Share
March 5.18 cents
April 5.13 cents
May 5.13 cents
June 5.13 cents
July 5.07 cents
August 5.07 cents
September 5.07 cents
October 5.10 cents
November 5.10 cents
December 5.10 cents
January 5.22 cents
February 5.22 cents
Total 61.52 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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
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 or
pay for future investments. 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 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Florida Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 4.65% 12.91%
Average Annual Total Return2 2.61% 6.29%
Distribution Rate3 5.33%
Taxable Equivalent Distribution Rate4 8.82%
30-Day Standardized Yield5 4.37%
Taxable Equivalent Yield4 7.24%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 5.22 cent per share monthly
dividend, plus an annual dividend adjustment of +.23 cents, and the offering
price of $11.79 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
FRANKLIN GEORGIA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and Georgia
state personal income taxes through a portfolio consisting primarily of
Georgia municipal bonds.*
*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.
State Update
Georgia's general obligation bonds enjoy Moody's(R) highest rating of Aaa.+
This rating reflects the national rating agency's assessment of Georgia's
strong financial position, moderate debt levels, conservative fiscal
management and healthy economy. The state's broad-based economy continues to
experience growth in population, employment, and tax revenue. Strategically
placed in the Southeast, the state's well developed transportation system has
allowed it to prosper from this region's strong economic growth.
+This does not represent Moody's rating of the fund.
The state's vibrant economy, modest debt levels, conservative fiscal
policies, and relatively low tax-structure make Georgia, in our opinion, a
model of financial management. We continue to have a positive outlook for
both the state and its debt.
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Portfolio Notes
During the one-year reporting period, the fund's holdings were largely
unchanged. We continued our strategy of pursuing both higher quality and
increased income. Toward this end, we engaged in a limited number of
transactions only when an opportunity presented itself to improve the quality
of the portfolio and/or the income.
By purchasing higher-quality issues, we maintained a competitive yield and
improved the portfolio's credit quality. As of February 28, 1997, 82% of the
fund was invested in AAA and AA rated bonds.
Franklin Georgia Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 21.4%
Housing 12.6%
Transportation 12.5%
Hospitals 12.2%
Pre-Refunded 10.7%
General Obligation 7.9%
Industrial 7.9%
Education 7.3%
Certificates of Participation 3.5%
Other Revenue 3.1%
Health Care .9%
For a complete list of portfolio holdings, please see page 97.
Performance Summary
Class I
The Franklin Georgia Tax-Free Income Fund - Class I share price, as measured
by net asset value, decreased two cents, from $11.88 on February 29, 1996, to
$11.86 on February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 5.13%,
based on an annualization of the current, monthly dividend of 5.3 cents ($.053)
per share and the maximum offering price of $12.39 on February 28, 1997. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Georgia state personal income tax bracket of 43.2% would need to
earn 9.04% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin Georgia Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97+
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 5.3 cents
October 5.3 cents
November 5.3 cents
December 5.3 cents
January 5.3 cents
February 5.3 cents
Total 64.8 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 or pay for
future investments. 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 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Georgia Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(9/01/87)
Cumulative Total Return1 5.47% 40.73% 108.41%
Average Annual Total Return2 .97% 6.14% 7.55%
Distribution Rate3 5.13%
Taxable Equivalent Distribution Rate4 9.04%
30-Day Standardized Yield5 4.42%
Taxable Equivalent Yield4 7.78%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.3 cent per share monthly
dividend and the maximum offering price of $12.39 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin Georgia Tax-Free Income Fund - Class II share price, as measured
by net asset value, ended unchanged at $11.92 for the period from February
29, 1996, through February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 4.78%,
based on an annualization of the current, monthly dividend of 4.79 cents
($.0479) per share, plus an annual dividend adjustment of +.06 cents, and the
offering price of $12.04 on February 28, 1997. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable
investment. For example, an investor in the maximum combined federal and
Georgia state personal income tax bracket of 43.2% would need to earn 8.42%
from a taxable investment to match the fund's tax-free distribution rate.
Franklin Georgia Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
March 5.09 cents
April 4.93 cents
May 4.93 cents
June 4.93 cents
July 4.65 cents
August 4.65 cents
September 4.45 cents
October 4.75 cents
November 4.75 cents
December 4.75 cents
January 4.79 cents
February 4.79 cents
Total 57.46 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 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 or pay for future investments. 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 18 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Georgia Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 4.97% 12.58%
Average Annual Total Return2 2.93% 6.08%
Distribution Rate3 4.78%
Taxable Equivalent Distribution Rate4 8.42%
30-Day Standardized Yield5 4.00%
Taxable Equivalent Yield4 7.04%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.79 cent per share monthly
dividend, plus an annual dividend adjustment of +.06 cents, and the offering
price of $12.04 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
FRANKLIN KENTUCKY TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and
Kentucky state personal income taxes through a portfolio consisting primarily
of Kentucky municipal bonds.*
*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.
Commonwealth Update
During the fiscal year ended February 28, 1997, Kentucky's Infrastructure
Authority issues maintained an A rating and its State Property & Building
Commission issues an A+ from Standard & Poor's(R), a national rating agency.+
The ratings on these appropriation-backed issues (Kentucky no longer issues
general obligation debt) are based on Standard & Poor's assessment of
Kentucky's steadily expanding economic base, improving financial position and
manageable debt load.
+This does not indicate Standard & Poor's rating of the fund.
Since 1993, Kentucky's financial position has shown considerable improvement,
and its economy has grown at a rate above the national average for the past
seven years. Although still fairly dependent upon agriculture and heavy
manufacturing, Kentucky's economy is moving into services and modern
manufacturing. A large state-reserve balance established in 1995, and a trend
of decreasing debt issuances extending back to 1991, have helped strengthen
the state's financial position.++
GRAPHIC MATERIAL 19 OMITTED - SEE APPENDIX AT END OF DOCUMENT
++Source: Standard & Poor's Creditweek Municipal, 7/15/96.
Portfolio Notes
During the one-year reporting period, the supply of Kentucky-backed municipal
bonds decreased with $1.2 billion worth of bonds issued in 1996, compared with
$1.7 billion in 1995.++ Because the demand for these bonds should outweigh
supply, we believe Kentucky's municipal bonds will remain attractive
investments. We reduced our exposure to Kentucky's hospital and utility sectors
by diversifying into other sectors. A limited supply and strong demand for
Kentucky bonds helps them maintain their value, but this environment also limits
buying opportunities for the fund. Most of the attractive issues in Kentucky
were in the primary market. We participated in several attractive primary
offerings in the past fiscal year, including Christian County - Jennie Stuart
Medical Center, Jefferson County - Jewish Hospital, and Kentucky Housing Corp.
Single Family Revs.
++Source: Standard & Poor's Creditweek Municipal, 7/15/96.
Franklin Kentucky Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Hospitals 23.4%
Utilities 16.5%
Housing 12.4%
Transportation 10.1%
Other Revenue 9.8%
Industrial 8.8%
Education 7.0%
Certificates of Participation 5.8%
General Obligation 5.6%
Pre-Refunded .6%
For a complete list of portfolio holdings, please see page 101.
Performance Summary
The Franklin Kentucky Tax-Free Income Fund's share price, as measured by net
asset value, increased one cent, from $11.04 on February 29, 1996, to $ 11.05
on February 28, 1997.
At the end of this reporting period, the fund's distribution rate was 5.30%,
based on an annualization of the current, monthly dividend of 5.1 cents
($.0510) per share and the maximum offering price of $11.54 on February 28,
1997. This double tax-free rate is generally higher than the after-tax return
on a comparable taxable investment. For example, an investor in the maximum
combined federal and Kentucky state personal income tax bracket of 43.2%
would need to earn 9.33% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Kentucky Tax-Free Income Fund
Dividend Distributions (3/1/96 - 2/28/97)+
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
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
GRAPHIC MATERIAL 20 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund has exceeded the rate of
inflation as measured by the Consumer Price Index since 1992, keeping your
purchasing power well ahead of inflation -- a primary goal of any investment.
The fund 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 or pay for future investments. 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 consists of
municipal bonds 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.
GRAPHIC MATERIAL 21 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Kentucky Tax-Free Income Fund
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(10/12/91)
Cumulative Total Return1 5.86% 43.86% 48.18%
Average Annual Total Return2 1.36% 6.61% 6.72%
Distribution Rate3 5.30%
Taxable Equivalent Distribution Rate4 9.33%
30-Day Standardized Yield5 5.17%
Taxable Equivalent Yield4 9.10%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.1 cent per share monthly
dividend and the maximum offering price of $11.54 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Kentucky state personal income tax bracket of 43.2%,
based on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge, with dividends reinvested at the public offering price. Thus,
actual total returns for purchasers of shares during that period would have
been somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
The fund's manager agreed in advance to waive a portion of the management
fees, which reduces operating expenses and increases distribution rate,
yield, and total return to shareholders. Without this waiver, the fund's
distribution rate would have been lower, and yield for the period would have
been 4.75%. The fee waiver may be discontinued at any time upon notice to the
fund's Board of Trustees.
FRANKLIN LOUISIANA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and
Louisiana state personal income taxes through a portfolio consisting
primarily of Louisiana municipal bonds.*
*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.
State Update
During the fiscal year ended February 28, 1997, Louisiana's general
obligation debt maintained its A- rating from Standard & Poor's(R), a national
rating agency.+ The rating is based on Standard & Poor's assessment of
Louisiana's moderately high debt and cyclical economy.
+This does not indicate Standard & Poor's rating of the fund.
Although Louisiana possesses a debt level above the national average and its
industrial diversity remains low, with the state heavily reliant on the oil
and gas industry for employment, state revenue growth recently has been
stronger than expected. The state realized a $318 million budget surplus for
fiscal year 1996 as a result of stronger-than-expected revenue growth and the
return of unspent moneys to the general fund by state agencies. Much of this
large surplus will go towards paying off debt as required by current
Louisiana law.
GRAPHIC MATERIAL 22 OMITTED - SEE APPENDIX AT END OF DOCUMENT
These factors, coupled with a steadily improving economy, led to a marked
improvement in Louisiana's debt situation. Per capita debt dropped by 43%
since 1989, to $1,080.++
++Source: The Bond Buyer, 1/3/97.
Portfolio Notes
During the one-year reporting period, we concentrated purchases in AAA rated
bonds, since we believed BBB rated bond yields were not high enough to
justify taking on the extra credit risk. On February 28, 1997, 58.8% of the
fund was invested in AAA rated securities.
We funded the purchases of these securities largely through the sale of
pre-refunded bonds. We attempted to realize what we felt was the best value
for the pre-refunded bonds by selling them at an opportune time and,
consequently, obtained high grade debt securities with longer call
protection. These newer securities should ensure a more dependable future
income stream than the pre-refunded bonds we sold. This strategy is designed
to extend the fund's income-earning.
Franklin Louisiana Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 21.7%
Housing 16.3%
Pre-Refunded 14.8%
Hospitals 11.0%
Education 9.9%
Industrial 7.5%
Sales Tax Bonds 7.3%
Other Revenue 5.5%
General Obligation 3.5%
Certificates of Participation 1.5%
Transportation 1.0%
For a complete list of portfolio holdings, please see page 104.
Performance Summary
Class I
The Franklin Louisiana Tax-Free Income Fund - Class I share price, as
measured by net asset value, ended unchanged at $11.32 for the period from
February 29, 1996, through February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 5.48%,
based on an annualization of the current, monthly dividend of 5.4 cents
($.054) per share and the maximum offering price of $11.82 on February 28,
1997. This double tax-free rate is generally higher than the after-tax return
on a comparable taxable investment. For example, an investor in the maximum
combined federal and Louisiana state personal income tax bracket of 43.2%
would need to earn 9.65% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Louisiana Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97+
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
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 23 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 or pay for
future investments. 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 24 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Louisiana Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(9/01/87)
Cumulative Total Return1 5.94% 39.30% 106.45%
Average Annual Total Return2 1.46% 5.94% 7.44%
Distribution Rate3 5.48%
Taxable Equivalent Distribution Rate4 9.65%
30-Day Standardized Yield5 4.78%
Taxable Equivalent Yield4 8.42%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current, maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.4 cent per share monthly
dividend and the maximum offering price of $11.82 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin Louisiana Tax-Free Income Fund - Class II share price, as
measured by net asset value, remained unchanged at $11.37 for the period from
February 29, 1996, through February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 4.98%,
based on an annualization of the current, monthly dividend of 4.76 cents
($.0476) per share, plus an annual dividend adjustment of -.02 cents, and the
offering price of $11.48 on February 28, 1997. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable
investment. For example, an investor in the maximum combined federal and
Louisiana state personal income tax bracket of 43.2% would need to earn 8.77%
from a taxable investment to match the fund's tax-free distribution rate.
Franklin Louisiana Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
March 4.85 cents++
April 4.85 cents
May 4.85 cents
June 4.85 cents
July 4.92 cents
August 4.92 cents
September 4.92 cents
October 4.75 cents
November 4.75 cents
December 4.75 cents
January 4.76 cents
February 4.76 cents
Total 57.93 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
++Increased from 4.8 cents per share.
GRAPHIC MATERIAL 25 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 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 or pay for future investments. 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 26 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Louisiana Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 5.27% 13.31%
Average Annual Total Return2 3.27% 6.48%
Distribution Rate3 4.98%
Taxable Equivalent Distribution Rate4 8.77%
30-Day Standardized Yield5 4.33%
Taxable Equivalent Yield4 7.62%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.76 cent per share monthly
dividend, plus an annual dividend adjustment of -.02 cents, and the offering
price of $11.48 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
FRANKLIN MARYLAND TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and
Maryland state personal income taxes through a portfolio consisting primarily
of Maryland municipal bonds.*
*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.
State Update
During the fund's fiscal year ended February 28, 1997, Maryland's general
obligation bonds maintained the highest rating -- AAA -- from Standard &
Poor's(R), a national rating agency.+ This high rating reflects Standard &
Poor's favorable outlook on Maryland's diverse economy, relatively low
unemployment, sound fiscal policy and manageable debt burden.
+This does not indicate Standard & Poor's rating of the fund.
Maryland's diverse economy is characterized by a relatively high per capita
income, advanced infrastructure, and a well-educated and productive work
force. While the state's unemployment rate remains below the national
average, job losses in key sectors, such as financial services and federal
government, have tempered employment and economic growth in 1996.
Nonetheless, because Maryland's conservative fiscal management has allowed it
to increase its financial reserves, we believe the state's prudent debt
management makes its municipal bonds attractive investments.++
GRAPHIC MATERIAL 27 OMITTED - SEE APPENDIX AT END OF DOCUMENT
++Source: Standard & Poor's Creditweek Municipal, 12/16/96.
Portfolio Notes
During the one-year reporting period, we focused on purchasing primarily
high-grade bonds (AA or better), since we believed BBB rated bond yields were
not high enough to compensate for the added credit risk.
We also significantly reduced the percentage of pre-refunded bonds in the
portfolio, from 20.5% in February 1996 to 11.1% on August 31. These sale
proceeds were reinvested to help improve the fund's call protection and its
income-earning ability. Since the end of August we have further reduced (by
about 1%) our position in pre-refunded bonds and fine-tuned other areas of
the portfolio. The fund is well-diversified among coupons, credit ratings,
and maturities. We continue to look for opportunities to capture the maximum
tax-advantaged gain possible by selling the pre-refunded bonds we still hold.
Franklin Maryland Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Housing 23.8%
Utilities 20.5%
Other Revenue 12.9%
Pre-Refunded 10.4%
Hospitals 8.6%
Certificates of Participation 6.9%
General Obligation 6.5%
Education 6.4%
Transportation 4.0%
For a complete list of portfolio holdings, please see page 108.
Performance Summary
Class I
The Franklin Maryland Tax-Free Income Fund - Class I share price, as measured
by net asset value, decreased five cents, from $11.38 on February 29, 1996,
to $11.33 on February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 5.27%,
based on an annualization of the current, monthly dividend of 5.2 cents
($.052) per share and the maximum offering price of $11.83 on February 28,
1997. This double tax-free rate is generally higher than the after-tax return
on a comparable taxable investment. For example, an investor in the maximum
combined federal and Maryland state personal income tax bracket of 44.4%
would need to earn 9.48% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Maryland Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97+
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
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 28 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index since
1989, 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 or pay for
future investments. 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 29 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Maryland Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(10/03/88)
Cumulative Total Return1 5.24% 42.14% 85.58%
Average Annual Total Return2 .73% 6.36% 7.08%
Distribution Rate3 5.27%
Taxable Equivalent Distribution Rate4 9.48%
30-Day Standardized Yield5 4.66%
Taxable Equivalent Yield4 8.38%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.2 cent per share monthly
dividend and the maximum offering price of $11.83 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Maryland state personal income tax rate of 44.4%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin Maryland Tax-Free Income Fund - Class II share price, as
measured by net asset value, decreased four cents, from $11.44 on February
29, 1996, to $11.40 on February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 4.81%,
based on an annualization of the current, monthly dividend of 4.62 cents
($.0462) per share, plus an annual dividend adjustment of -.05 cents, and the
offering price of $11.52 on February 28, 1997. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable
investment. For example, an investor in the maximum combined federal and
Maryland state personal income tax bracket of 44.4% would need to earn 8.65%
from a taxable investment to match the fund's tax-free distribution rate.
Franklin Maryland Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
March 5.12 cents
April 4.65 cents
May 4.65 cents
June 4.65 cents
July 4.62 cents
August 4.62 cents
September 4.62 cents
October 4.68 cents
November 4.68 cents
December 4.68 cents
January 4.62 cents
February 4.62 cents
Total 56.21 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 30 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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
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 or
pay for future investments. 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 31 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Maryland Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 4.68% 14.04%
Average Annual Total Return2 2.60% 6.85%
Distribution Rate3 4.81%
Taxable Equivalent Distribution Rate4 8.65%
30-Day Standardized Yield5 4.20%
Taxable Equivalent Yield4 7.55%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.62 cent per share monthly
dividend, plus an annual dividend adjustment of -.05 cents, and the offering
price of $11.52 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Maryland state personal income tax rate of 44.4%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
FRANKLIN MISSOURI TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high current income exempt from regular federal and Missouri
state personal income taxes through a portfolio consisting primarily of
Missouri municipal bonds.*
*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.
State Update
During the one-year period ended February 28, 1997, Missouri's general
obligation debt maintained the highest possible rating -- AAA from Standard &
Poor's(R), a national rating agency.++ The rating is based on Standard & Poor's
favorable assessment of Missouri's low debt burden, prudent fiscal management
and diversified economy.
++This does not indicate Standard & Poor's rating of the fund.
The state's economic expansion has outpaced the national average in terms of
employment growth and increasing personal-income levels over the last two
years. Personal income is expected to increase 4.4% in 1997.+ Behind this
growth is an increase in service-sector jobs, primarily in health care,
computer services and gaming. In other positive developments, the state's
largest employer, McDonnell-Douglas, merged with industry leader Boeing, to
form the largest defense and avionics firm in the world. This is largely good
news for the state and for McDonnell-Douglas, whose future in civil-avionics
was questionable before the merger.
GRAPHIC MATERIAL 32 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Boeing has already announced it will retain its new, $13 billion Defense
Systems Group headquarters in St. Louis, and does not anticipate any
employment declines there.++
+Source: Standard & Poor's Creditweek Municipal, 3/18/96.
++Source: PRNewswire, 12/16/96.
The state's strong economic performance and prudent fiscal management have
allowed Missouri's general fund to post its fourth year of surplus.
Additionally, Missouri's reluctance to issue general obligation debt results
in a per-capita debt burden of only $247, nearly half the $431 national
average.+
Portfolio Notes
During the fiscal year, we sold pre-refunded bonds and reinvested the
proceeds in bonds with better call protection. Our exposure to pre-refunded
bonds decreased from 22.6% on February 29, 1996, to 18.1% on February 28,
1997. This strategy is designed to extend the fund's income-earning potential.
Roughly 42% of Missouri's bonds that came to market during the reporting
period were insured. Traditionally, insured bonds yield significantly less
than somewhat riskier, lower-quality issues. Recent market conditions,
however, have provided us with an opportunity to purchase the insured issues
at yields that are close to those of lower-quality issues. As a result, on
February 28, 1997, 60.2% of the portfolio was invested in AAA securities, and
approximately 40% of these issues were insured. Issues in which we
participated included the Missouri Health and Educational Facilities for St.
Louis University (insured), St. Louis Convention Center Sports Facility, and
the St. Louis Municipal Financial Corporation Lease Revenue Bond for the
Justice Center (insured).
The supply of Missouri bonds for 1996 was a relatively low $3.046 billion.
Because the supply for 1997 is expected to remain low, Missouri municipal
bonds should continue to be attractive investments.
Franklin Missouri Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Certificates of Participation 19.6%
Pre-Refunded 18.1%
Hospitals 12.3%
Utilities 9.7%
Housing 8.7%
Transportation 8.6%
Other Revenue 8.1%
Health Care 4.6%
Education 4.0%
General Obligation 3.0%
Industrial 2.0%
Tax Allocation Bonds 1.3%
For a complete list of portfolio holdings, please see page 111.
Performance Summary
Class I
The Franklin Missouri Tax-Free Income Fund - Class I share price, as measured
by net asset value, decreased 11 cents, from $11.94 on February 29, 1996, to
$11.83 on February 28, 1997.
In addition to distributing 64.8 cents ($0.648) per share in dividend income
during the reporting period, the fund also paid out a long-term capital gain
of 4.2 cents ($.042) per share in December 1996. Distributions will vary
depending on income earned by the fund, and any profits realized from the
sales of securities in the fund's portfolio. Past distributions are not
predictive of future trends. At the end of this reporting period, the fund's
distribution rate was 5.24%, based on an annualization of the current,
monthly dividend of 5.4 cents ($.054) per share and the maximum offering
price of $12.36 on February 28, 1997. This double tax-free rate is generally
higher than the after-tax return on a comparable taxable investment. For
example, an investor in the maximum combined federal and Missouri state
personal income tax bracket of 43.2% would need to earn 9.23% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Missouri Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97+
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
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 33 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 or pay for
future investments. 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 34 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Missouri Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(9/01/87)
Cumulative Total Return1 5.06% 42.38% 108.86%
Average Annual Total Return2 .59% 6.40% 7.57%
Distribution Rate3 5.24%
Taxable Equivalent Distribution Rate4 9.23%
30-Day Standardized Yield5 4.71%
Taxable Equivalent Yield4 8.29%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current, maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.4 cent per share monthly
dividend and the maximum offering price of $12.36 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin Missouri Tax-Free Income Fund - Class II share price, as
measured by net asset value, decreased 12 cents, from $11.97 on February 29,
1996, to $11.85 on February 28, 1997.
In addition to distributing 58.13 cents ($0.5813) per share in dividend
income during the reporting period, the fund also paid out a long-term
capital gain of 4.2 cents ($.042) per share in December 1996. Distributions
will vary depending on income earned by the fund, and any profits realized
from the sales of securities in the fund's portfolio. Past distributions are
not predictive of future trends. At the end of this reporting period, your
fund's distribution rate was 4.78%, based on an annualization of the current,
monthly dividend of 4.80 cents ($.048) per share, plus an annual dividend
adjustment of -0.33 cents, and the offering price of $11.97 on February 28,
1997. This double tax-free rate is generally higher than the after-tax return
on a comparable taxable investment. For example, an investor in the maximum
combined federal and Missouri state personal income tax bracket of 43.2%
would need to earn 8.42% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Missouri Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
March 5.03 cents
April 4.82 cents
May 4.82 cents
June 4.82 cents
July 4.91 cents
August 4.91 cents
September 4.91 cents
October 4.77 cents
November 4.77 cents
December 4.77 cents
January 4.80 cents
February 4.80 cents
Total 58.13 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 35 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 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 or pay for future investments. 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 36 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Missouri Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 4.32% 13.26%
Average Annual Total Return2 2.30% 6.43%
Distribution Rate3 4.78%
Taxable Equivalent Distribution Rate4 8.42%
30-Day Standardized Yield5 4.25%
Taxable Equivalent Yield4 7.48%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.80 cent per share monthly
dividend, plus an annual dividend adjustment of -0.33 cents, and the offering
price of $11.97 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
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 NORTHCAROLINA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and North
Carolina state personal income taxes through a portfolio consisting primarily
of North Carolina municipal bonds.*
*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.
State Update
During the fund's fiscal year ended February 28, 1997, North Carolina's
general obligation bonds maintained the highest possible rating -- AAA -- from
Standard & Poor's(R), a national rating agency. This high rating reflects
Standard & Poor's favorable assessment of North Carolina's increasingly
diversified economy, low debt levels and sound financial performance.+
+This does not indicate Standard & Poor's rating of the fund.
North Carolina ranks among the top ten states in economic growth, as measured
by gains in income, employment, and population. Its diversification into
financial services, research and high technology manufacturing helped
contribute to a 2.1% average gain in nonfarm jobs during the period, compared
with the national average of 1.4%. This trend should help reduce the state's
dependence on agriculture, textiles, and furniture manufacturing. In
addition, North Carolina continues its commitment to securing a sound
financial position through conservative budgeting principles.++
GRAPHIC MATERIAL 37 OMITTED - SEE APPENDIX AT END OF DOCUMENT
++Source: Moody's Municipal Credit Report, 1/10/97.
Portfolio Notes
During the one-year reporting period, we focused on your fund's core
strategy: maximizing tax-free income distributions while preserving equity.
We purchased primarily high-grade bonds (AA or better), since we felt the
yields on BBB rated bonds were not high enough to compensate for the extra
credit risk. On February, 28, 1997, 59.9% of your fund was invested in
high-grade bonds.
Although the supply of North Carolina municipal bonds remains light, thus
supporting their price, we did participate in new issues over the period,
including Concord, North Carolina Utilities, Martin Co. North Carolina
Weyerhauser, and North Carolina Medical Care for Wilson Memorial.
Franklin North Carolina Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 29.7%
Housing 14.5%
Certificates of Participation 14.1%
Hospitals 13.5%
Pre-Refunded 8.4%
Industrial 5.2%
General Obligation 4.7%
Other Revenue 3.8%
Education 2.5%
Health Care 1.9%
Transportation 1.1%
Sales Tax Revenue .6%
For a complete list of portfolio holdings, please see page 116.
Performance Summary
Class I
The Franklin North Carolina Tax-Free Income Fund - Class I share price, as
measured by net asset value, decreased two cents, from $11.75 on February 29,
1996, to $11.73 on February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 5.09%,
based on an annualization of the current, monthly dividend of 5.2 cents
($.0520) per share, plus an annual dividend adjustment of -.07 cent, and the
maximum offering price of $12.25 on February 28, 1997. This double tax-free
rate is generally higher than the after-tax return on a comparable taxable
investment. For example, an investor in the maximum combined federal and
North Carolina state personal income tax bracket of 44.3% would need to earn
9.14% from a taxable investment to match the fund's tax-free distribution
rate.
Franklin North Carolina Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
March 5.4 cents
April 5.4 cents
May 5.4 cents
June 5.2 cents
July 5.2 cents
August 5.2 cents
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 63.0 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 38 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 or pay for
future investments. 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 39 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin North Carolina Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(9/01/87)
Cumulative Total Return1 5.38% 39.74% 107.61%
Average Annual Total Return2 .91% 6.00% 7.51%
Distribution Rate3 5.09%
Taxable Equivalent Distribution Rate4 9.14%
30-Day Standardized Yield5 4.68%
Taxable Equivalent Yield4 8.40%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.2 cent per share monthly
dividend and the maximum offering price of $12.25 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and North Carolina 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin North Carolina Tax-Free Income Fund - Class II share price, as
measured by net asset value, decreased one cent, from $11.80 on February 29,
1996, to $11.79 on February 28, 1997.
At the end of this reporting period, your fund's distribution rate was 4.59%,
based on an annualization of the current, monthly dividend of 4.56 cents
($.0456) per share, plus an annual dividend adjustment of
- -.07 cent, and the offering price of $11.91 on February 28, 1997. This double
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum combined federal
and North Carolina state personal income tax bracket of 44.3% would need to
earn 8.24% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin North Carolina Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
March 5.05 cents
April 4.83 cents
May 4.83 cents
June 4.64 cents
July 4.70 cents
August 4.70 cents
September 4.70 cents
October 4.64 cents
November 4.64 cents
December 4.64 cents
January 4.56 cents
February 4.56 cents
Total 56.49 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 40 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 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 or pay for future investments. 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 41 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin North Carolina Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 4.83% 12.86%
Average Annual Total Return2 2.78% 6.22%
Distribution Rate3 4.59%
Taxable Equivalent Distribution Rate4 8.24%
30-Day Standardized Yield5 4.27%
Taxable Equivalent Yield4 7.66%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the curent 4.56 cents per share monthly
dividend, plus an annual dividend adjustment of -.07 cent, and the offering
price of $11.91 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
FRANKLIN TEXAS TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal income tax
through a portfolio consisting primarily of Texas municipal bonds.*
*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.
State Update
During the one-year period ended February 28, 1997, Standard & Poor's(R), a
national rating agency, maintained its AA rating on Texas' general obligation
debt.++ This strong rating is based on Standard & Poor's favorable outlook for
the state's increasingly diversified economy, low debt levels, and positive
employment and economic forecasts.
++This does not indicate Standard & Poor's rating of the fund.
Texas leads the nation in terms of economic expansion. Since 1990 the state
has added approximately 1.3 million jobs, nearly a 20% increase through the
end of 1996. In addition, wages increased by 5.5% in 1996.+ A resurgence in
construction, manufacturing, and services has broadened the state's economic
base, reducing its dependence on the oil and gas industry.
Texas possesses a strong debt position. However, despite its ability to
generate year-end cash surpluses in recent years, the state continues to face
budgetary pressures, as demand for medical assistance and education grows. In
addition, it may become more difficult for the state to balance its budget as
the impact of federal reforms on medical and welfare assistance is fully
realized.++
GRAPHIC MATERIAL 42 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Source: Texas Economic Quarterly, 12/96.
++Source: Moody's Municipal Credit Report, 12/4/96.
Portfolio Notes
During the one-year reporting period, the difference between yields of
higher-rated and lower-rated issues decreased. As a result, we focused our
efforts on purchasing AAA rated bonds, since we felt the yields available on
BBB rated bonds were not high enough to compensate for the added credit risk.
As of February 28, 1997, 63.8% of your fund was invested in AAA securities.
We funded the purchase of these securities largely through the sale of
pre-refunded bonds. We attempted to realize what we felt was the best value
for the pre-refunded bonds by selling them at an opportune time and,
consequently, obtained high-grade debt securities with longer call
protection. These new purchases should ensure a more dependable future income
stream. Traditionally, insured bonds yield significantly less than somewhat
riskier, lower-quality issues. Recent market conditions, however, have
provided us with an opportunity to purchase the insured issues at yields
close to those of lower-quality issues.
Franklin Texas Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Utilities 24.9%
Industrial 12.4%
Health Care 11.9%
Education 9.2%
Other Revenue 9.0%
Hospitals 8.8%
Transportation 8.1%
Pre-Refunded 7.7%
Housing 6.6%
General Obligation 1.4%
For a complete list of portfolio holdings, please see page 121.
Performance Summary
Class I
The Franklin Texas Tax-Free Income Fund - Class I share price, as measured by
net asset value, decreased 21 cents, from $11.58 on February 29, 1996, to
$11.37 on February 28, 1997.
In addition to distributing 67.2 cents ($0.672) per share in dividend income
during the reporting period, the fund also paid out a long-term capital gain
of 19.77 cents ($0.1977) per share in December 1996. Distributions will vary
depending on income earned by the fund, and any profits realized from the
sales of securities in the fund's portfolio. Past distributions are not
predictive of future trends. At the end of this reporting period, your fund's
distribution rate was 5.66%, based on an annualization of the current,
monthly dividend of 5.6 cents ($.0560) per share and the maximum offering
price of $11.87 on February 28, 1997. This tax-free rate is generally higher
than the after-tax return on a comparable taxable investment. For example, an
investor in the maximum federal income tax bracket of 39.6% would need to
earn 9.37% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Texas Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97+
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
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 43 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 or pay for
future investments. 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 44 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Texas Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(9/01/87)
Cumulative Total Return1 5.91% 41.06% 111.16%
Average Annual Total Return2 1.45% 6.20% 7.70%
Distribution Rate3 5.66%
Taxable Equivalent Distribution Rate4 9.37%
30-Day Standardized Yield5 4.63%
Taxable Equivalent Yield4 7.67%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current, maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.6 cent per share monthly
dividend and the maximum offering price of $11.87 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin Texas Tax-Free Income Fund's - Class II share price, as measured
by net asset value, decreased 19 cents, from $11.68 on February 29, 1996, to
$11.49 on February 28, 1997.
In addition to distributing 61.28 cents ($0.6128) per share in dividend
income during the reporting period, the fund also paid out a long-term
capital gain of 19.77 cents ($0.1977) per share in December 1996.
Distributions will vary depending on income earned by the fund, and any
profits realized from the sales of securities in the fund's portfolio. Past
distributions are not predictive of future trends. At the end of this
reporting period, your fund's distribution rate was 5.20%, based on an
annualization of the current, monthly dividend of 5.04 cents ($.0504) per
share, plus an annual dividend adjustment of -.10 cent, and the offering
price of $11.61 on February 28, 1997. This tax-free rate is generally higher
than the after-tax return on a comparable taxable investment. For example, an
investor in the maximum federal personal income tax bracket of 39.6% would
need to earn 8.61% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Texas Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
March 5.21 cents
April 5.04 cents
May 5.04 cents
June 5.04 cents
July 5.05 cents
August 5.05 cents
September 5.05 cents
October 5.24 cents
November 5.24 cents
December 5.24 cents
January 5.04 cents
February 5.04 cents
Total 61.28 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions and total return calculations include all accrued income
earned by the fund during the reporting period.
GRAPHIC MATERIAL 45 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 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 or pay for future investments. 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 46 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Texas Tax-Free Income Fund - Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 5.48% 14.02%
Average Annual Total Return2 3.43% 6.86%
Distribution Rate3 5.20%
Taxable Equivalent Distribution Rate4 8.61%
30-Day Standardized Yield5 4.20%
Taxable Equivalent Yield4 6.95%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the period indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 5.04 cent per share monthly
dividend, plus an annual dividend adjustment of -.10 cent, and the offering
price of $11.61 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you
sell your shares. Past performance is not predictive of future results.
FRANKLIN VIRGINIA TAX-FREE INCOME FUND
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and
Virginia state personal income taxes through a portfolio consisting primarily
of Virginia municipal bonds.*
*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.
Commonwealth Update
During the one-year reporting period ended February 28, 1997, Virginia's
general obligation bonds continued to receive the highest quality rating from
both Moody's (Aaa) and Standard & Poor's(R) (AAA), two national rating
agencies.++ These high ratings are based on the rating agencies' favorable
assessments of Virginia's low debt levels, sound financial management and
increasingly diverse economic base.
++This does not indicate Standard & Poor's or Moody's, ratings, of the fund.
Virginia's economy continues to be one of the strongest in the nation. The
driving force behind this growth and an important cause of increased economic
diversification away from the defense industry, has been the growth of the
high-technology sector. The state has attracted companies such as Motorola
Inc., IBM and Toshiba, who plan to build major plants in Virginia over the
next several years. Virginia's financial position remained strong over the
period and there was no increase in state debt.+
+Source: The Bond Buyer, 1/9/97, 1/10/97.
GRAPHIC MATERIAL 47 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Portfolio Notes
Governor George Allen kept his pledge to avoid issuing new state debt in
1996. The stable supply of Virginia municipal bonds, coupled with current
economic conditions, contribute to our positive outlook for the fund.
During the fiscal year, we tried to protect the fund's long-term
income-producing potential by extending the call protection of its issues. We
sold securities with shorter calls and purchased bonds providing longer call
protection. In tandem with this, we sold pre-refunded bonds, at what we
determined to be an opportune time, and again, we used the proceeds to
purchase securities with longer call protection.
Franklin Virginia Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
Housing 18.9%
Utilities 18.2%
Hospitals 15.9%
Pre-Refunded 12.8%
Transportation 10.4%
Industrial 8.0%
Education 5.5%
Other Revenue 5.2%
Certificates of Participation 3.0%
General Obligation 2.0%
Health Care 0.1%
For a complete list of portfolio holdings, please see page 125.
Performance Summary
Class I
The Franklin Virginia Tax-Free Income Fund - Class I share price, as measured
by net asset value, decreased seven cents, from $11.72 on February 29, 1996,
to $11.65 on February 28, 1997.
In addition to distributing 64.8 cents ($0.648) per share in dividend income
during the reporting period, the fund also paid out a long-term capital gain
of 0.4 cents ($.004) per share in December 1996. Distributions will vary
depending on income earned by the fund, and any profits realized from the
sales of securities in the fund's portfolio. Past distributions are not
predictive of future trends. At the end of this reporting period, your fund's
distribution rate was 5.32%, based on an annualization of the current,
monthly dividend of 5.4 cents ($.054) per share and the maximum offering
price of $12.17 on February 28, 1997. This double tax-free rate is generally
higher than the after-tax return on a comparable taxable investment. For
example, an investor in the maximum combined federal and Virginia state
personal income tax bracket of 43.1% would need to earn 9.35% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Virginia Tax-Free Income Fund - Class I
Dividend Distributions 3/1/96 - 2/28/97+
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
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 48 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class I shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 or pay for
future investments. 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 49 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Virginia Tax-Free Income Fund - Class I
Periods ended February 28, 1997
Since
Inception
1-Year 5-Year(9/01/87)
Cumulative Total Return1 5.15% 41.29% 109.15%
Average Annual Total Return2 .68% 6.23% 7.58%
Distribution Rate3 5.32%
Taxable Equivalent Distribution Rate4 9.35%
30-Day Standardized Yield5 4.68%
Taxable Equivalent Yield4 8.22%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the sales charge. See Note below.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the current, maximum
4.25% initial sales charge. See Note below.
3. Based on an annualization of the current, 5.4 cent per share monthly
dividend and the maximum offering price of $12.17 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which affects subsequent performance.
All total return calculations assume reinvestment of dividends and capital
gains at net asset value, and 12b-1 fees from the date of the plan's
implementation. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Performance Summary
Class II
The Franklin Virginia Tax-Free Income Fund - Class II share price, as
measured by net asset value, decreased six cents, from $11.77 on February 29,
1996, to $11.71 on February 28, 1997.
In addition to distributing 58.11 cents ($0.5811) per share in dividend
income during the reporting period, the fund also paid out a long-term
capital gain of 0.4 cents ($.004) per share in December 1996. Distributions
will vary depending on income earned by the fund, and any profits realized
from the sales of securities in the fund's portfolio. Past distributions are
not predictive of future trends. At the end of this reporting period, your
fund's distribution rate was 4.90%, based on an annualization of the current,
monthly dividend of 4.83 cents ($.0483) per share, plus an annual dividend
adjustment of +.06 cents, and the offering price of $11.83 on February 28,
1997. This double tax-free rate is generally higher than the after-tax return
on a comparable taxable investment. For example, an investor in the maximum
combined federal and Virginia state personal income tax bracket of 43.1%
would need to earn 8.61% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Virginia Tax-Free Income Fund - Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
March 4.92 cents
April 4.83 cents
May 4.83 cents
June 4.83 cents
July 4.85 cents
August 4.85 cents
September 4.85 cents
October 4.83 cents
November 4.83 cents
December 4.83 cents
January 4.83 cents
February 4.83 cents
Total 58.11 cents
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
day you purchased your shares and any account activity during the month.
Income distributions include all accrued income earned by the fund during the
reporting period.
GRAPHIC MATERIAL 50 OMITTED - SEE APPENDIX AT END OF DOCUMENT
As illustrated by the chart to the right, your fund's Class II shares have
exceeded the rate of inflation as measured by the Consumer Price Index 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 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 or pay for future investments. 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 51 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Virginia Tax-Free Income Fund -- Class II
Periods ended February 28, 1997
Since
Inception
1-Year(5/01/95)
Cumulative Total Return1 4.61% 12.91%
Average Annual Total Return2 2.57% 6.29%
Distribution Rate3 4.90%
Taxable Equivalent Distribution Rate4 8.61%
30-Day Standardized Yield5 4.22%
Taxable Equivalent Yield4 7.42%
1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes the 1.0% initial
sales charge and 1.0% contingent deferred sales charge, applicable to shares
redeemed within the first 18 months of investment.
3. Based on an annualization of the current 4.83 cent per share monthly
dividend, plus an annual dividend adjustment of +.06 cents, and the offering
price of $11.83 on February 28, 1997.
4. Taxable equivalent distribution rate and yield assume the 1997 maximum
combined federal and Virginia state personal income tax rate of 43.1%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
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.
GLOSSARY OF INVESTMENT TERMS
Call Protection: the length of time during which a bond cannot be redeemed by
its issuer.
Coupon: the interest rate on a bond that the issuer promises to pay to the
holder until the bond matures.
Full-Coupon Bond: a bond with a coupon rate that is at, or near, current
market interest rates.
High-Grade Bond/High-Quality Bond: a bond rated AAA or AA by Standard &
Poor's(R) or Aaa or Aa by Moody's Investors Service -- two national
credit-rating agencies.
Investment-Grade Bond: a bond with a rating of AAA to BBB-, usually within
the top-four rating categories assigned to bonds.
Non-Rated Bonds: a bond that has not been rated by one or more of the major
rating agencies. Issues are usually non-rated because they are too small to
justify the expense of getting a rating. In many instances, just because a
bond is non-rated by an agency, it does not mean it has a lower credit rating.
Pre-Refunded Bond: A bond that will be paid off at its first call date with
proceeds of the sale of a second bond carrying a lower interest rate.
Primary Market: the market for new issues of securities; a market is
"primary" if the issuer of the securities receives the proceeds of the sale.
Secondary Market: a market where previously issued securities are bought and
sold; the selling dealers and investors receive the proceeds, not the issuer.
Underwriter: an investment banker who agrees to purchase a new issue of
securities from an issuer and distribute it to investors, making a profit on
the underwriting spread.
Weighted Average Maturity: the weighted average of all individual maturities
in the portfolio based on their par values.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Alabama Tax-Free Income Fund (Note 1)
Long Term Investments 97.7%
<C> <S> <C>
$ 1,500,000 Alabama Building Renovation Financing Authority Revenue, 7.45%, 09/01/11 ..................... $ 1,657,320
Alabama HFA, SFMR, GNMA Secured,
490,000 Series A, 7.50%, 10/01/10 .................................................................. 515,078
125,000 Series A, 8.00%, 10/01/20 .................................................................. 129,555
3,440,000 Series A-1, 6.50%, 04/01/17 ................................................................ 3,540,517
1,225,000 Series A-2, 6.80%, 04/01/25 ................................................................ 1,282,257
285,000 Series C, 7.45%, 10/01/21 .................................................................. 296,223
1,020,000 Series C-2, 7.75%, 04/01/22 ................................................................ 1,064,380
1,395,000 Alabama Judicial Building Authority Revenue, Judicial Facilities Project, AMBAC Insured, Pre-Refunded,
7.25%, 01/01/14 ............................................................................. 1,545,242
4,500,000 Alabama State Docks Department, Docks Facilities Revenue, MBIA Insured, 6.30%, 10/01/21 ...... 4,699,080
2,000,000 Alabama State IDA, Solid Waste Disposal Revenue, Pine City Fiber Co., 6.45%, 12/01/23 ........ 2,009,600
250,000 Alabama State University Dormitory Revenue, Pre-Refunded, 8.00%, 01/01/14 .................... 273,660
3,200,000 Alabama Water Pollution Control Authority, Revolving Fund Loan, Series B, 7.75%, 08/15/12 .... 3,403,840
2,215,000 Alabaster Water and Gas Board Revenue, AMBAC Insured, 6.35%, 09/01/14 ........................ 2,373,018
750,000 Albertville GO, Warrants, MBIA Insured, 7.00%, 04/01/11 ...................................... 810,885
115,000 Alexander City GO, Warrants, Refunding, Series 1988, Pre-Refunded, 7.90%, 05/01/08 ........... 118,062
2,000,000 Alexander City Utility Revenue, Warrants, FSA Insured, 6.20%, 08/15/10 ....................... 2,136,620
250,000 Anniston Regional Medical Center Board, Hospital Revenue, Refunding, Northeast Alabama Regional
Medical Center Project, Series A, 7.70%, 07/01/08 ........................................... 256,170
1,000,000 Athens Electric Revenue, Warrants, MBIA Insured, 6.00%, 06/01/25 ............................. 1,029,170
1,500,000 Athens Water and Sewer Revenue, Warrants, AMBAC Insured, 6.10%, 08/01/18 ..................... 1,571,055
1,520,000 Auburn Governmental Utility Services Corp., Waste Water Treatment Revenue, Merscot-Auburn L.P.
Project, FGIC Insured, 7.30%, 01/01/12 ...................................................... 1,636,462
2,000,000 Auburn University General Fee Revenue, Refunding, 7.00%, 06/01/11 ............................ 2,204,320
1,000,000 Bessemer Medical Clinic Board Revenue, Refunding, Bessemer Carraway Center, Series A,
MBIA Insured, 7.25%, 04/01/15 ............................................................... 1,077,800
500,000 Birmingham Airport Authority Revenue, Series 1990-A, AMBAC Insured, 7.375%, 07/01/10 ......... 544,940
Birmingham Baptist Medical Center, Special Care Facilities Financing Authority Revenue, MBIA Insured,
3,500,000 Refunding, Baptist Health System, Inc., 5.875%. 11/15/19 ................................... 3,545,430
1,870,000 Series A, 7.00%, 01/01/21 .................................................................. 2,012,494
Birmingham GO, Refunding,
145,000 8.00%, 10/01/15 ............................................................................ 150,407
1,000,000 Series B, 6.25%, 04/01/12 .................................................................. 1,055,980
1,000,000 Series B, 6.25%, 04/01/16 .................................................................. 1,049,960
Birmingham-Jefferson Civic Center Authority, Special Tax, Capital Outlay,
285,000 7.40%, 01/01/08 ............................................................................ 303,913
640,000 7.25%, 01/01/12 ............................................................................ 665,395
1,200,000 Birmingham Special Care Facilities Financing Authority Revenue, Health Care Medical Center East,
MBIA Insured, 7.00%, 07/01/12 ............................................................... 1,305,168
2,000,000 Birmingham Special Care Facilities Financing Authority Revenue, Refunding, Medical Center East,
MBIA Insured, 7.25%, 07/01/15 ............................................................... 2,031,840
3,250,000 Camden IDB, PCR, Facilities Revenue, Refunding, MacMillian Bloedel Project, Series A, 7.75%,
05/01/09 .................................................................................... 3,507,303
500,000 Citronelle IDB, PCR, Stauffer Chemical Project, Guaranteed by Imperial Chemical Plc., Series 1982,
8.00%, 12/01/12 ............................................................................. 556,605
1,000,000 Coffee County PBA, Building Revenue, Warrants, FSA Insured, 6.10%, 09/01/16 .................. 1,031,670
1,750,000 Colbert County Health Care Authority, Helen Keller Hospital, 8.75%, 06/01/09 ................. 1,925,193
5,000,000 Columbia IDB, PCR, Refunding, Alabama Power Co. Project, AMBAC Insured, 6.50%, 09/01/23 ...... 5,278,750
2,000,000 Courtland IDB, Environmental Improvement Revenue, Refunding, Champion International Corp. Project,
6.40%, 11/01/26 ............................................................................. 2,009,560
Courtland IDB, Solid Waste Disposal Revenue, Champion International Corp. Project,
$ 505,000 7.75%, 01/01/20 ............................................................................ $ 539,784
5,000,000 Series A, 6.50%, 09/01/25 .................................................................. 5,072,000
4,000,000 Courtland IDBR, Refunding, Champion International Corp. Project, Series A, 7.20%, 12/01/13 ... 4,357,920
2,000,000 Cullman Water Revenue, Warrants, Series A, AMBAC Insured, 6.20%, 10/01/12 .................... 2,083,800
2,000,000 Daphne Utilities Board, Water, Gas and Sewer Revenue, Refunding, Series A, FGIC Insured,
Pre-Refunded, 7.35%, 06/01/20 ................................................................ 2,217,260
200,000 Decatur GO, Warrants, Series A, Pre-Refunded, 7.60%, 05/01/09 ................................ 205,234
1,400,000 Demopolis HDC, MFHR, Refunding, Series 1990-A, FSA Insured, 7.625%, 08/01/19 ................. 1,457,988
3,500,000 Fairfield IDB, Environmental Improvement Revenue, Refunding, USX Corp. Project, Series A, 6.70%,
12/01/24 .................................................................................... 3,678,990
3,000,000 Fairfield, Warrants, AMBAC Insured, 6.30%, 06/01/22 .......................................... 3,190,920
1,565,000 Gadsden HDC, MFR, Refunding, Series A, 7.00%, 01/01/22 ....................................... 1,615,409
1,000,000 Guam Airport Authority Revenue, Series A, Refunding, 6.50%, 10/01/23 ......................... 1,031,710
1,935,000 Gulf Shores GO, Refunding, Warrants, AMBAC Insured, 6.00%, 09/01/21 .......................... 2,015,593
6,000,000 Helena Utilities Board, Water and Sewer Revenue, MBIA Insured, 5.75%, 09/01/25 ............... 6,014,940
430,000 Homewood Special Care Facilities Financing Authority, Hospital Revenue, Lakeshore Hospital Project,
Refunding, Series B, Pre-Refunded, 8.25%, 02/01/04 .......................................... 463,721
2,070,000 Houston County Health Care Authority Revenue, Southeast Alabama Medical Center, MBIA Insured,
6.125%, 10/01/12 ............................................................................ 2,152,220
2,175,000 Huntsville Health Care Authority Facilities Revenue, Series B, MBIA Insured, 6.50%, 06/01/13 . 2,356,874
230,000 Huntsville Solid Waste Disposal Authority and Resource Recovery Revenue, FGIC Insured, 7.00%,
10/01/14 .................................................................................... 246,376
1,000,000 Jasper County Waterworks & Sewer Board, Water and Sewer Revenue, AMBAC Insured, 6.15%,
06/01/14 .................................................................................... 1,056,870
200,000 Jefferson County GO, Warrants, Pre-Refunded, 7.50%, 04/01/07 ................................. 211,536
200,000 Jefferson County Sewer Revenue, Warrants, ETM, 7.50%, 09/01/13 ............................... 213,638
1,255,000 LCM Housing Assistance Corp. Project, MFR, Refunding, Series A, 7.875%, 01/01/22 ............. 1,304,246
1,050,000 Limestone County Water Authority Revenue, FGIC Insured, 7.70%, 12/01/19 ...................... 1,110,858
500,000 Madison County PBA Revenue, Warrants, 6.90%, 11/01/11 ........................................ 534,480
Madison GO, Warrants, MBIA Insured,
2,000,000 6.00%, 04/01/23 ............................................................................ 2,090,600
1,560,000 Series B, 6.25%, 02/01/15 .................................................................. 1,657,204
2,290,000 Madison School, Warrants, MBIA Insured, 6.25%, 02/01/14 ...................................... 2,432,690
Marshall County Health Care Authority Hospital Revenue,
2,530,000 Crossover Refunding, Guntersville-Arab Medical Center, 7.60%, 10/01/07 ..................... 2,749,047
10,810,000 Refunding, Boaz-Albertville Medical Center, 6.50%, 01/01/18 ................................ 10,854,645
1,000,000 Mobile Airport Authority Revenue, Mae Project, 7.375%, 11/01/12 .............................. 1,065,620
1,500,000 Mobile Commission of Water and Sewer Revenue, Refunding, 6.50%, 01/01/09 ..................... 1,621,545
45,000 Mobile GO, Warrants, Capital Improvements, Pre-Refunded, 7.90%, 08/15/11 ..................... 46,760
1,340,000 Mobile Housing Assistance Corp., MFHR, Refunding, Series 1990-A, FSA Insured, 7.625%, 02/01/21 1,395,248
8,000,000 Mobile IDB, Mobile Energy Service Co. Project, Solid Waste Disposal Revenue, Refunding, 6.95%,
1/01/20 ...................................................................................... 8,447,520
155,000 Montgomery Downtown RDA Mortgage Revenue, State of Alabama Project, MBIA Insured,
Pre-Refunded, 7.75%, 10/01/13 ................................................................ 167,048
6,000,000 Montgomery Medical Clinic Board, Health Care Facilities Revenue, Jackson Hospital and Clinic,
Refunding, AMBAC Insured, 6.00%, 03/01/26 ................................................... 6,135,600
5,750,000 Morgan County, Decatur Health Care Revenue, Refunding, Decatur General Hospital,
Connie Lee Insured, 6.375%, 03/01/24 ........................................................ 6,019,963
1,500,000 Moulton Waterworks Board, Water Revenue, Series A, 6.30%, 01/01/18 ........................... 1,472,730
Muscle Shoals GO, Refunding, Warrants, MBIA Insured,
1,725,000 5.80%, 08/01/16 ............................................................................ 1,758,396
4,000,000 5.90%, 08/01/25 ............................................................................ 4,077,040
Northeast Alabama Water, Sewer and Fire Protection District Revenue, AMBAC Insured,
$ 2,000,000 6.375%, 05/01/22 ........................................................................... $ 2,109,440
30,000 Pre-Refunded, 7.90%, 05/01/15 .............................................................. 31,967
200,000 Northport GO, Warrants, FGIC Insured, Pre-Refunded, 7.70%, 12/01/13 .......................... 216,556
5,000,000 Oneonta Utilities Board Revenue, FSA Insured, 6.90%, 11/01/24 ................................ 5,439,050
3,640,000 Orange Beach Water, Sewer and Fire Protection Authority Revenue, Pre-Refunded, 7.50%, 05/01/22 4,161,212
Pelham GO, Warrants, AMBAC Insured, 6.25%,
1,000,000 11/01/12 ................................................................................... 1,059,060
2,500,000 11/01/22 ................................................................................... 2,662,200
780,000 Piedmont IDB, IDR, Springs Industrial Project, 8.25%, 09/01/10 ............................... 850,801
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
500,000 7.90%, 07/01/07 ............................................................................ 537,015
175,000 7.875%, 07/01/17 ........................................................................... 187,899
Puerto Rico Commonwealth Highway Authority Revenue,
600,000 Refunding, Series R, 7.15%, 07/01/00 ....................................................... 647,352
155,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ................................................... 166,816
175,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A, 7.90%,
07/01/07 ..................................................................................... 185,791
300,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Commonwealth Appropriation,
Refunding, 7.875%, 10/01/04 ................................................................. 327,366
Puerto Rico Electric Power Authority Revenue, Refunding,
15,000 Series L, Pre-Refunded, 8.40%, 07/01/15 .................................................... 15,536
350,000 Series M, Pre-Refunded, 8.00%, 07/01/08 .................................................... 376,121
355,000 Series N, 7.00%, 07/01/07 .................................................................. 377,756
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
Upjohn Co. Project, 7.50%, 12/01/23 ......................................................... 216,375
40,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded, 7.875%,
07/01/16 .................................................................................... 41,375
Russell County PBA Revenue, 01/01/14,
1,900,000 Phenix City Jail Project, Warrants, 7.125%.................................................. 1,938,911
200,000 Russell County Jail Project, Pre-Refunded, 8.50%............................................ 218,807
4,925,000 Tuscaloosa, Warrants, AMBAC Insured, 6.75%, 07/01/20 ......................................... 5,273,641
5,000,000 West Jefferson IDB, PCR, Refunding, Alabama Power Co., Miller Plant Co., Series C, MBIA Insured,
6.05%, 05/01/23 ............................................................................. 5,079,650
3,000,000 West Morgan-East Lawrence Water Authority, Water Revenue, Refunding, FGIC Insured, 5.625%,
08/15/25 .................................................................................... 2,960,070
3,500,000 Wilsonville IDB, PCR, Refunding, Southern Electric Generating System, Series C, MBIA Insured,
6.75%, 02/01/15 ............................................................................. 3,737,580
------------
Total Long Term Investments (Cost $184,349,086)......................................... 194,547,292
------------
aShort Term Investments 0.4%
300,000 Columbia IDB, PCR, Refunding, Alabama Power Co. Project, Series D, Daily VRDN and Put, 3.45%,
10/01/22 .................................................................................... 300,000
300,000 North Environmental Improvement Authority, PCR, DATES, Reynold Metals, Refunding, Daily VRDN
and Put, 3.50%, 12/01/00 .................................................................... 300,000
300,000 Stevenson IDB, Environmental Improvement Revenue, DATES, Refunding, Mead Corp. Project, Daily
VRDN and Put, 4.40% 11/01/16 ................................................................ 300,000
------------
Total Short Term Investments (Cost $900,000) ........................................... 900,000
------------
Total Investments (Cost $185,249,086) 98.1% ....................................... 195,447,292
Other Assets and Liablities, Net 1.9% ............................................. 3,701,045
------------
Net Assets 100.0% ................................................................. $199,148,337
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $185,249,836 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 10,218,832
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (21,376)
------------
Net unrealized appreciation ................................................................ $ 10,197,456
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
DATES - Demand Adjustable Tax-Exempt Securities
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
IDA - Industrial Development 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.
MFHR - Multi-Family Housing Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Florida Tax-Free Income Fund (Note 1)
Long Term Investments 98.0%
<C> <S> <C>
Bonds 94.5%
Alachua County Health Facilities Authority Revenue,
$ 6,705,000 Refunding, Santa Fe Health Care Facilities Project, Pre-Refunded, 7.60%, 11/15/13 ......... $ 7,579,667
12,000,000 Shands Teaching Hospital, Series A, MBIA Insured, 5.80%, 12/01/26 ......................... 12,131,160
5,755,000 Alachua County Public Improvement Revenue, Refunding, FSA Insured, 5.375%, 08/01/17 ......... 5,618,837
2,000,000 Atlantic Beach Utilities Systems Revenue, MBIA Insured, 5.50%, 10/01/25 ..................... 1,960,380
11,205,000 Bay County Hospital System Revenue, Refunding, Bay Medical Center Project, Pre-Refunded,
8.00%, 10/01/12,............................................................................ 13,695,087
Bay County Resource Recovery Revenue, Refunding, MBIA Insured, 6.60%,
3,710,000 Series A, 07/01/11 ........................................................................ 4,063,007
18,150,000 Series B, 07/01/12 ........................................................................ 19,876,973
Bay County Water System Revenue, Refunding, AMBAC Insured,
525,000 6.50%, 09/01/07 ........................................................................... 577,847
675,000 6.60%, 09/01/11 ........................................................................... 740,671
13,130,000 Bay Medical Center, Hospital Revenue, Refunding, Bay Medical Center Project, AMBAC Insured,
5.60%, 10/01/19 ............................................................................ 13,062,774
4,000,000 Boynton Beach Public Service Tax Revenue, MBIA Insured, Pre-Refunded, 7.50%, 11/01/10 ....... 4,449,840
5,000,000 Brevard County Health Facilities Authority Revenue, Refunding, Wuesthoff Memorial Hospital,
Series B, Pre-Refunded, 7.20%, 04/01/13 .................................................... 5,673,500
1,670,000 Brevard County HFA, SFMR, Refunding, Series B, FSA Insured, 7.00%, 03/01/13 ................. 1,763,236
4,415,000 Brevard County School Board COP, Series A, Refunding, AMBAC Insured, 5.40%, 07/01/11 ........ 4,476,280
2,250,000 Broward County Educational Facilities Authority Revenue, Refunding, Nova Southeastern University
Project, Connie Lee Insured, 6.125%, 04/01/17 .............................................. 2,315,273
Broward County Health Facility Authority Revenue, Nursing Home, Refunding,
2,080,000 7.40%, 08/15/10 ........................................................................... 2,213,952
1,475,000 7.50%, 08/15/20 ........................................................................... 1,599,033
Broward County HFA Revenue, GNMA Secured,
4,185,000 Series B, 7.55%, 03/01/15 ................................................................. 4,401,992
1,365,000 Series C, 8.00%, 03/01/21 ................................................................. 1,435,093
360,000 Series D, 6.90%, 06/01/09 ................................................................. 380,758
865,000 Series D, 7.375%, 06/01/21 ................................................................ 919,019
Broward County Professional Sports Facilities, Tax Revenue, Civic Arena Project, Series A,
MBIA Insured,
5,000,000 5.75%, 09/01/21 ........................................................................... 5,047,000
8,745,000 5.625%, 09/01/28 .......................................................................... 8,674,690
Broward County Resource Recovery Revenue, 7.95%, 12/01/08,
5,840,000 Broward Waste Energy, L.P., North Project.................................................. 6,401,282
11,145,000 SES Waste Energy Co., L.P., South Project.................................................. 12,216,146
200,000 Broward County Tourist Development, Special Tax Revenue, Convention Center Project,
FGICInsured, Pre-Refunded, 7.75%, 10/01/13 ................................................. 215,708
585,000 Broward County Water and Sewer Utility Revenue, Series B, AMBAC Insured, Pre-Refunded, 7.50%,
10/01/18 ................................................................................... 609,588
1,500,000 Cape Canaveral Hospital District Revenue, Certificates, AMBAC Insured, 6.875%, 01/01/21 ..... 1,616,550
Celebration Community Development District, Special Assessment, MBIA Insured,
5,500,000 6.00%, 05/01/10 ........................................................................... 5,800,190
4,000,000 6.10%, 05/01/16 ........................................................................... 4,161,000
Charlotte County Utilities Revenue, Refunding, Series A, FGIC Insured,
3,000,000 5.625%, 10/01/21 .......................................................................... 3,003,630
5,000,000 6.20%,10/01/23 ............................................................................ 5,016,100
Citrus County PCR, Florida Power and Light Co., Crystal River, Refunding,
11,100,000 Series A, 6.625%, 01/01/27 ................................................................ 11,919,513
20,400,000 Series B, 6.35%, 02/01/22 ................................................................. 21,761,088
Bonds (cont.)
Clay County HFA Revenue, SFM, Series A, GNMA Secured,
$ 2,075,000 8.20%, 06/01/21 ........................................................................... $ 2,176,032
4,675,000 7.80%, 06/01/22 ........................................................................... 4,956,155
1,310,000 7.45%, 09/01/23 ........................................................................... 1,372,893
2,900,000 Clearwater MFR, Rental Housing, Drew Gardens Projects, Refunding, Series A, FHA Insured, 6.50%,
10/01/25 ................................................................................... 2,978,155
1,000,000 Clewiston Water and Sewer Revenue, Refunding, AMBAC Insured, Pre-Refunded, 7.65%, 10/01/10 .. 1,103,800
305,000 Collier County Water and Sewer District Revenue, Sewer Assessment, East and South Naples
Project, MBIA Insured, 7.15%, 10/01/11 ..................................................... 314,894
3,095,000 Coral Springs ID, Special Water and Sewer Project, 6.75%, 11/01/02 .......................... 3,171,230
Dade County, Series DD, MBIA Insured,
1,000,000 7.70%, 10/01/13 ........................................................................... 1,022,430
380,000 7.75%, 10/01/18 ........................................................................... 388,504
Dade County Health Facilities Authority, Hospital Revenue,
75,000 Mt. Sinai Medical Center Project, FSA Insured, Pre-Refunded, 8.40%, 12/01/17 .............. 79,084
7,475,000 Refunding, Catholic Health and Rehabilitation, Inc. Project, 7.625%, 08/15/20 ............. 8,012,901
1,930,000 Dade County HFA, MFMR, GNMA Secured, Hialeah Center, Series 5, Pre-Refunded, 7.875%,
12/01/32 ................................................................................... 2,160,500
Dade County HFA, SFMR,
40,000 Refunding, Series A, 8.125%, 07/01/07 ..................................................... 40,646
1,155,000 Refunding, Series D, FSA Insured, 6.95%, 12/15/12 ......................................... 1,226,679
300,000 Refunding, Series E, FNMA Secured, 7.00%, 03/01/24 ........................................ 314,289
2,670,000 Series A, GNMA Secured, 7.50%, 09/01/13 ................................................... 2,729,942
1,555,000 Series A, GNMA Secured, 7.10%, 03/01/17 ................................................... 1,625,535
260,000 Series B, GNMA Secured, 7.25%, 09/01/23 ................................................... 273,083
125,000 Dade County IDA, IDR, Epworth Village West, FHA Insured, Pre-Refunded, 8.25%, 02/01/28 ...... 132,546
5,695,000 Dade County IDA, Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%,
02/01/23 ................................................................................... 6,113,355
140,000 Dade County Public Facilities Revenue, Jackson Memorial Hospital, Series A, MBIA Insured, 7.30%,
06/01/12 ................................................................................... 142,303
14,610,000 Dade County School Board COP, Series B, AMBAC Insured, 5.75%, 08/01/19 ...................... 14,688,602
5,960,000 Dade County School District GO, Pre-Refunded, 7.375%, 07/01/08 .............................. 6,503,075
4,100,000 Dade County Seaport Revenue, Refunding, Series 95, MBIA Insured, 5.75%, 10/01/15 ............ 4,194,341
5,000,000 Dade County, Special Obligation, Courthouse Center Project, 6.10%, 04/01/20 ................. 5,155,250
Dade County Water and Sewer System Revenue, FGIC Insured,
8,245,000 5.75%, 10/01/22 ........................................................................... 8,329,099
31,445,000 5.50%, 10/01/25 ........................................................................... 30,691,263
Dovera Community Development District Revenue, Special Assessment,
1,370,000 7.625%, 05/01/03 .......................................................................... 1,447,693
2,170,000 7.875%, 05/01/12 .......................................................................... 2,301,394
670,000 Dunes Community Development District Revenue, Water and Sewer Project, Pre-Refunded, 8.25%,
10/01/18 ................................................................................... 726,608
Duval County HFA, SFMR, GNMA Secured,
65,000 Series 1988, 8.625%, 12/01/19 ............................................................. 69,353
90,000 Series A, 8.50%, 09/01/19 ................................................................. 93,988
2,590,000 Series A, 7.85%, 12/01/22 ................................................................. 2,728,461
595,000 Series B, 7.70%, 11/01/11 ................................................................. 619,823
1,420,000 Series C, FGIC Insured, 7.70%, 09/01/24 ................................................... 1,510,156
Escambia County HFA, SFMR,
15,000 Refunding, 8.75%, 10/01/15 ................................................................ 15,429
4,235,000 Series A, GNMA Secured, 7.40%, 10/01/23 ................................................... 4,412,658
4,350,000 Escambia County HFA Revenue, Refunding, Baptist Hospital and Manor, 6.75%, 10/01/14 ......... 4,580,768
Bonds (cont.)
$ 1,190,000 Escambia County PCR, Refunding, Gulf Power Co. Project, 8.25%, 06/01/17 ..................... $ 1,223,165
4,000,000 Escambia County Revenue, Series B, Sub-Series 1, MBIA Insured, 7.20%, 01/01/15 .............. 4,244,360
3,255,000 Escambia County School Board COP, FSA Insured, Pre-Refunded, 6.375%, 02/01/12 ............... 3,478,409
90,000 Escambia County Tourist Development Revenue, Pre-Refunded, 8.40%, 12/01/12 .................. 94,866
2,500,000 Escambia County Utilities Authority, Sanitary System Revenue, FSA Insured, 6.00%, 01/01/23 .. 2,565,575
2,000,000 Escambia County Utilities Authority System Revenue, Refunding, FGIC Insured, 7.75%, 01/01/15 2,146,620
3,700,000 First Governmental Financing Commission Revenue, Gainsville, Hollywood, and St. Petersburg,
AMBAC Insured, 5.75%, 07/01/16 ............................................................. 3,763,011
Florida HFA,
3,700,000 General Mortgage, Refunding, Series A, 6.40%, 06/01/24 .................................... 3,835,975
785,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.80%, 09/01/10 .......................... 830,962
320,000 Homeownership Revenue, Series G-1, GNMA Secured, 8.30%, 06/01/20 .......................... 335,053
5,425,000 Homeownership Revenue, Series G-1, GNMA Secured, 7.90%, 03/01/22 .......................... 5,733,249
4,000,000 MF Housing, Citrus Meadows Apartments Project, Series Q, GNMA Secured, 7.65%, 06/20/31 .... 4,140,560
3,445,000 MF Housing, Driftwood Terrace Project, Series I, 7.65%, 12/20/31 .......................... 3,630,065
4,000,000 MF Mortgage, Lake Carlton Arms, Guaranteed, Refunding, Series F, Mandatory Put 12/01/99,
7.375%, 12/01/07 ......................................................................... 4,066,720
2,900,000 MFHR, Refunding, Series A, 6.95%, 10/01/21 ................................................ 3,026,382
400,000 SFMR, Series A, 8.60%, 07/01/16 ........................................................... 408,720
Florida State Board of Education, Capital Outlay, Public Education,
8,775,000 Refunding, Series A, 7.25%, 06/01/23 ...................................................... 9,612,311
4,500,000 Series A, 5.875%, 06/01/16 ................................................................ 4,604,130
8,990,000 Series B, 5.875%, 06/01/24 ................................................................ 9,120,175
7,000,000 Series B, 5.875%, 06/01/25 ................................................................ 7,101,360
650,000 Series B-1, Pre-Refunded, 7.875%, 06/01/19 ................................................ 694,928
10,000,000 Series F, FGIC Insured, 5.50%, 06/01/26 ................................................... 9,771,600
2,550,000 Florida State Community Services Corp., Walton County Water and Sewer Revenue, South Walton
County Regional Utilities, 7.00%, 03/01/18 ................................................. 2,791,103
6,000,000 Florida State Correctional Privatization Commission COP, Correctional Facility Bay Project,
MBIA Insured, 6.00%, 08/01/15 .............................................................. 6,208,680
2,960,000 Florida State Department of Corrections COP, Okeechobee Correctional Facility, AMBAC Insured,
6.25%, 03/01/15 ............................................................................ 3,147,546
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 ......................................... 3,273,270
Florida State Department of General Services, Facilities Management Division, Revenue, Florida
Facilities Pool,
145,000 Pre-Refunded, 8.125%, 09/01/17 ............................................................ 156,845
7,000,000 Refunding, Series B, AMBAC Insured, 5.70%, 09/01/20 ....................................... 7,025,340
3,715,000 Florida State GO, Pre-Refunded, 7.375%, 07/01/19 ............................................ 4,053,511
Florida State Mid-Bay Bridge Authority Revenue,
13,505,000 Crossover Refunding, Series A, 6.00%, 10/01/13 ............................................ 13,630,191
7,000,000 Crossover Refunding, Series A, 6.10%, 10/01/22 ............................................ 7,064,610
11,100,000 Refunding, Series D, 6.125%, 10/01/22 ..................................................... 11,220,879
2,600,000 Series A, 8.00%, 10/01/06 ................................................................. 2,875,626
14,250,000 Series A, 7.50%, 10/01/17 ................................................................. 15,478,778
6,000,000 Series A, ETM, 6.875%, 10/01/22 ........................................................... 7,032,960
Florida State Turnpike Authority Revenue, Department of Transportation, Series A,
8,780,000 AMBAC Insured, Pre-Refunded, 7.125%, 07/01/18 ............................................. 9,875,656
17,350,000 FGIC Insured, 5.50%, 07/01/21 ............................................................. 17,051,580
7,000,000 FGIC Insured, 5.625%, 07/01/25 ............................................................ 6,945,400
2,375,000 Pre-Refunded, 7.75%, 07/01/09 ............................................................. 2,610,956
10,000,000 Pre-Refunded, 7.50%, 07/01/19 ............................................................. 10,938,700
Bonds (cont.)
Gainesville Utility System Revenue,
$ 1,520,000 Series A, Pre-Refunded, 6.50%, 10/01/22 ................................................... $ 1,688,036
3,500,000 Series B, 6.00%, 10/01/17 ................................................................. 3,608,185
1,600,000 Sub-Series A, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/13 ................................ 1,713,568
8,675,000 Gateway Services District Revenue, Transportation Roadway Service Charges, 8.75%, 05/01/14 .. 9,373,077
2,000,000 Gulf Breeze Local Government Loan Program Revenue, FGIC Insured, 7.75%, 12/01/15 ............ 2,212,980
3,685,000 Halifax Hospital and Medical Center Revenue, Refunding, Series A, MBIA Insured, Pre-Refunded,
6.75%, 10/01/11 ............................................................................ 4,116,624
Hillsborough County Aviation Authority Revenue,
14,945,000 Refunding, Special Purpose, Delta Airlines, Inc., 7.75%, 01/01/24 ......................... 16,041,365
8,500,000 Refunding, Tampa International Airport, Series A, FGIC Insured, 6.90%, 10/01/11 ........... 9,117,865
5,730,000 Tampa International Airport, Series B, FGIC Insured, 5.875%, 10/01/23 ..................... 5,847,866
Hillsborough County Capital Improvement Revenue, County Center Project, Second Series,
Pre-Refunded,
8,300,000 6.625%, 07/01/12 .......................................................................... 9,235,908
1,250,000 6.75%, 07/01/22 ........................................................................... 1,398,263
5,300,000 Hillsborough County IDA, IDR, Colonial Penn Insurance Project, 7.35%, 08/01/13 .............. 5,830,159
3,000,000 Hillsborough County Port District Revenue, Tampa Port Authority, Pre-Refunded, 8.25%, 06/01/09 3,450,480
Hillsborough County School Board COP, MBIA Insured, 6.00%,
9,500,000 07/01/12 .................................................................................. 9,912,300
5,500,000 07/01/14 .................................................................................. 5,697,945
Hillsborough County Utilities Revenue, Refunding,
10,400,000 Series A, 6.625%, 08/01/11 ................................................................ 11,006,944
5,515,000 Series A, 7.00%, 08/01/14 ................................................................. 5,923,441
3,000,000 Series A, 6.50%, 08/01/16 ................................................................. 3,145,080
1,135,000 Series A, Pre-Refunded, 7.00%, 08/01/14 ................................................... 1,270,689
1,000,000 Series B, 6.50%, 08/01/16 ................................................................. 1,048,360
1,000,000 Indian River County Hospital District, Hospital Revenue, Refunding, FSA Insured, 5.70%, 10/01/15 1,005,000
5,000,000 Jacksonville Capital Improvement Revenue Certificates, Gator Bowl Project, 5.875%, 10/01/25 . 5,100,300
Jacksonville Electric Authority Revenue, Refunding, St. John's River Park System,
1,750,000 Issue 2, Series 11, 5.25%, 10/01/20 ....................................................... 1,665,895
5,000,000 Series 1, 6.00%, 10/01/16 ................................................................. 5,001,100
Jacksonville Health Facilities Authority, Hospital Revenue, Refunding,
2,500,000 Baptist Medical Center Project, Series A, MBIA Insured, 7.30%, 06/01/19 ................... 2,676,425
8,480,000 Riverside Hospital Project, Pre-Refunded, 7.625%, 10/01/13 ................................ 9,344,112
1,750,000 Jacksonville Hospital Revenue, University Medical Center, Inc. Project, Connie Lee Insured, 6.60%,
02/01/21 ................................................................................... 1,857,713
1,000,000 Jupiter Sales Tax Revenue, Pre-Refunded, Series 1990, 7.40%, 09/01/20 ....................... 1,116,670
5,000,000 Kissimmee Water and Sewer Revenue, Refunding, AMBAC Insured, 6.00%, 10/01/15 ................ 5,124,900
Lakeland Electric and Water Revenue,
6,200,000 5.50%, 10/01/26 ........................................................................... 6,014,806
12,800,000 Refunding & Improvement, Series B, 5.625%, 10/01/19 ....................................... 12,742,656
4,500,000 Lakeland Utility Tax Revenue, Refunding & Improvement, Series A, FGIC Insured, 6.00%, 10/01/17 4,665,465
1,000,000 Lee County Capital Bonds, Refunding, Series A, MBIA Insured, 7.30%, 10/01/07 ................ 1,088,400
Lee County IDA, Sewer IDR, Bonita Springs Project, Asset Guaranty, Insured,
5,000,000 7.20%, 11/01/11 ........................................................................... 5,426,400
2,000,000 7.25%, 11/01/20 ........................................................................... 2,167,740
2,000,000 Lee County Local Option Gas Tax Revenue, FGIC Insured, 5.75%, 10/01/20 ...................... 2,025,180
Lee County Solid Waste System Revenue, Series A, MBIA Insured, 7.00%,
1,945,000 10/01/04 .................................................................................. 2,160,195
1,175,000 10/01/05 .................................................................................. 1,302,429
Bonds (cont.)
Lee County Solid Waste System Revenue, Series A, MBIA Insured, 7.00%, (cont.)
$ 1,305,000 10/01/06 .................................................................................. $ 1,446,527
4,600,000 10/01/11 .................................................................................. 5,086,864
Lee County Transportation Facilities Revenue, MBIA Insured, 5.75%,
4,500,000 10/01/22 .................................................................................. 4,556,655
5,900,000 10/01/27 .................................................................................. 5,974,281
Leesburg Hospital Revenue, Capital Improvement, Leesburg Regional Medical Center Project,
Series 1991-A, Pre-Refunded,
1,250,000 7.375%, 07/01/11 .......................................................................... 1,438,025
2,115,000 7.50%, 07/01/21 ........................................................................... 2,445,511
7,000,000 Leesburg Hospital Revenue, Refunding, Leesburg Regional Medical Center Project, Series A,
6.125%, 07/01/18 ........................................................................... 7,074,200
500,000 Leesburg Utilities Revenue, Refunding, FGIC Insured, 7.60%, 10/01/09 ........................ 535,185
960,000 Leon HFA, SFMR, Series A, GNMA Secured, 7.30%, 04/01/21 ..................................... 1,001,856
Manatee County HFA, SFMR, Series A, GNMA Secured,
1,165,000 8.10%, 11/01/20 ........................................................................... 1,211,565
4,320,000 6.85%, 11/01/23 ........................................................................... 4,473,835
Manatee County IDR, Manatee Hospitals and Health Systems, Inc.,
1,500,000 ETM, 8.25%, 03/01/01 ...................................................................... 1,590,375
6,700,000 Pre-Refunded, 9.25%, 03/01/21 ............................................................. 7,962,347
5,575,000 Manatee County School Board COP, MBIA Insured, 6.125%, 07/01/21 ............................. 5,788,969
4,000,000 Martin County Consolidated Utilities System Revenue, Refunding & Improvement, FGIC Insured,
6.00%, 10/01/24 ............................................................................ 4,138,080
14,500,000 Martin County PCR, Refunding, Florida Power and Light Co. Project, MBIA Insured, 7.30%, 07/01/20 15,889,535
2,000,000 Miami Beach Special Obligation, Subordinated, FGIC Insured, 7.375%, 12/01/08 ................ 2,187,260
Miami Health Facilities Authority Revenue, Mercy Hospital Project, Refunding,
250,000 8.125%, 08/01/11 .......................................................................... 264,560
7,500,000 Series A, Pre-Refunded, 7.35%, 08/01/15 ................................................... 8,197,650
6,500,000 Miramar Waste Water Improvement Assessment Revenue, FGIC Insured, 6.75%, 10/01/25 ........... 7,180,615
5,000,000 Nassau County PCR, Refunding, ITT Rayonier, Inc. Project, 6.25%, 06/01/10 ................... 5,116,100
14,370,000 North Broward Hospital District Revenue, Refunding & Improvement, MBIA Insured, 5.75%, 01/15/27 14,393,279
North Miami Health Facilities Authority Revenue, Catholic Health Services Obligation Group, 6.00%,
2,000,000 08/15/16 .................................................................................. 2,029,680
1,750,000 08/15/24 .................................................................................. 1,768,690
1,500,000 North Port Utilities Revenue, FGIC Insured, 6.25%, 10/01/22 ................................. 1,575,450
395,000 North Springs ID Revenue, Special Assessment, 6.75%, 05/01/03 ............................... 404,926
Northern Palm Beach County Water Control District, Unit Development No. 31, Project 2,
725,000 6.75%, 11/01/07 ........................................................................... 747,888
1,470,000 6.625%, 11/01/13 .......................................................................... 1,494,476
1,000,000 Ocala Gas Tax Revenue, MBIA Insured, Pre-Refunded, 7.40%, 12/01/09 .......................... 1,047,610
Orange County Capital Improvement Revenue, MBIA Insured, 7.70%, 10/01/18,
170,000 Series A .................................................................................. 182,165
30,000 Series A, Pre-Refunded..................................................................... 32,333
180,000 Series B, Pre-Refunded..................................................................... 194,000
Orange County Health Facilities Authority Revenue,
1,000,000 Adventist/Sunbelt, Series A, AMBAC Insured, 6.875%, 11/15/15 .............................. 1,096,440
3,000,000 Adventist/Sunbelt, Series A, FSA Insured, 7.00%, 11/15/14 ................................. 3,199,350
1,000,000 Crossover Refunding, Orlando Regional Healthcare, Series A, MBIA Insured, 6.00%, 11/01/24 . 1,013,360
9,770,000 Refunding, Pooled Hospital Loan, Series A, FGIC Insured, 7.875%, 12/01/25 ................. 10,058,508
10,660,000 Refunding, Pooled Hospital Loan, Series B, MBIA Insured, 7.875%, 12/01/25 ................. 10,967,115
Bonds (cont.)
Orange County HFA Revenue, GNMA Secured,
$ 4,730,000 Refunding, Series A, FGIC Insured, 7.60%, 01/01/24 ........................................ $ 4,978,089
1,935,000 Series A, 7.75%, 11/01/12 ................................................................. 2,045,295
410,000 Series A, 7.375%, 09/01/24 ................................................................ 432,710
780,000 Series D, 7.80%, 10/01/22 ................................................................. 827,276
5,050,000 Orange County Public Services, Tax Revenue, FGIC Insured, 6.00%, 10/01/24 ................... 5,237,810
Orange County Tourist Development Tax Revenue,
3,000,000 AMBAC Insured, Pre-Refunded, 7.25%, 10/01/10 .............................................. 3,346,860
24,675,000 Series B, MBIA Insured, 6.00%, 10/01/24 ................................................... 25,526,781
265,000 Orlando and Orange County Expressway Authority Revenue, Senior Lien, AMBAC Insured, ETM,
7.625%, 07/01/18 ........................................................................... 281,724
Orlando Community RDA, Tax Increment Revenue, Series A,
2,155,000 6.50%, 10/01/11 ........................................................................... 2,284,472
2,585,000 6.75%, 10/01/16 ........................................................................... 2,757,497
3,500,000 Osceola County Gas Tax Revenue, Refunding & Improvement, FGIC Insured, 6.00%, 04/01/13 ...... 3,654,350
Osceola County IDA Revenue, Community Provider Pooled Loan Program, FSA Insured, 07/01/10,
4,634,000 Series A, 7.75%............................................................................ 4,923,162
795,000 Series C, 7.60%............................................................................ 841,078
200,000 Osceola County Transportation Revenue, Series A, FGIC Insured, Pre-Refunded, 7.70%, 04/01/13 212,170
Pace Property Finance Authority, Utilities System Revenue, Refunding & Improvement,
1,000,000 6.125%, 09/01/07 .......................................................................... 1,026,400
2,545,000 6.25%, 09/01/13 ........................................................................... 2,574,344
1,170,000 6.125%, 09/01/17 .......................................................................... 1,167,953
Palm Beach County Criminal Justice Facilities Revenue, FGIC Insured,
5,000,000 6.00%, 06/01/15 ........................................................................... 5,208,100
6,950,000 Pre-Refunded, 7.25%, 06/01/11 ............................................................. 7,695,318
Palm Beach County HFA, SFM Purchase Revenue, GNMA Secured,
7,485,000 Series A, 7.70%, 03/01/22 ................................................................. 7,815,538
5,270,000 Series B, 7.60%, 03/01/23 ................................................................. 5,555,792
Palm Beach County IDR, Lourdes-Noreen McKeen Residence, Geriatric Care, Inc.,
1,755,000 6.55%, 12/01/16 ........................................................................... 1,826,271
4,000,000 6.625%, 12/01/26 .......................................................................... 4,239,160
Palm Beach County Solid Waste Authority Revenue,
65,000 GO, 8.75%, 07/01/10 ....................................................................... 68,043
535,000 Refunding, MBIA Insured, 7.40%, 12/01/05 .................................................. 574,542
1,965,000 Refunding, MBIA Insured, Pre-Refunded, 7.40%, 12/01/05 .................................... 2,119,587
Palm Beach County Solid Waste, IDR, Okeelanta Power and Light Co. Project, Series A,
3,600,000 6.50%, 02/15/09 ........................................................................... 3,107,232
11,700,000 6.70%, 02/15/15 ........................................................................... 9,939,033
1,015,000 Pensacola-Westwood Homes Development Corp. Revenue, Refunding, Mortgage Loan, FHA Insured,
6.40%, 07/15/23 ............................................................................ 1,029,159
Pinellas County HFA, SFMR, GNMA Secured,
1,425,000 Multi-County Program, Series B, 6.875%, 08/01/10 .......................................... 1,490,436
5,625,000 Multi-County Program, Series B, 7.375%, 02/01/24 .......................................... 5,941,294
1,825,000 Series A, 7.30%, 08/01/22 ................................................................. 1,893,693
1,600,000 Series A, 7.75%, 08/01/23 ................................................................. 1,685,984
12,200,000 Pinellas County PCR, Refunding, Florida Power and Light Co., 7.20%, 12/01/14 ................ 13,341,676
Plantation Health Facilities Authority Revenue, Covenant Retirement Community, Inc.,
1,500,000 7.625%, 12/01/12 .......................................................................... 1,630,410
3,000,000 7.75%, 12/01/22 ........................................................................... 3,263,520
2,035,000 Polk County HFA, Refunding, Series A, GNMA Secured, 7.15%, 09/01/23 ......................... 2,140,840
Bonds (cont.)
$ 18,000,000 Polk County IDA Revenue, Solid Waste Disposal Facility, Tampa Electric Co. Project, 5.85%,
12/01/30 ................................................................................... $ 17,789,040
Port Everglades Authority, Port Improvement Revenue, 7.50%,
18,050,000 Refunding, Series A, 09/01/12 ............................................................. 19,012,968
575,000 Series 1986, ETM, 11/01/06 ................................................................ 649,612
65,000 Royal Palm Beach, Utility System Revenue, Series A, AMBAC Insured, Pre-Refunded, 8.875%,
10/15/13 ................................................................................... 68,342
Santa Rosa County Health Facilities Authority Revenue, Refunding,
40,000 Gulf Breeze Hospital, Inc., 8.60%, 10/01/02 ............................................... 42,301
520,000 Gulf Breeze Hospital, Inc., Pre-Refunded, 8.70%, 10/01/14 ................................. 566,628
14,350,000 Gulf Breeze Hospital, Inc., Series A, 6.20%, 10/01/14 ..................................... 14,491,491
4,290,000 Santa Rosa County IDR, Holley Navarre Water System Project, 6.75%, 05/01/24 ............... 4,461,600
6,250,000 Sarasota County Solid Waste System Revenue, AMBAC Insured, 5.50%, 10/01/16 .................. 6,197,938
Sarasota County Utility System Revenue,
2,000,000 Capital Appreciation, AMBAC Insured, Pre-Refunded, 7.50%, 06/01/10 ........................ 2,059,040
9,000,000 Refunding, Series A, FGIC Insured, 5.25%, 10/01/25 ........................................ 8,553,150
5,000,000 Seminole County Sales Tax Revenue, MBIA Insured, 5.80%, 10/01/26 ............................ 5,074,700
Seminole County School Board COP, MBIA Insured,
1,150,000 Series A, 6.125%, 07/01/14 ................................................................ 1,200,911
5,000,000 Series B, Pre-Refunded, 6.50%, 07/01/21 ................................................... 5,620,350
7,500,000 Seminole County Solid Waste Disposal System Revenue, MBIA Insured, Pre-Refunded, 7.25%,
10/01/20 ................................................................................... 8,367,150
1,000,000 South Florida Water Management District, Special Obligation, Land Acquisition Bonds,
AMBAC Insured, 6.00%, 10/01/15 .............................................................. 1,037,450
3,000,000 South Indian River Water Control District, Refunding, Series C, Pre-Refunded, 7.50%, 10/01/06 3,221,880
4,660,000 St. Johns County IDA, IDR, Professional Golf Hall of Fame Project, MBIA Insured, 5.80%, 09/01/16 4,696,348
2,995,000 St. Johns County Water and Sewer Revenue, Series B-1, FGIC Insured, 7.00%, 06/01/11 ......... 3,102,251
7,500,000 St. Lucie County Solid Waste Disposal Revenue, Florida Power and Light Co. Project, 7.15%,
02/01/23 ................................................................................... 8,044,950
5,100,000 St. Lucie, West Services District, Capital Improvement Revenue, Lake Charles Project, 7.50%,
02/01/00 ................................................................................... 5,169,462
St. Petersburg Health Facilities Authority Revenue,
10,500,000 Allegany Health System, Series A, MBIA Insured, 7.00%, 12/01/15 ........................... 11,611,845
8,630,000 Allegany Health System, St. Mary, Series B, Pre-Refunded, 7.75%, 12/01/15 ................. 9,591,814
2,500,000 Bon Secours-Maria Manor Project, Series B, Pre-Refunded, 7.875%, 08/15/18 ................. 2,690,975
2,940,000 Refunding, Allegany Health System, St. Anthony, Series C, 7.75%, 01/01/14 ................. 3,076,828
340,000 Refunding, Allegany Health System, St. Anthony, Series C, Pre-Refunded, 7.75%, 01/01/14 ... 358,193
Sunrise Lakes Recreation District, Phase 4, Series A, 6.75%,
3,080,000 08/01/15 .................................................................................. 3,229,904
6,120,000 08/01/24 .................................................................................. 6,346,256
Sunrise Special Tax District No. 1, Refunding, 6.375%,
3,485,000 11/01/08 .................................................................................. 3,688,489
12,390,000 11/01/21 .................................................................................. 12,853,510
Sunrise Utility System Revenue, Series A, AMBAC Insured,
4,230,000 5.90%, 10/01/18 ........................................................................... 4,302,968
11,150,000 5.75%, 10/01/26 ........................................................................... 11,210,768
3,400,000 Tallahassee Consolidated Utility System Revenue, Series 1994, 6.20%, 10/01/19 ............... 3,572,618
Tampa Allegany Health System Revenue, St. Joseph,
8,000,000 FGIC Insured, Pre-Refunded, 7.375%, 12/01/23 .............................................. 8,814,640
1,180,000 MBIA Insured, 6.75%, 12/01/17 ............................................................. 1,283,675
7,000,000 MBIA Insured, 6.50%, 12/01/23 ............................................................. 7,700,070
Bonds (cont.)
Tampa Capital Improvement Program Revenue, 10/01/18,
$ 6,300,000 Series A, 8.25%............................................................................ $ 6,616,197
31,670,000 Series B, 8.375%........................................................................... 33,323,807
2,000,000 Tampa Guaranteed Entitlement Revenue, Refunding, AMBAC Insured, 7.15%, 10/01/18 ............. 2,216,020
Tampa Sports Authority Revenue, Guaranteed Package, Tampa Bay Arena Project, MBIA Insured,
1,000,000 6.00%, 10/01/15 ........................................................................... 1,073,420
1,715,000 6.05%, 10/01/20 ........................................................................... 1,841,035
2,695,000 6.10%, 10/01/26 ........................................................................... 2,913,133
Tampa Sports Authority Revenue, Interlock Agreement, Tampa Bay, MBIA Insured,
4,250,000 6.05%, 10/01/15 ........................................................................... 4,455,488
5,160,000 6.10%, 10/01/20 ........................................................................... 5,384,563
6,800,000 6.125%, 10/01/26 .......................................................................... 7,092,876
Tampa Water and Sewer Revenue, Sub-Lien, Series A, AMBAC Insured,
340,000 7.75%, 10/01/14 ........................................................................... 363,882
3,000,000 7.25%, 10/01/16 ........................................................................... 3,166,500
6,000,000 Titusville Water and Sewer Revenue, Refunding, MBIA Insured, 6.20%, 10/01/14 ................ 6,391,740
University Community Hospital, Inc., Florida Hospital Revenue, Refunding, FSA Insured,
Pre-Refunded,
5,000,000 7.375%, 09/01/07 .......................................................................... 5,588,000
5,000,000 7.50%, 09/01/11 ........................................................................... 5,608,050
6,000,000 Venice Health Care Revenue, Bon Secours Health System Project, MBIA Insured, 5.625%,
08/15/26 ................................................................................... 5,961,300
Viera East Community Development District, Special Assessment,
2,265,000 7.50%, 05/01/03 ........................................................................... 2,378,114
4,020,000 8.50%, 05/01/04 ........................................................................... 4,454,160
10,640,000 8.625%, 05/01/14 .......................................................................... 11,856,046
5,225,000 Pre-Refunded, 7.50%, 05/01/12 ............................................................. 6,008,646
7,355,000 Refunding, 6.30%, 05/01/26 ................................................................ 7,557,557
11,295,000 Refunding, Series A, 6.00%, 05/01/14 ...................................................... 11,409,870
11,340,000 Refunding, Water Management, Series A, 6.50%, 05/01/22 .................................... 11,347,598
7,490,000 Series B, 6.75%, 05/01/14 ................................................................. 7,559,058
465,000 Series B, Water Management, 6.50%, 05/01/05 ............................................... 463,842
4,580,000 Series B, Water Management, 6.50%, 05/01/22 ............................................... 4,474,202
Viera East Community Development District, Water and Sewer Revenue
3,615,000 7.875%, 05/01/03 .......................................................................... 3,770,481
2,850,000 6.75%, 05/01/09 ........................................................................... 2,879,669
500,000 Volusia County Educational Facility Authority Revenue, Embry-Riddle Aeronautical University,
Connie Lee Insured, 6.625%, 10/15/22 ....................................................... 534,680
9,770,000 Volusia County Health Facilities Authority Revenue, Hospital Facilities, Memorial Health Systems
Project, AMBAC Insured, 5.50%, 11/15/26 .................................................... 9,545,485
1,970,000 West Lake Community Development District, Special Assessment, MBIA Insured, 5.75%, 05/01/17 . 1,990,763
3,000,000 West Palm Beach Utilities System Revenue, MBIA Insured, 5.75%, 10/01/27 ..................... 3,020,010
Westgate/Belvedere Homes Community RDA Revenue, Series 1992,
410,000 6.50%, 11/01/09 ........................................................................... 432,611
1,410,000 6.60%, 11/01/17 ........................................................................... 1,460,153
------------
Total Bonds (Cost $1,324,572,337)...................................................... 1,401,062,064
------------
Zero Coupon Bonds 3.5%
3,670,000 Broward County Water and Sewer Utility Revenue, Refunding, Series A, AMBAC Insured, (original
accretion rate 7.50%), 10/01/08 ............................................................ 1,978,716
17,020,000 Dade County Guaranteed Entitlement Revenue, Capital Appreciation, AMBAC Insured, Pre-Refunded,
(original accretion rate 7.70%), 08/01/18 .................................................. 4,414,987
Zero Coupon Bonds (cont.)
$ 1,625,000 illsborough County Utilities Revenue, Refunding, Series A, (original accretion rate 6.97%), 08/01/98$1,523,112
5,770,000 Lakeland Electric and Water Revenue, Capital Appreciation, (original accretion rate 7.00%), 10/01/14 2,167,557
Port Everglades Authority, Port Improvement Revenue, Refunding, Series A,
10,575,000 (original accretion rate 7.40%), 09/01/02 ................................................. 7,982,432
9,075,000 (original accretion rate 7.40%), 09/01/03 ................................................. 6,467,026
3,550,000 (original accretion rate 7.40%), 09/01/04 ................................................. 2,383,647
50,000,000 (original accretion rate 7.45%), 09/01/10 ................................................. 22,289,500
Sarasota Special Obligated Revenue, Refunding, AMBAC Insured,
1,365,000 (original accretion rate 6.69%), 11/01/09 ................................................. 702,346
1,780,000 (original accretion rate 6.74%), 11/01/12 ................................................. 751,996
2,180,000 (original accretion rate 6.74%), 11/01/15 ................................................. 759,861
------------
Total Zero Coupon Bonds (Cost $45,122,117) ............................................ 51,421,180
------------
Total Long Term Investments (Cost $1,369,694,454) ..................................... 1,452,483,244
------------
aShort Term Investments 0.1%
1,000,000 Dade County Health Facilities Authority Revenue, Miami Children's Hospital Project, Daily VRDN and
Put, 3.50%, 09/01/20 (Cost $1,000,000)...................................................... 1,000,000
------------
Total Investments (Cost $1,370,694,454) 98.1% .................................... 1,453,483,244
Other Assets and Liabilities 1.9% ................................................ 28,159,395
------------
Net Assets 100.0% ............................................................... $1,481,642,639
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $1,370,694,454 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 85,772,404
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (2,983,614)
------------
Net unrealized appreciation................................................................ $ 82,788,790
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
ID - Improvement District
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Georgia Tax-Free Income Fund (Note 1)
Long Term Investments 98.4%
<C> <S> <C>
$ 500,000 Albany-Dougherty County Hospital Authority Revenue, Anticipation Certificates, Series B,
AMBAC Insured, Pre-Refunded, 7.50%, 09/01/10 ................................................ $ 560,805
50,000 Albany-Dougherty Inner City Authority, Improvement Revenue, Municipal Auditorium Project,
Series 1988-B, 7.875%, 01/01/09 .............................................................. 52,352
50,000 Athens Housing Authority, MFHR, Oakwood Forest Apartments Project, 8.125%, 12/01/05 .......... 50,380
1,400,000 Atlanta Board of Education, COP, FGIC Insured, Pre-Refunded, 7.125%, 06/01/12 ................ 1,544,900
Atlanta COP, Pretrial Detention Center, MBIA Insured, 6.25%,
1,000,000 12/01/11 ................................................................................... 1,067,860
3,800,000 12/01/17 ................................................................................... 3,977,270
2,000,000 Atlanta Downtown Development Authority Revenue, Refunding, Underground Atlanta Project, 6.25%,
10/01/16 ..................................................................................... 2,093,020
6,000,000 Atlanta GO, Series A, 6.125%, 12/01/23 ....................................................... 6,270,000
1,480,000 Atlanta HDC, Mortgage Revenue, Refunding, Oakland City/West, Series A, FHA Insured, 6.375%,
03/01/23 .................................................................................... 1,509,156
3,500,000 Atlanta Special Purpose Facilities Revenue, Delta Air Lines, Inc. Project, Series 1989-B, 7.90%,
12/01/18 .................................................................................... 3,780,980
1,700,000 Atlanta Urban Residential Finance Authority, MFHR, Defoors Ferry Manor Project, 5.90%, 10/01/18 1,705,610
70,000 Atlanta Urban Residential Finance Authority, SFMR, GNMA Secured, 8.25%, 10/01/21 ............. 71,025
1,000,000 Barnesville Water and Sewer Revenue, Refunding, 6.85%, 09/01/17 .............................. 1,056,830
100,000 Bartow County Water and Sewage Revenue, Refunding, AMBAC Insured, Pre-Refunded, 8.00%,
09/01/15 .................................................................................... 107,990
Burke County Development Authority, PCR, Georgia Power Co., Refunding, Plant Vogtle, First Series,
1,000,000 6.10%, 04/01/25 ............................................................................ 1,016,910
10,000,000 MBIA Insured, 6.60%, 07/01/24 .............................................................. 10,546,700
Chatham County Hospital Authority Revenue, Memorial Medical Center, Series A,
1,700,000 MBIA Insured, Pre-Refunded, 7.00%, 01/01/21 ................................................ 1,885,759
1,000,000 Refunding & Improvement, AMBAC Insured, 5.70%, 01/01/19 .................................... 1,002,460
4,710,000 Refunding & Improvement, AMBAC Insured, 5.50%, 01/01/21 .................................... 4,605,626
90,000 Cherokee County Hospital Authority Revenue, Certificates, MBIA Insured, 8.00%, 12/01/13 ...... 95,346
1,595,000 Cherokee County Water and Sewage Revenue, Refunding, MBIA Insured, 6.90%, 08/01/18 ........... 1,737,067
40,000 Clark County Hospital Authority Revenue, Certificates, Series A, MBIA Insured, 7.10%, 01/01/08 41,211
1,400,000 Clayton County Development Authority, Special Facility Revenue, Refunding, Delta Air Lines, Inc.
Project, 7.625%, 01/01/20 ................................................................... 1,486,282
2,400,000 Clayton County Hospital Authority Revenue, Anticipation Certificates, Southern Regional Medical
Center, MBIA Insured, 7.00%, 08/01/13 ....................................................... 2,644,200
100,000 Cobb County, Kennestone Hospital Authority Revenue, Series A, MBIA Insured, ETM, 7.75%,
02/01/07 .................................................................................... 113,158
1,000,000 Cobb County Residential Care Facilities Authority Revenue, Refunding, 7.50%, 08/01/15 ........ 1,050,160
1,000,000 Colquitt County Hospital Authority Revenue, Certificates, Colquitt Regional Medical Center,
MBIA Insured, Pre-Refunded, 6.70%, 03/01/12 ................................................. 1,115,720
1,300,000 Columbia County Water and Sewer Revenue, Series A, AMBAC Insured, Pre-Refunded, 6.90%,
06/01/11 .................................................................................... 1,448,603
100,000 Commerce, City of, Combined Public Utility Revenue, Refunding & Improvement, AMBAC Insured,
Pre-Refunded, 7.50%, 12/01/20 ............................................................... 110,504
1,000,000 Conyers Water and Sewer Revenue, Series A, AMBAC Insured, 6.60%, 07/01/15 .................... 1,088,400
750,000 Coweta County Association, County Commissioners of Georgia Leasing Program, MBIA Insured,
Pre-Refunded, 7.00%, 12/01/10 ............................................................... 811,725
300,000 Dade County Water and Sewer Authority Revenue, Refunding, FGIC Insured, Pre-Refunded, 7.60%,
07/01/15 .................................................................................... 328,818
2,000,000 Dalton Building Authority Revenue, Northwest Trade and Convention, Pre-Refunded, 7.10%, 07/01/11 2,243,400
100,000 Dekalb County Hospital Authority Revenue, Anticipation Certificates, Dekalb Medical Center,
Pre-Refunded, 7.00%, 08/01/09 ............................................................... 108,387
405,000 Dekalb County Housing Authority, SFMR, GNMA Secured, 7.70%, 02/01/24 ......................... 432,451
$ 600,000 Dekalb County Water and Sewer Revenue, Series 1990, Pre-Refunded, 7.00%, 10/01/10 ............ $ 664,452
1,315,000 Dekalb Private Hospital Authority Revenue, Anticipation Certificates, Emory University Project, 7.00%,
04/01/21 .................................................................................... 1,412,086
1,215,000 East Point Building Authority Revenue, Public Facilities and Equipment Project, AMBAC Insured,
Pre-Refunded, 6.70%, 02/01/11 ............................................................... 1,339,319
95,000 Ellijay-Gilmer County Water and Sewer Authority Revenue, Pre-Refunded, 7.875%, 01/01/14 ...... 100,139
1,000,000 Fayetteville Water and Sewer Revenue, Refunding, AMBAC Insured, 5.75%, 11/01/17 .............. 1,014,340
950,000 Fitzgerald Housing Authority Mortgage Revenue, Refunding, Bridge Creek, Series A, MBIA Insured,
6.50%, 07/01/24 ............................................................................. 975,080
100,000 Fulco Hospital Authority Revenue, Anticipation Certificates, Shepherd Spinal Center Project,
Series 1988-A, 7.75%, 10/01/08 .............................................................. 103,841
Fulton County Building Authority Revenue, 01/01/15,
750,000 Human Resources and Government Facilities Program, 7.10%.................................... 813,248
1,000,000 Refunding, Judicial Center Facilities Project, 6.50%........................................ 1,050,670
Fulton County School District,
1,150,000 5.625%, 01/01/21 ........................................................................... 1,147,643
60,000 Unlimited Tax, GO, Pre-Refunded, 7.625%, 05/01/17 .......................................... 62,179
115,000 Fulton County Water and Sewer Revenue, Pre-Refunded, 8.25%, 01/01/14 ......................... 121,567
1,480,000 Fulton Dekalb Hospital Authority Revenue, Grady Memorial Hospital Project, Series A, AMBAC Insured,
Pre-Refunded, 7.25%, 01/01/20 ............................................................... 1,623,072
Gainesville and Hall County Hospital Authority Revenue, Anticipation Certificates, Refunding,
Northeast Georgia Health Care Project, MBIA Insured,
210,000 5.75%, 10/01/17 ............................................................................ 211,642
750,000 6.00%, 10/01/25 ............................................................................ 769,440
455,000 Series B, 7.20%, 10/01/20 .................................................................. 481,263
Georgia Municipal Electric Authority, Special Obligation, Refunding,
140,000 Second Crossover Series, 8.125%, 01/01/17 .................................................. 146,737
1,000,000 Third Crossover Series, 6.60%, 01/01/18 .................................................... 1,117,960
Georgia Municipal Electric Power Authority Revenue, Pre-Refunded,
800,000 Refunding, Series R, 7.40%, 01/01/25 ....................................................... 862,160
400,000 Series A, 7.40%, 01/01/25 .................................................................. 431,080
100,000 Series S, 7.25%, 01/01/09 .................................................................. 107,509
1,000,000 Georgia State HFA, MFR, Lake Vista Apartments Project, Series A, FSA Insured, 5.95%, 01/01/27 1,008,350
Georgia State HFA Revenue, Homeownership Opportunity Program,
2,895,000 Series A-1, 6.75%, 06/01/17 ................................................................ 3,055,354
645,000 Series C, 6.60%, 12/01/23 .................................................................. 674,689
1,000,000 Georgia State HFA Revenue, MFMR, Club Candlewood Project, FSA Insured, 7.15%, 01/01/25 ....... 1,049,470
Georgia State HFA Revenue, SFMR,
1,995,000 Refunding, Series A, 6.60%, 12/01/23 ....................................................... 2,047,409
1,000,000 Series B, Sub-Series B-2, 6.15%, 12/01/28 .................................................. 1,013,650
Georgia State Residential Finance Authority, Homeownership Mortgage,
1,160,000 Series B, FHA/VA, 7.00%, 12/01/12 .......................................................... 1,236,734
265,000 Series B, Sub-Series B-1, Convertible Loans, 7.50%, 06/01/17 ............................... 281,987
395,000 Series E, Sub-Series E-1, FHA Insured, 7.50%, 06/01/17 ..................................... 419,502
5,000 Georgia State Residential Finance Authority, SFM, FHA Insured, VA/GML, Series A-2, 8.40%,
12/01/18 .................................................................................... 5,153
1,000,000 Georgia State Tollway Authority Revenue, Guaranteed, Georgia 400 Project, 6.80%, 07/01/10 .... 1,098,790
3,300,000 Hogansville Combined Public Utility System Revenue, Refunding, FSA Insured, 6.00%, 10/01/23 .. 3,420,648
2,000,000 Houston County School District, Intergovernmental Contract Trust, MBIA Insured, 6.00%, 03/01/14 2,077,340
1,000,000 La Grange Water and Sewerage Revenue, Pre-Refunded, 7.375%, 01/01/12 ......................... 1,098,550
1,000,000 Liberty County Hospital Authority Revenue, Anticipation Certificates, MBIA Insured, 5.55%, 08/01/26 975,880
850,000 Liberty County IDR, Refunding, Leconte Property, Inc. Project, 7.875%, 12/01/14 .............. 933,343
$ 1,000,000 Macon-Bibb County Urban Development Authority Revenue, MFHR, Collateralized, Series A,
FNMA Secured, 7.50%, 01/01/24 ............................................................... $ 1,057,080
Marietta Development Authority Revenue, Life College, Refunding, First Mortgage, Series A,
FSA Insured,
2,600,000 5.75%, 09/01/14 ............................................................................ 2,634,710
1,100,000 5.80%, 09/01/19 ............................................................................ 1,112,045
1,000,000 5.95%, 09/01/19 ............................................................................ 1,022,690
Metropolitan Atlanta Rapid Transit Authority, Sales Tax Revenue,
2,170,000 Refunding, Series A, Second Indenture, MBIA Insured, 5.625%, 07/01/20 ...................... 2,165,595
6,230,000 Series A, MBIA Insured, Pre-Refunded, 6.90%, 07/01/20 ...................................... 7,179,950
630,000 Series K, 7.25%, 07/01/10 .................................................................. 661,651
250,000 Series L, Pre-Refunded, 7.20%, 07/01/10 .................................................... 271,530
1,000,000 Series O, Pre-Refunded, 6.55%, 07/01/20 .................................................... 1,100,280
Monroe County Development Authority, PCR,
250,000 Georgia Power Co., Scherer Project, 8.375%, 07/01/17 ....................................... 257,640
1,000,000 Georgia Power Co., Scherer Project, First Series, Senior Lien, 5.75%, 09/01/23 ............. 1,003,430
1,000,000 Refunding, Georgia Power Co., AMBAC Insured, 6.25%, 07/01/19 ............................... 1,036,840
1,500,000 Refunding, Oglethorpe Power Co., Scherer Project, Series A, 6.80%, 01/01/12 ................ 1,708,890
500,000 Paulding County Water and Sewer Revenue, AMBAC Insured, 5.80%, 12/01/16 ...................... 507,935
1,000,000 Pike County School District, Refunding, AMBAC Insured, 5.70%, 02/01/16 ....................... 1,037,620
100,000 Polk County Water Authority, Water and Sewerage Revenue, Refunding, MBIA Insured, 7.00%,
12/01/15 .................................................................................... 106,690
50,000 Private Colleges and Universities, Facilities Authority Revenue, Spellman College Project,
Pre-Refunded, 7.75%, 06/01/13 ............................................................... 53,381
250,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
7.875%, 07/01/17 ............................................................................ 268,428
Puerto Rico Commonwealth Highway Authority Revenue,
230,000 Refunding, Series R, 7.15%, 07/01/00 ....................................................... 248,152
100,000 Series P, Pre-Refunded, 8.125%, 07/01/13 ................................................... 107,623
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
175,000 7.90%, 07/01/07 ............................................................................ 185,791
50,000 7.50%, 07/01/09 ............................................................................ 52,830
80,000 Puerto Rico Commonwealth Public Improvement GO, Series A, Pre-Refunded, 7.75%, 07/01/13 ...... 85,770
1,500,000 Puerto Rico Commonwealth, Refunding, Series A, 6.00%, 07/01/14 ............................... 1,537,305
Puerto Rico Electric Power Authority Revenue,
150,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ......................................... 161,195
180,000 Refunding, Series N, 7.125%, 07/01/14 ...................................................... 194,184
1,000,000 Refunding, Series U, 6.00%, 07/01/14 ....................................................... 1,033,040
165,000 Series O, 7.125%, 07/01/14 ................................................................. 176,402
235,000 Series O, Pre-Refunded, 7.125%, 07/01/14 ................................................... 254,601
1,000,000 Series T, 6.00%, 07/01/16 .................................................................. 1,019,910
200,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs.,
Series A, 8.00%, 09/01/12 ................................................................... 215,676
110,000 Puerto Rico Municipal Finance Agency, Series A, 8.25%, 07/01/08 .............................. 117,699
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Pre-Refunded,
80,000 Series H, 7.875%, 07/01/16 ................................................................. 82,751
100,000 Series J, 7.00%, 07/01/19 .................................................................. 105,775
1,000,000 Richmond County Board of Education, MBIA Insured, 5.95%, 11/01/26 ............................ 1,003,440
1,500,000 Richmond County Development Authority, Solid Waste Disposal Revenue, International Paper Co.
Project, 5.80%, 12/01/20 .................................................................... 1,473,285
200,000 Royston Downtown Development Authority Revenue, Cobb Memorial Hospital Project, Pre-Refunded,
8.20%, 07/01/08 ............................................................................. 208,961
$ 1,000,000 Savannah EDA, IDR, Refunding, Hershey Foods Corp. Project, 6.60%, 06/01/12 ................... $ 1,075,320
3,000,000 Savannah Hospital Authority Revenue, Refunding, St. Joseph's Hospital Project, 6.20%, 07/01/23 3,028,740
4,600,000 Savannah Port Authority PCR, Refunding, Union Carbide Plastic Co., Inc., 7.55%, 08/01/04 ..... 4,622,493
St. Mary's Housing Authority MFMR, FNMA Secured, 7.375%,
700,000 Pine Apartments, Series C, 04/01/22 ........................................................ 722,665
500,000 Refunding, Cumberland Oaks Apartments, Series A, 09/01/22 .................................. 529,214
2,330,000 Tift County School District, MBIA Insured, 6.125%, 02/01/15 .................................. 2,416,000
1,500,000 Walker, Dade and Catoosa County Hospital Authority Revenue, Anticipation Certificates, Series A,
FGIC Insured, 7.00%, 10/01/10 ............................................................... 1,664,640
2,000,000 Walton County Water and Sewer Authority Revenue, Refunding & Improvement, MBIA Insured, 6.00%,
02/01/21 .................................................................................... 2,069,460
1,780,000 White County IDA Revenue, Refunding, Clark Schwebel Fiber Glass, 6.85%, 06/01/10 ............. 1,900,398
------------
Total Long Term Investments (Cost $134,446,197)......................................... 142,193,046
------------
aShort Term Investments 0.1%
100,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.95%, 12/01/15 (Cost $100,000).............................................................. 100,000
------------
Total Investments (Cost $134,546,197) 98.5% ....................................... 142,293,046
Other Assets and Liabilities, Net 1.5% ............................................ 2,094,305
------------
Net Assets 100.0% ................................................................. $144,387,351
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $134,546,197 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 7,776,554
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (29,705)
------------
Net unrealized appreciation ................................................................ $ 7,746,849
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
EDA - Economic Development Authority
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GML - Guaranteed Mortgage Loan
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Authority/Agency
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
VA - Veterans Administration
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Kentucky Tax-Free Income Fund (Note 1)
Long Term Investments 98.7%
<C> <S> <C>
$ 700,000 Ashland PCR, Refunding, Ashland Oil, Inc. Project, 6.65%, 08/01/09 ............................. $ 746,242
1,000,000 Ashland Solid Waste Revenue, Ashland Oil, Inc. Project, 7.20%, 10/01/20 ........................ 1,067,110
710,000 Boone County PCR, Refunding, Collateralized, Series A, Dayton Power and Light Co., 6.50%, 11/15/22 756,732
200,000 Campbell County Water Revenue, District No. 1, 6.60%, 12/01/11 ................................. 215,168
325,000 Carroll County PCR, Collateralized, Kentucky Utilities Co. Project, Series B, 6.25%, 02/01/18 .. 338,637
1,000,000 Christian County Hospital Revenue, Jennie Stuart Medical Center, Series A, 6.00%, 07/01/17 ..... 1,009,720
Danville Multi-City Lease Revenue,
1,500,000 Campbellsville, Series B, MBIA Insured, 6.15%, 07/01/12 ..................................... 1,591,560
125,000 Housing Authority, Jefferson County, 6.50%, 02/01/12 ........................................ 130,746
100,000 Shelbyville, Series H, MBIA Insured, 6.70%, 07/01/11 ........................................ 109,880
Daviess County Hospital Revenue, Odch, Inc., Series A, MBIA Insured, 6.25%,
100,000 08/01/12 .................................................................................... 105,375
210,000 08/01/22 .................................................................................... 219,721
545,000 Daviess County Public Improvement Corp. Revenue, Refunding, First Mortgage, Court Facilities Project,
Series A, 5.70%, 10/01/14 ..................................................................... 551,137
100,000 Eastern University Revenues, Consolidated Educational Building, Series Q, AMBAC Insured, 6.40%,
05/01/08 ...................................................................................... 107,072
200,000 Edgewood Public Properties Corp. Revenue, First Mortgage, Public Facilities Project, 6.70%, 12/01/21 211,610
500,000 Fulton County Industrial Building Revenue, H.I.S., Inc. Project, 7.50%, 02/01/10 ............... 512,360
400,000 Guam Airport Authority Revenue, Series A, Refunding, 6.50%, 10/01/23 ........................... 412,684
225,000 Guam Power Authority Revenue, Series A, 6.30%, 10/01/22 ........................................ 228,636
1,000,000 Hancock County Solid Waste Disposal Revenue, Willamette Industries, Inc. Project, 6.60%, 05/01/26 1,044,040
125,000 Hopkins County Hospital Revenue, Trover Clinic Foundation, Inc., MBIA Insured, 6.625% 11/15/11 . 136,365
1,000,000 Jefferson County Capital Projects Corp., Lease Revenue, Series A, AMBAC Insured, 5.60%, 04/01/14 1,010,640
Jefferson County Health Facilities Revenue, Jewish Hospital Health Care Services, Inc., AMBAC Insured,
750,000 6.50%, 05/01/15 ............................................................................. 807,518
720,000 6.55%, 05/01/22 ............................................................................. 776,830
2,000,000 Refunding, 5.75%, 01/01/26 .................................................................. 2,004,900
100,000 Jefferson County Hospital Revenue, Alliant Health System Project, Series C, MBIA Insured, 6.20%,
10/01/04 ...................................................................................... 108,921
1,995,000 Jefferson County MFHR, Watterson Park Apartments Project, Series A, 6.35%, 11/15/11 ............ 2,040,187
Jefferson County PCR,
450,000 DuPont, Series A, 6.30%, 07/01/12 ........................................................... 489,159
1,000,000 Louisville Gas and Electric Co. Project, Series B, 5.625%, 08/15/19 ......................... 1,002,290
100,000 Refunding, Louisville Gas and Electric Co. Project, Series A, 7.45%, 06/15/15 ............... 108,981
250,000 Jefferson County School District Finance Corp., School Building Revenue, MBIA Insured, Refunding,
Series B, 6.20%, 01/01/07 ..................................................................... 269,395
Kenton County Airport Board Revenue,
1,230,000 Cincinnati/Northern Kentucky International Airport, Series B, MBIA Insured, 5.75%, 03/01/13 . 1,256,113
445,000 Special Facilities, Delta Airlines Project, Series A, 7.50%, 02/01/20 ....................... 480,613
150,000 Special Facilities, Delta Airlines Project, Series A, 7.125%, 02/01/21 ...................... 159,642
445,000 Special Facilities, Delta Airlines Project, Series B, 7.25%, 02/01/22 ....................... 478,500
Kenton County Water District No. 001, Waterworks Revenue,
155,000 Refunding, FGIC Insured, 6.375%, 02/01/17 ................................................... 165,146
500,000 Series A, MBIA Insured, 5.80%, 02/01/15 ..................................................... 511,255
500,000 Series B, FGIC Insured, 5.70%, 02/01/20 ..................................................... 503,880
750,000 Kentucky Development Finance Authority, Hospital Revenue, Refunding & Improvement, St. Elizabeth
Medical Center, Series A, FGIC Insured, 6.00%, 11/01/10 ....................................... 768,240
Kentucky Economic Development Financing Authority, Hospital Facilities Revenue,
650,000 Refunding, Baptist Healthcare System, MBIA Insured, 5.00%, 08/15/24 ......................... 585,559
1,500,000 bRefunding, Pikeville United Methodist Hospital Project, Connie Lee Insured, 5.70%, 02/01/28 1,484,835
625,000 St. Elizabeth Medical Center Project, Series A, FGIC Insured, 6.00%, 12/01/22 ............... 644,925
$ 500,000 Kentucky Economic Development Financing Authority, Medical Center Revenue, Refunding &
Improvement, Ashland Hospital Corp., Series A, FSA Insured, 6.125%, 02/01/12 .................. $ 524,355
Kentucky HFC, Housing Revenue,
1,500,000 Refunding, Series A, 6.375%, 07/01/28 ....................................................... 1,539,375
1,445,000 Series C, FHA Insured, 6.40%, 01/01/17 ...................................................... 1,503,436
40,000 SFMR, Series A, 6.60%, 07/01/11 ............................................................. 41,713
150,000 SFMR, Series B, 6.60%, 07/01/11 ............................................................. 156,425
120,000 SFMR, Series D, FHA/VA, 7.45%, 01/01/23 ..................................................... 124,123
Kentucky Infrastructure Authority Revenue, Revolving Fund Program,
100,000 Series E, 6.50%, 06/01/11 ................................................................... 105,048
100,000 Series G, 6.30%, 06/01/12 ................................................................... 106,060
500,000 Series J, 6.375%, 06/01/14 .................................................................. 535,060
300,000 Wastewater Revolving Fund Program, Series D, 5.75%, 06/01/15 ................................ 300,429
Kentucky State Development Finance Authority Revenue,
100,000 Refunding, Sisters of Charity of Nazareth Health Corp., 6.75%, 11/01/12 ..................... 107,471
110,000 St. Claire Medical Center Project, Pre-Refunded, 7.125%, 09/01/21 ........................... 123,659
Kentucky State Property and Buildings Commission Revenue, 6.00%,
45,000 Project No. 50, Pre-Refunded, 02/01/10 ...................................................... 47,556
700,000 Project No. 56, 09/01/14 .................................................................... 722,988
15,000 Kentucky State Turnpike Authority, EDR, Revitalization Road Project, Pre-Refunded, 7.25%, 05/15/10 16,503
Lexington-Fayette Urban County Government Revenue, University of Kentucky Library Project,
MBIA Insured,
500,000 6.625%, 11/01/13 ............................................................................ 541,315
750,000 6.75%, 11/01/24 ............................................................................. 818,745
400,000 Louisville and Jefferson County Metropolitan Sewer District Revenue, Refunding, Series A, MBIA Insured,
5.50%, 05/15/21 ............................................................................... 393,656
Louisville and Jefferson County Metropolitan Sewer District, Sewer and Drain System Revenue, Series A,
500,000 FGIC Insured, 5.20%, 05/15/26 ............................................................... 472,045
500,000 bMBIA Insured, 5.50%, 05/15/21 .............................................................. 488,835
500,000 Refunding, AMBAC Insured, 6.75%, 05/15/25 ................................................... 555,990
500,000 McCracken County Hospital Revenue, Refunding, Mercy Health System, Series A, MBIA Insured, 6.40%,
11/01/07 ...................................................................................... 550,880
625,000 Mount Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 6.10%, 03/01/08 ........ 649,794
1,050,000 Pendleton Multi-County Association Trust, Lease Revenue, Series A, 6.50%, 03/01/19 ............. 1,096,452
Puerto Rico Commonwealth, GO,
430,000 6.45%, 07/01/17 ............................................................................. 462,684
1,000,000 FSA Insured, 5.40%, 07/01/25 ................................................................ 978,620
100,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Refunding, Series V,
6.625%, 07/01/12 .............................................................................. 107,925
1,000,000 Puerto Rico Electric Power Authority Revenue, Refunding, Series U, 6.00%, 07/01/14 ............. 1,033,040
1,480,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA, Special Facilities, American Airlines,
Series A, 6.45%, 12/01/25 ..................................................................... 1,554,710
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
1,000,000 Refunding, Series M, 5.75%, 07/01/15 ........................................................ 992,080
50,000 Series L, Pre-Refunded, 6.875%, 07/01/21 .................................................... 56,533
350,000 Russell Health System Revenue, Franciscan Health Center, Series B, 8.10%, 07/01/15 ............. 400,733
100,000 Somerset Water Project Revenue, MBIA Insured, 6.40%, 12/01/06 .................................. 102,442
University of Kentucky Revenues, Community College Educational Buildings,
350,000 Refunding, Series J, 5.10%, 05/01/10 ........................................................ 347,987
100,000 Series I, 6.40%, 05/01/08 ................................................................... 107,331
$ 145,000 University of Kentucky Revenues, Consolidated Educational Buildings, Series M, 6.40%, 05/01/10 . $ 155,066
750,000 University of Louisville Revenues, Refunding, Consolidated Educational Buildings, Series I, 5.40%,
05/01/16 ...................................................................................... 741,997
------------
Total Long Term Investments (Cost $41,845,271)............................................ 43,715,385
------------
aShort Term Investments 0.9%
400,000 Kentucky Development Finance Authority Revenue, Pooled Loan Program, Series A, FGIC Insured,
Weekly VRDN and Put, 3.30%, 12/01/15 (Cost $400,000) .......................................... 400,000
------------
Total Investments (Cost $42,245,271) 99.6% .......................................... 44,115,385
Other Assets and Liabilities, Net 0.4% .............................................. 173,279
------------
Net Assets 100.0% ................................................................... $44,288,664
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $42,245,271 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 1,893,938
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (23,824)
------------
Net unrealized appreciation .................................................................. $ 1,870,114
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
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
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
VA - Veterans Administration
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). bSee Note 1(g) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Louisiana Tax-Free Income Fund (Note 1)
<C> <S> <C>
Long Term Investments 98.5%
Bonds 96.8%
Ascension Parish Sales and Use Tax, Gravity Drainage District No. 1, Pre-Refunded, 7.25%,
$ 300,000 12/01/06..................................................................................... $ 327,021
300,000 12/01/07 .................................................................................... 327,021
200,000 12/01/08 .................................................................................... 218,014
500,000 Bastrop, Inc., IDB, PCR, Refunding, International Paper Co. Project, 6.90%, 03/01/07 .......... 540,995
150,000 Baton Rouge Public Improvement, Sales and Use Tax Revenue, AMBAC Insured, 7.00%, 08/01/08 ..... 160,968
200,000 Caddo Parish School District GO, Refunding, MBIA Insured, Pre-Refunded, 7.20%, 03/01/05 ....... 200,000
400,000 Calcasieu Parish Memorial Hospital Service District Revenue, Lake Charles Memorial Hospital Project,
MBIA Insured, Pre-Refunded, 7.50%, 12/01/18 .................................................. 411,240
50,000 Calcasieu Parish Public School ID No. 30, GO, Ward 4, Unlimited Tax, Pre-Refunded, 8.00%, 08/01/04 52,363
Calcasieu Parish Public Trust Authority, Mortgage Revenue, Refunding,
1,075,000 Series A, 7.75%, 06/01/12 ................................................................... 1,141,897
1,020,000 Series B, 6.875%, 11/01/12 .................................................................. 1,064,360
1,380,000 Denham Springs-Livingston Housing and Mortgage Finance Authority, SFMR, ETM, 7.20%, 08/01/10 .. 1,593,210
1,500,000 DeSoto Parish Environmental Improvement Revenue, International Paper Co. Project, Series A, 7.70%,
11/01/18 ..................................................................................... 1,709,400
DeSoto Parish GO, 8.00%,
150,000 School District No. 1, Pre-Refunded, 01/01/09 ............................................... 159,885
50,000 School District No. 2, 08/01/06 ............................................................. 53,664
East Baton Rouge Mortgage Finance Authority,
840,000 MBS, Series A, 7.875%, 08/01/23 ............................................................. 885,049
1,245,000 SF Purchase, Series F, GNMA Secured, 7.875%, 12/01/21 ....................................... 1,325,078
1,000,000 SFM, Refunding, Series A, 6.10%, 10/01/29 ................................................... 1,005,710
425,000 East Baton Rouge Parish Public Improvement, Sales and Use Tax, MBIA Insured, Pre-Refunded,
7.25%, 02/01/13 .............................................................................. 455,583
750,000 East Baton Rouge Parish Sales and Use Tax, FGIC Insured, 5.90%, 02/01/18 ...................... 766,388
50,000 Franklin Public Improvement GO, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%,
12/01/03 ..................................................................................... 52,647
Iberville Parish Consolidated School District No. 005, Pre-Refunded,
125,000 8.125%, 10/01/08 ............................................................................ 135,225
245,000 GO, Unlimited Tax, 8.00%, 10/01/04 .......................................................... 264,578
110,000 Jefferson Parish Home Mortgage Authority, SFMR, GNMA Secured, Series A, 8.30%, 04/01/20 ....... 115,176
Jefferson Parish Road District No. 1, GO, FGIC Insured, Pre-Refunded, 7.40%,
100,000 03/01/06 .................................................................................... 103,461
50,000 03/01/08 .................................................................................... 51,731
500,000 Jefferson Parish School Board, Sales and Use Tax Revenue, Series A, ETM, 7.35%, 02/01/03 ...... 514,420
400,000 Lafayette Parish Consolidated School District No. 1, FGIC Insured, Pre-Refunded, 7.70%, 03/01/07 430,524
25,000 Lafayette Public Improvement, Sales Tax Revenue, Refunding, FGIC Insured, Pre-Refunded, 8.00%,
03/01/08 ..................................................................................... 26,479
Lafayette Public Trust Financing Authority, SFMR, Series A,
30,000 ETM, 7.20%, 04/01/11 ........................................................................ 34,001
370,003 Refunding, 8.50%, 11/15/12 .................................................................. 390,643
95,000 Lafourche Parish Home Mortgage Authority, SFMR, ETM, 7.40%, 07/01/10 .......................... 108,483
3,000,000 Lake Charles Harbor and Terminal District, Port Facilities Revenue, Refunding, Occidental Petroleum
Corp., 7.20%, 12/01/20 ....................................................................... 3,276,150
750,000 Lake Charles Nonprofit HDC, Section 8, Assisted Mortgage Revenue, Refunding, Chateau Project,
Series 1990-A, FSA Insured, 7.875%, 02/15/25 ................................................. 788,558
1,750,000 Leesville, IDBR, Refunding, Wal-Mart Stores, Inc. Project, 7.10%, 03/01/11 .................... 1,856,750
500,000 Louisiana Gas Fuel Tax Revenue, 7.25%, 11/15/04 ............................................... 538,970
Louisiana Mortgage, HFA Revenue,
2,795,000 MF, Refunding, Series A, FHA Insured, 7.00%, 07/01/22 ....................................... 2,880,275
750,000 MF, Westview Project, FHA Insured, 7.80%, 04/01/30 .......................................... 786,180
Bonds (cont.)
Louisiana Mortgage, HFA Revenue, (cont.)
$ 20,000 SF, GNMA Secured, 9.125%, 11/01/18 .......................................................... $ 20,738
620,000 SF, GNMA Secured, 8.30%, 11/01/20 ........................................................... 641,595
1,600,000 Louisiana Office Capital Facility Corp., Non-Profit Corp., 7.75%, 12/01/10 .................... 1,768,272
Louisiana Public Facilities Authority, Hospital Revenue, Refunding,
75,000 Touro Infirmary Project, Series A, MBIA Insured, Pre-Refunded, 8.00%, 06/01/09 .............. 80,154
3,000,000 Women's Hospital Foundation Project, 7.25%, 10/01/22 ........................................ 3,212,460
65,000 Women's Hospital Foundation Project, FGIC Insured, Pre-Refunded, 8.125%, 10/01/14 ........... 70,317
1,230,000 Louisiana Public Facilities Authority, Lease Revenue, Orleans Parish School Board Project, FSA Insured,
5.65%, 06/15/11 .............................................................................. 1,234,280
Louisiana Public Facilities Authority Revenue,
930,000 Alton Ochsner Medical Foundation Project, Series C, MBIA Insured, 6.50%, 05/15/22 ........... 980,034
1,000,000 Centenary College Project, 5.90%, 02/01/17 .................................................. 978,070
62,483 MFHR, Pontchartrain Apartments, Series A, GNMA Secured, 8.375%, 07/20/23 .................... 65,934
1,200,000 Mortgage Purchase, HFA, 6.05%, 01/01/26 ..................................................... 1,201,560
200,000 Refunding, Jefferson Parish Eastbank Office, FGIC Insured, 7.70%, 08/01/10 .................. 216,166
1,000,000 Refunding, Loyola University Project, MBIA Insured, 5.625%, 10/01/16 ........................ 1,004,870
1,900,000 Refunding, MF Housing, Series A, One Lakeshore, GNMA Secured, 6.40%, 07/20/20 ............... 1,933,288
1,923,966 SFM Purchase, Series C, 8.45%, 12/01/12 ..................................................... 2,051,622
1,500,000 Student Loan, Series A, Sub-Series 3, 7.00%, 09/01/06 ....................................... 1,575,585
5,500,000 Tulane University, AMBAC Insured, 6.05%, 10/01/25 ........................................... 5,651,800
50,000 Tulane University, Series B, Pre-Refunded, 8.00%, 08/15/15 .................................. 51,955
30,000 Louisiana Public Facilities Authority, SFM Purchase, Series C, GNMA Secured, 8.80%, 04/01/13 .. 31,442
Louisiana Stadium and Exposition District, Hotel Occupancy Tax and Stadium Revenue, FGIC Insured,
5,000,000 Series A, 6.00%, 07/01/16 ................................................................... 5,191,050
1,500,000 Series B, 5.25%, 07/01/20 ................................................................... 1,418,910
Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Loop, Inc. Project, First Stage,
Refunding,
1,000,000 Series B, 7.20%, 09/01/08 ................................................................... 1,102,640
1,000,000 Series E, 7.60%, 09/01/10 ................................................................... 1,098,450
2,500,000 Louisiana State University, Agricultural and Mechanical College, University Revenues, Auxiliary,
MBIA Insured, 5.50%, 07/01/26 ................................................................ 2,422,000
1,050,000 Mississippi River Bridge Authority Revenue, 6.75%, 11/01/12 ................................... 1,136,352
50,000 Morgan City GO, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%, 12/01/03 ........... 52,666
Natchitoches Parish GO, Consolidated School, District No. 7, Pre-Refunded,
125,000 8.30%, 03/01/10 ............................................................................. 135,831
230,000 Series B, 7.50%, 03/01/09 ................................................................... 249,764
235,000 Series B, 7.50%, 03/01/10 ................................................................... 255,194
65,000 New Orleans Audubon Park Commission, Aquarium Project, MBIA Insured, Pre-Refunded, 7.90%,
10/01/08 ..................................................................................... 67,840
2,000,000 New Orleans GO, Refunding, AMBAC Insured, 6.00%, 09/01/21 ..................................... 2,034,500
560,000 New Orleans Home Mortgage Authority, SFMR, Series A, Pre-Refunded, 7.50%, 10/01/18 ............ 588,034
50,000 New Orleans International Airport Revenue, Series A, FGIC Insured, Pre-Refunded, 8.875%, 08/01/17 52,023
1,000,000 New Orleans Public Improvement GO, FGIC Insured, 5.90%, 11/01/25 .............................. 1,019,580
1,000,000 New Roads Electric System Revenue, 7.00%, 07/01/17 ............................................ 1,059,650
970,000 Orleans Levee District, GO, Levee Improvement, FSA Insured, 5.95%, 11/01/14 ................... 993,784
Orleans Parish Law Enforcement District, GO, AMBAC Insured, 7.10%,
185,000 05/01/05 .................................................................................... 197,082
750,000 05/01/10 .................................................................................... 799,208
Ouachita Parish Hospital Service Revenue, District No. 1, Glenwood Regional Medical Center,
1,000,000 Pre-Refunded, 7.50%, 07/01/21 ............................................................... 1,133,050
2,500,000 Refunding, FSA Insured, 5.75%, 05/15/21 ..................................................... 2,496,500
Bonds (cont.)
$ 75,000 Plaquemines Parish GO, Unlimited Tax, Pre-Refunded, 8.40%, 08/01/06 ........................... $ 79,568
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
500,000 7.90%, 07/01/07 ............................................................................. 537,015
1,000,000 7.875%, 07/01/17 ............................................................................ 1,073,710
500,000 Puerto Rico Commonwealth GO, Series 1990, Pre-Refunded, 7.70%, 07/01/20 ....................... 563,235
1,000,000 Puerto Rico Commonwealth Highway Authority Revenue, Series Q, Pre-Refunded,
8.00%, 07/01/18 .............................................................................. 1,134,010
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
525,000 7.90%, 07/01/07 ............................................................................. 557,372
100,000 7.75%, 07/01/08 ............................................................................. 105,976
Puerto Rico Electric Power Authority Revenue, Pre-Refunded,
100,000 Refunding, Series M, 8.00%, 07/01/08 ........................................................ 107,463
560,000 Refunding, Series N, 7.125%, 07/01/14 ....................................................... 597,419
1,000,000 Series P, 7.00%, 07/01/21 ................................................................... 1,124,130
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
260,000 Series B, 7.65%, 10/15/22 ................................................................... 273,853
650,000 Series C, 6.85%, 10/15/23 ................................................................... 683,709
150,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs.,
Series A, 8.00%, 09/01/12 .................................................................... 161,757
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Pre-Refunded,
100,000 Series H, 7.875%, 07/01/16 .................................................................. 103,439
1,000,000 Series J, 7.25%, 07/01/17 ................................................................... 1,060,950
75,000 Rapides Parish GO, Consolidated School District No. 52, Pineville, 8.40%, 03/01/03 ............ 79,406
1,370,000 Rapides Parish Housing and Mortgage Finance Authority, SFM, ETM, 7.25%, 08/01/10 .............. 1,510,096
150,000 Shreveport GO, Series A, Pre-Refunded, 7.50%, 01/01/09 ........................................ 158,718
3,500,000 Shreveport Water and Sewer Revenue, Refunding, Series A, FGIC Insured, 5.95%, 12/01/14 ........ 3,597,230
1,000,000 St. Bernard Parish Exempt Facilities Revenue, Mobil Oil Corp. Project, 5.90%, 11/01/26 ........ 1,002,410
St. Bernard Parish Home Mortgage Authority Revenue, SFMR, Series A,
435,000 FGIC Insured, ETM, 7.50%, 09/01/10 .......................................................... 510,703
871,427 Refunding, 8.00%, 03/25/12 .................................................................. 913,578
2,500,000 St. Charles Parish PCR, Louisiana Power and Light Co. Project, 7.50%, 06/01/21 ................ 2,673,225
St. Charles Parish Solid Waste Disposal Revenue, Louisiana Power and Light Co. Project,
1,500,000 7.05%, 04/01/22 ............................................................................. 1,575,960
750,000 Series A, 7.00%, 12/01/22 ................................................................... 793,890
St. John's Baptist Parish Sales Tax District, 7.30%,
430,000 12/01/08 .................................................................................... 464,856
275,000 12/01/09 .................................................................................... 295,966
50,000 St. Mary's Parish Public Improvement, Sales and Use Tax Revenue, Refunding, Pre-Refunded, 8.40%,
12/01/03 ..................................................................................... 52,666
380,387 St. Mary's Public Trust Financing Authority, SFMR, Refunding, Series A, 7.625%, 03/25/12 ...... 410,395
125,000 St. Tammany's Parish Hospital Service Revenue, District No. 2, Pre-Refunded, 8.00%, 10/01/08 .. 134,988
St. Tammany's Public Trust Financing Authority, SFMR, Series A, ETM, 7.20%,
165,000 07/01/10 .................................................................................... 188,196
50,000 07/01/11 .................................................................................... 56,313
5,500,000 Tangipahoa Parish Hospital Service Revenue, District No. 1, Refunding, AMBAC Insured, 6.25%,
02/01/24 ..................................................................................... 5,720,274
125,000 Terrebonne Parish Hospital Service Revenue, District No. 1, Refunding, Terrebonne General Medical
Center Project, MBIA Insured, 7.50%, 04/01/15 ................................................ 131,137
205,000 Ville Platte Utilities Revenue, Refunding, Pre-Refunded, 7.80%, 05/01/02 ...................... 221,914
Bonds (cont.)
West Feliciana Parish PCR, Gulf States Utilities Co. Project,
$ 6,500,000 7.70%, 12/01/14 ............................................................................. $ 7,158,904
5,000,000 Refunding, 8.00%, 12/01/24 .................................................................. 5,368,900
------------
Total Bonds (Cost $105,555,465).......................................................... 112,209,678
------------
Zero Coupon Bonds 1.7%
5,000,000 Shreveport Water and Sewer Revenue, Refunding, Series B, FGIC Insured, (original accretion rate
7.05%), 12/01/11 (Cost $1,786,976)............................................................ 2,023,050
------------
Total Investments (Cost $107,342,441) 98.5% ........................................ 114,232,728
Other Assets and Liabilities 1.5% .................................................. 1,752,546
------------
Net Assets 100.0% .................................................................. $115,985,274
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $107,342,441 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 6,890,287
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ --
------------
Net unrealized appreciation ................................................................. $ 6,890,287
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
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.
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corp.
ID - Improvement District
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MBS - Mortgage-Backed Securities
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SF - Single Family
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Maryland Tax-Free Income Fund (Note 1)
<C> <S> <C>
Long Term Investments 97.0%
$ 200,000 Anne Arundel County GO, Second Issue, 7.75%, 03/15/08 ........................................ $ 216,112
1,650,000 Anne Arundel County Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.00%, 01/01/26 ..... 1,674,635
9,500,000 Anne Arundel County PCR, Refunding, Baltimore Gas and Electric Co. Project, 6.00%, 04/01/24 .. 9,726,195
4,250,000 Baltimore Convention Center Revenue, FGIC Insured, 6.15%, 09/01/19 ........................... 4,409,758
545,000 Baltimore COP, Refunding, Series C, MBIA Insured, 7.25%, 04/01/16 ............................ 589,183
90,000 Baltimore County Authority Revenue, Series 1989, 7.20%, 07/01/19 ............................. 95,682
Baltimore County Mortgage Revenue, Old Orchard Apartments Project, Refunding, Series A,
MBIA Insured,
1,000,000 7.00%, 07/01/16 ............................................................................ 1,061,690
3,000,000 7.125%, 01/01/27 ........................................................................... 3,211,410
Baltimore Economic Development Lease Revenue, Refunding, Armistead Partnership, Series A,
1,435,000 6.75%, 08/01/02 ............................................................................ 1,542,037
3,225,000 7.00%, 08/01/11 ............................................................................ 3,515,734
1,000,000 Baltimore GO, Series B, 7.15%, 10/15/08 ...................................................... 1,179,810
1,850,000 Baltimore Port Facilities Revenue, Consolidated Coal Sales, Series A, 6.50%, 10/01/11 ........ 2,005,622
Baltimore Revenue, Refunding, Series A, FGIC Insured,
5,000,000 Waste Water Project, 5.80%, 07/01/15 ....................................................... 5,133,200
2,000,000 Water Project, 5.50%, 07/01/26 ............................................................. 1,968,340
250,000 Bel Air COP, Parking Facilities, FSA Insured, Pre-Refunded, 7.80%, 06/01/10 .................. 271,555
350,000 Frederick County College Revenue, Hood College Project, 7.20%, 07/01/09 ...................... 374,532
500,000 Frederick County EDR, Refunding, Manekin Frederick Project, Series A, 7.50%, 12/01/14 ........ 546,370
Gaithersburg Hospital Facilities Revenue, Shady Grove, 09/01/21,
10,000,000 Improvement Revenue, Series A, Pre-Refunded, 8.25%.......................................... 11,672,600
8,000,000 Refunding & Improvement, FSA Insured, 6.00%................................................. 8,219,200
3,000,000 Harford County Mortgage Revenue, Refunding, Greenbrier V Apartments Project, FHA Insured, 6.50%,
11/01/26 .................................................................................... 3,138,060
1,250,000 Howard County EDR, Refunding, 7.75%, 06/01/12 ................................................ 1,322,413
215,000 Howard County Metropolitan District, Series A, Pre-Refunded, 7.40%, 02/15/18 ................. 229,966
2,000,000 Howard County Mortgage Revenue, Refunding, Normandy Woods III Apartments Project, Series A,
6.10%, 07/01/25 ............................................................................. 2,020,960
300,000 Kent County College Revenue, Refunding, Washington College Project, 7.70%, 07/01/18 .......... 320,544
1,900,000 Maryland Environmental Services, COP, Water and Waste Facilities, Series A, 6.70%, 06/01/11 .. 2,037,541
650,000 Maryland Local Government Insurance Trust Capitalization Program, Series A, 7.125%, 08/01/09 . 710,990
Maryland State CDA, Department of Economic and Community Development,
350,000 SF Program, First Series, 7.00%, 04/01/14 .................................................. 360,255
1,000,000 SFHR Program, Fourth Series, 7.30%, 04/01/17 ............................................... 1,051,800
Maryland State CDA, Department of Housing and Community Development,
130,000 Infrastructure Financing, Series A, AMBAC Insured, 7.25%, 06/01/09 ......................... 138,748
990,000 MFHR Mortgage, Series A, 7.80%, 05/15/32 ................................................... 1,063,646
1,800,000 MFHR Mortgage, Series A, 6.85%, 05/15/33 ................................................... 1,870,020
1,000,000 MFHR Mortgage, Series D, 7.70%, 05/15/20 ................................................... 1,064,650
675,000 MFHR Mortgage, Series E, 7.10%, 05/15/28 ................................................... 706,826
140,000 SF Program, 1st Series, 7.40%, 04/01/17 .................................................... 145,510
680,000 SF Program, 2nd Series, 7.60%, 04/01/23 .................................................... 716,564
260,000 SF Program, 2nd Series, 7.85%, 04/01/29 .................................................... 273,811
300,000 SF Program, 3rd Series, 7.375%, 04/01/26 ................................................... 309,129
1,435,000 SF Program, 3rd Series, 7.25%, 04/01/27 .................................................... 1,498,398
995,000 SF Program, 4th Series, 7.375%, 04/01/10 ................................................... 1,045,675
940,000 SF Program, 4th Series, 7.45%, 04/01/32 .................................................... 981,275
1,955,000 SF Program, 5th Series, 6.85%, 04/01/11 .................................................... 2,061,548
Maryland State Community Development Administration, MFHR, Series A,
200,000 Department of Economics and Community Development, 7.375%, 05/15/26 ........................ 203,946
30,000 Department of Housing and Community Development, 7.50%, 05/15/31 ........................... 32,056
$ 1,000,000 Maryland State EDC Lease Revenue, Hilton Street Facilities, Series A, 7.00%, 01/01/10 ........ $ 1,099,340
3,000,000 Maryland State Energy Financing Adminstration, Solid Waste Disposal Revenue, Limited Obligation,
Wheelabrator Water Projects, 6.45%, 12/01/16 ................................................ 3,130,230
Maryland State Health and Higher Educational Facilities Authority Revenue,
1,000,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/12 .................................. 1,153,660
250,000 Doctors Community Hospital, Pre-Refunded, 8.75%, 07/01/22 .................................. 288,415
150,000 Franklin Square Hospital, MBIA Insured, 7.50%, 07/01/19 .................................... 162,960
100,000 Hartford Memorial Hospital and Fallston General Hospital, 8.50%, 07/01/14 .................. 103,070
9,750,000 Johns Hopkins Medical Institutions, Parking Facilities, AMBAC Insured, 5.50%, 07/01/26 ..... 9,581,910
1,700,000 Kernan Hospital, Connie Lee Insured, 6.10%, 07/01/24 ....................................... 1,748,484
100,000 North Arundel Hospital, MBIA Insured, Pre-Refunded, 7.875%, 07/01/21 ....................... 107,236
3,000,000 Refunding, Doctors Community Hospital, 5.75%, 07/01/13 ..................................... 2,898,120
150,000 Refunding, Johns Hopkins Hospital, 7.375%, 07/01/09 ........................................ 159,431
100,000 Refunding, Johns Hopkins University, 7.375%, 07/01/08 ...................................... 105,793
2,460,000 Refunding, Junior Lien, Francis Scott Key Facility, 5.625%, 07/01/25 ....................... 2,444,256
1,350,000 Maryland State IDA Financing, EDR, FSA Insured, 7.10%, 07/01/18 .............................. 1,472,931
6,000,000 Maryland State IDA Revenue Financing, American Center Physics Headquarters, 6.625%, 01/01/17 . 6,238,320
4,655,000 Maryland State Stadium Authority, Lease Revenue, Convention Center Expansion, AMBAC Insured,
5.875%, 12/15/14 ............................................................................ 4,817,227
Maryland State Stadium Authority, Sports Facilities Lease Revenue,
5,000,000 AMBAC Insured, 5.75%, 03/01/22 ............................................................. 5,030,100
500,000 Series D, 7.60%, 12/15/19 .................................................................. 542,395
5,400,000 Maryland State Transportation Facilities Authority Revenue, Refunding, Series 1992, 5.75%, 07/01/13 5,424,030
1,000,000 Maryland Water Quality Financing Administration Revenue, Revolving Loan Fund, Series A, 6.55%,
09/01/14 .................................................................................... 1,074,750
2,500,000 Montgomery County Housing Opportunities Commission, MFHR, Series B, 6.00%, 07/01/37 .......... 2,505,850
Montgomery County Housing Opportunities Commission, MFMR, Series A,
1,580,000 7.25%, 07/01/11 ............................................................................ 1,675,400
2,410,000 7.00%, 07/01/23 ............................................................................ 2,514,594
Montgomery County Housing Opportunities Commission, SFMR, Series A, 07/01/17,
2,015,000 6.80% ...................................................................................... 2,086,774
460,000 7.50% ...................................................................................... 486,151
175,000 7.625% ..................................................................................... 180,623
1,000,000 Montgomery County Revenue Authority, Golf Course System, Series A, 6.125%, 10/01/22 .......... 1,001,990
Northeast Solid Waste Disposal Authority Revenue, Montgomery County Resources Recreation Project,
Series A,
3,100,000 6.20%, 07/01/10 ............................................................................ 3,188,846
6,000,000 6.30%, 07/01/16 ............................................................................ 6,100,200
Ocean City GO, Refunding, MBIA Insured, 5.75%,
1,880,000 03/15/12 ................................................................................... 1,933,242
1,120,000 03/15/13 ................................................................................... 1,151,718
1,180,000 03/15/14 ................................................................................... 1,208,332
2,050,000 Prince George's County COP, Real Estate Acquisition Program II, MBIA Insured, 6.00%, 09/15/14 2,140,631
130,000 Prince George's County GO, Consolidated Public Improvement, Series A, Pre-Refunded, 7.20%,
02/01/08 .................................................................................... 138,758
Prince George's County Hospital Revenue, Dimensions Health Corp., Pre-Refunded,
3,500,000 7.25%, 07/01/17 ............................................................................ 4,014,955
1,000,000 7.00%, 07/01/22 ............................................................................ 1,135,400
5,500,000 Prince George's County Housing Authority, MFHR, Emerson House Project, Series A, 7.00%, 04/15/19 5,737,655
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 ............................................ 3,014,840
2,750,000 Prince George's County IDA Lease Revenue, Upper Marlboro Justice Center Project, MBIA Insured,
5.80%, 06/30/14 ............................................................................. 2,828,238
$ 500,000 Prince George's County, Maryland Parking Authority Revenue, Refunding, Justice Center Facilities
Project, 6.45%, 05/01/05 .................................................................... $ 544,500
Prince George's County PCR, Refunding, Potomac Electric Project,
1,200,000 6.00%, 09/01/22 ............................................................................ 1,234,932
2,975,000 6.375%, 01/15/23 ........................................................................... 3,172,272
3,000,000 Puerto Rico Commonwealth GO, 5.50%, 07/01/17 ................................................. 2,956,440
3,000,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Y, 5.50%,
07/01/26 .................................................................................... 2,885,820
1,145,000 Rockville Mortgage Revenue, Refunding, Summit Apartments Project, Series A, MBIA Insured, 5.70%,
01/01/26 .................................................................................... 1,144,885
Washington Suburban Sanitary District, General Construction,
1,330,000 5.25%, 06/01/19 ............................................................................ 1,285,856
100,000 Pre-Refunded, 7.25%, 12/01/09 .............................................................. 107,616
------------
Total Long Term Investments (Cost $175,694,312)......................................... 184,677,172
------------
aShort Term Investments 1.3%
1,200,000 Howard County MFHR, Avalon Meadows Project, Weekly VRDN and Put, 3.25%, 06/15/26 ............. 1,200,000
1,200,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.95%, 12/01/15 ............................................................................. 1,200,000
------------
Total Short Term Investments (Cost $2,400,000).......................................... 2,400,000
------------
Total Investments (Cost $178,094,312) 98.3%........................................ 187,077,172
Other Assets and Liablities, Net 1.7%.............................................. 3,241,626
------------
Net Assets 100.0% ................................................................. $190,318,798
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $178,094,312 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 9,088,705
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (105,845)
------------
Net unrealized appreciation................................................................. $ 8,982,860
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Authority/Agency
COP - Certificate of Participation
EDC - Economic Development Corp.
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assistance
GO - General Obligation
IDA - Industrial Development Authority/Agency
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PCR - Pollution Control Revenue
SF - Single Family
SFHR - Single Family Housing Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Missouri Tax-Free Income Fund (Note 1)
<C> <S> <C>
Long Term Investments 99.7%
$ 500,000 Audrain County Hospital Revenue, Refunding, Audrain Medical Center Project, AMBAC Insured, 7.35%,
11/01/08 .................................................................................... $ 562,610
3,000,000 Bi-State Development Agency, Missouri-Illinois Metropolitan District No. 5, Refunding, American
Commercial Terminals, 7.75%, 06/01/10........................................................ 3,265,380
600,000 Bi-State Development Agency, Missouri-Illinois Metropolitan District Revenue, Refunding, Arch Parking
Facility, 7.25%, 01/02/13 ................................................................... 612,324
1,400,000 Bowling Green School District R1, Building Corp., Leasehold Revenue, MBIA Insured, 6.50%,
03/01/13 .................................................................................... 1,480,948
1,180,000 Christian County Reorganized School District No. R-6, AMBAC Insured, 7.05%, 03/01/11 ......... 1,279,781
1,000,000 Columbia Special Obligation, Capital Improvement, 5.50%, 02/01/16 ............................ 990,670
Franklin County Consolidated School District No. 2, GO, FGIC Insured, Pre-Refunded,
500,000 7.20%, 03/01/05 ........................................................................... 517,080
500,000 7.25%, 03/01/06 ........................................................................... 517,320
Guam Airport Authority Revenue,
1,075,000 Series A, Refunding, 6.50%, 10/01/23 ...................................................... 1,109,088
500,000 Series B, 6.60%, 10/01/10 ................................................................. 519,845
4,000,000 Series B, 6.70%, 10/01/23 ................................................................. 4,144,600
1,300,000 Hannibal IDA, Health Facilities, 5.75%, 03/01/22 ............................................. 1,314,768
1,745,000 Hazelwood IDA, MFHR, Refunding, Lakes Apartments Project, Series A, 6.10%, 09/20/26 .......... 1,782,640
3,000,000 Jackson County IDA Revenue, St. Joseph's Health Center Corp., MBIA Insured, 6.50%, 07/01/19 .. 3,198,660
880,000 Jackson County Lease COP, Longview Recreation Complex Project, Pre-Refunded, 8.00%, 11/01/07 . 921,395
370,000 Jefferson County Reorganized School District No. R-3, AMBAC Insured, 7.00%, 03/01/09 ......... 395,219
Joplin Catholic Health Facilities Corp. Revenue, IDA, St. John's Regional Medical Center Project,
Series 1987, 7.125%, 06/01/14,
150,000 COP ....................................................................................... 153,588
200,000 Refunding, MBIA Insured ................................................................... 205,188
605,000 Kansas City Airport Revenue, General Improvement, Series B, FSA Insured, 6.875%, 09/01/12 .... 667,351
3,345,000 Kansas City IDA, MFHR, Mews Apartments Project, Series A, 6.30%, 07/01/20 .................... 3,400,427
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 .................................... 5,121,050
Kansas City MAC, Leasehold Revenue, Capital Improvement,
7,790,000 Citywide Infrastructure, Series B, FSA Insured, 6.50%, 03/01/14 ........................... 8,297,285
1,750,000 Refunding, Roe Bartle, Series B-1, AMBAC Insured, Pre-Refunded, 7.125%, 04/15/16 .......... 1,931,178
1,665,000 Truman Medical Center, Series A, 7.00%, 11/01/11 .......................................... 1,788,776
1,850,000 Kansas City School District Building Corp., Leasehold Revenue, Capital Improvement Project,
Series A, FGIC Insured, Pre-Refunded, 7.90%, 02/01/08 ....................................... 1,958,540
3,525,000 Kansas City Tax Increment Financing Commission, Tax Increment Revenue, Briarcliff West Project,
Series B, 7.00%, 11/01/14 ................................................................... 3,654,368
Lake of The Ozarks Community Bridge Corp., Bridge System Revenue,
3,035,000 6.25%, 12/01/16 ........................................................................... 3,000,735
7,000,000 6.40%, 12/01/25 ........................................................................... 6,953,590
75,000 Lee's Summit COP, 8.50%, 08/01/02 ............................................................ 76,120
Lee's Summit, IDA Revenue, John Knox Village Project,
1,000,000 6.55%, 08/15/10 ........................................................................... 1,043,750
2,000,000 6.625%, 08/15/13 .......................................................................... 2,073,880
40,000 Marion County Nursing Home District Revenue, Refunding, Pre-Refunded, 9.00%, 08/01/03 ........ 42,029
1,000,000 Missouri School Board Association COP, Lease Participation, North St. Francois County Project,
MBIA Insured, Pre-Refunded, 7.375%, 04/01/10 ................................................ 1,054,800
Missouri School Board Association COP, Pooled Finance Program, MBIA Insured, 03/01/06,
130,000 Series A-3, 7.875%......................................................................... 134,008
225,000 Series A-5, 7.375%......................................................................... 232,974
Missouri School Boards Association, Lease Participation Certificates, FSA Insured, 03/01/16,
$ 6,150,000 Fox C-6 School District, 5.75%............................................................. $ 6,233,825
2,220,000 Refunding, Republic R-3 School District Project, 6.00%..................................... 2,294,681
Missouri State Environmental Improvement and Energy Resources Authority, PCR,
2,100,000 National Rural Association, Electric Project, Series 1984 G-6, AMBAC Insured, 5.85%, 02/01/13 2,140,845
950,000 Revolving Fund, Lee's Summit, Series B, 7.125%, 12/01/10 .................................. 1,043,338
4,500,000 Revolving Fund, Series A, 6.55%, 07/01/14 ................................................. 4,845,150
1,000,000 Revolving Fund, Series A, Kansas City Project, 5.75%, 01/01/16 ............................ 1,020,910
1,945,000 Revolving Fund, Springfield Project, Series A, 7.00%, 10/01/10 ............................ 2,122,034
1,000,000 Revolving Fund Program, Series A, FSA Insured, 6.05%, 07/01/16 ............................ 1,046,280
1,000,000 Revolving Fund Program, Series B, 5.80%, 01/01/15 ......................................... 1,024,730
2,000,000 Revolving Fund Program, Series B, 7.20%, 07/01/16 ......................................... 2,269,580
2,000,000 Thomas Hill Electric Cooperative, 5.50%, 12/01/11 ......................................... 2,022,240
2,390,000 Missouri State Environmental Improvement and Energy Resources Authority, Union Electric Project,
7.40%, 05/01/20 ............................................................................. 2,601,324
Missouri State Health and Educational Facilities Authority, Health Facilities Revenue,
2,000,000 Barnes Hospital, Pre-Refunded, 7.125%, 12/15/20 ........................................... 2,236,400
100,000 Bethesda Health Group, Inc. Project, Pre-Refunded, 8.00%, 04/01/13 ........................ 105,436
2,745,000 Heartland Health System Project, AMBAC Insured, 6.35%, 11/15/17 ........................... 2,903,606
3,500,000 Lake of The Ozarks General Hospital, Pre-Refunded, 8.00%, 02/15/11 ........................ 3,817,170
4,000,000 Lutheran Senior Services, Series A, 6.375%, 02/01/27 ...................................... 4,076,800
125,000 Refunding, Charles E. Still Osteopathic Hospital Project, 7.625%, 02/01/08 ................ 126,748
1,250,000 Refunding, Lake Of The Ozarks General Hospital, 6.25%, 02/15/11 ........................... 1,280,800
1,000,000 Refunding, Lake Of The Ozarks General Hospital, 6.50%, 02/15/21 ........................... 1,021,140
1,000,000 Refunding & Improvement, Christian Health, Series A, FGIC Insured, Pre-Refunded, 6.875%,
02/15/21 ................................................................................. 1,109,380
175,000 Spelman-St. Luke's Hospital Corp. Project, Pre-Refunded, 7.875%, 10/01/18 ................. 189,075
Missouri State Health and Educational Facilities Authority Revenue,
5,000,000 Health Midwest, Series A, MBIA Insured, 6.40%, 02/15/15 ................................... 5,295,050
700,000 Health Midwest, Series B, MBIA Insured, 6.10%, 06/01/11 ................................... 742,518
1,990,000 Health Midwest, Series B, MBIA Insured, 6.25%, 06/01/14 ................................... 2,111,569
1,100,000 Health Midwest, Series B, MBIA Insured, 6.25%, 02/15/22 ................................... 1,148,972
4,000,000 Jefferson Memorial Hospital Obligated Group, 6.75%, 05/15/15 .............................. 4,136,440
3,000,000 Jefferson Memorial Hospital Obligated Group, 6.80%, 05/15/25 .............................. 3,090,720
1,000,000 Refunding, SSM Health Care, Series AA, MBIA Insured, 6.25%, 06/01/16 ...................... 1,049,050
50,000 Refunding, St. Louis University, Series A, AMBAC Insured, 7.875%, 06/01/12 ................ 51,391
865,000 Refunding & Improvement, Heartland Health, 8.125%, 10/01/10 ............................... 940,575
1,200,000 Refunding & Improvement, St. Luke's Hospital of Kansas City Project, MBIA Insured, Pre-Refunded,
7.00%, 11/15/13 .......................................................................... 1,355,952
950,000 Sisters of St. Mary's Health Care Project, Series A, MBIA Insured, Pre-Refunded, 7.75%, 06/01/16 1,014,847
Missouri State HDC, GNMA Secured,
2,240,000 Series B, 6.40%, 12/01/24 ................................................................. 2,295,933
2,000,000 SFMR, Homeowner Loan, Series D, 6.125%, 03/01/28 .......................................... 2,003,940
1,730,000 SFMR, Series 1990-B, 7.75%, 06/01/22 ...................................................... 1,824,769
145,000 SFMR, Series A, 7.90%, 02/01/21 ........................................................... 150,713
430,000 SFMR, Series A, 7.625%, 02/01/22 .......................................................... 449,604
2,000,000 SFMR, Series B, 6.10%, 09/01/14 ........................................................... 2,040,320
355,000 SFMR, Series B, 7.625%, 06/01/21 .......................................................... 369,221
2,000,000 SFMR, Series B, 6.45%, 09/01/27 ........................................................... 2,047,220
1,620,000 SFMR, Series C, 6.90%, 07/01/18 ........................................................... 1,693,645
135,000 Missouri State Housing Development Commission, MFHR, FHA Insured, 8.50%, 12/01/29 ............ 140,586
5,000,000 Missouri State Western College Revenue, Refunding, Student Housing, Pre-Refunded, 8.00%,
10/01/16 .................................................................................... 5,819,850
$ 1,000,000 Moberly Combined Waterworks and Sewerage System, Refunding & Improvement Bonds,
FGIC Insured, Pre-Refunded, 7.50%, 08/01/15 ................................................. $ 1,121,000
50,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc., Pre-Refunded,
8.75%, 03/01/16 ............................................................................. 53,609
1,000,000 Northeast State University Recreational Facility Revenue, Campus Recreational Center Project,
AMBAC Insured, 5.80%, 06/01/15 .............................................................. 1,015,590
300,000 North Kansas City School District Facilities Authority, MBIA Insured, Pre-Refunded, 7.40%, 03/01/06 310,827
5,200,000 Northwest R-I Educational Facilities Authority, Leasehold Revenue, Jefferson County, FSA Insured,
5.70%, 03/01/15 ............................................................................. 5,213,156
5,000,000 Phelps County Hospital Revenue, Refunding, Phelps County Regional Medical Center,
Connie Lee Insured, 6.00%, 05/15/13 ......................................................... 5,071,650
250,000 Platte County Reorganized School District No. R-5, Pre-Refunded, 7.25%, 03/01/06 ............. 258,538
1,500,000 Platte County School District, Park Hill, Refunding & Improvement, 5.55%, 03/01/16 ........... 1,499,985
2,820,000 Poplar Bluff Public Building Corp., Leasehold Revenue, Series A, MBIA Insured, 5.50%, 09/01/12 2,860,749
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Pre-Refunded, Series A,
500,000 7.90%, 07/01/07 ........................................................................... 537,015
375,000 7.875%, 07/01/17 .......................................................................... 402,641
40,000 FSA Insured, 9.00%, 07/01/09 .............................................................. 50,779
2,500,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Y, 5.50%,
07/01/26 .................................................................................... 2,404,850
75,000 Puerto Rico Commonwealth Highway Authority Revenue, Series P, Pre-Refunded, 8.125%,
07/01/13 .................................................................................... 80,717
20,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ....................... 20,099
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
200,000 7.90%, 07/01/07 ........................................................................... 212,332
975,000 7.75%, 07/01/08 ........................................................................... 1,033,266
120,000 Puerto Rico Commonwealth Public Improvement GO, Series A, Pre-Refunded, 7.75%, 07/01/13 ...... 128,654
Puerto Rico Electric Power Authority Revenue,
15,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15 ........................................ 15,536
25,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ........................................ 26,866
1,110,000 Refunding, Series N, 7.125%, 07/01/14 ..................................................... 1,184,170
280,000 Series O, 7.125%, 07/01/14 ................................................................ 299,348
2,375,000 Series X, 6.00%, 07/01/15 ................................................................. 2,429,791
380,000 Puerto Rico HFC, MFMR, Portfolio A, Series 1, 7.50%, 04/01/22 ................................ 400,444
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
40,000 Series A, 7.80%, 10/15/21 ................................................................. 41,556
1,265,000 Series C, 6.85%, 10/15/23 ................................................................. 1,330,603
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
350,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12 .......................................... 377,433
300,000 Upjohn Co. Project, 7.50%, 12/01/23 ....................................................... 324,564
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 2,347,575
130,000 Puerto Rico Municipal Finance Agency, Series A, 8.25%, 07/01/08 .............................. 139,099
Puerto Rico PBA, Guaranteed Public Education and Health Facilities,
3,200,000 Refunding, Series M, 5.75%, 07/01/15 ...................................................... 3,174,656
175,000 Series H, Pre-Refunded, 7.875%, 07/01/16 .................................................. 181,018
1,750,000 Series H, Pre-Refunded, 7.25%, 07/01/17 ................................................... 1,856,663
2,500,000 Puerto Rico Port Authority Revenue, Special Facilities, American Airlines, Series A, 6.25%, 06/01/26 2,562,600
1,000,000 Raymore GO, FSA Insured, 6.00%, 03/01/14 ..................................................... 1,037,580
250,000 Southwest University Housing System Revenue, FGIC Insured, Pre-Refunded, 7.00%, 10/01/10 ..... 259,880
2,000,000 Springfield Waterworks Revenue, Series A, 5.60%, 05/01/23 .................................... 1,999,820
500,000 St. Charles County Community College, Pre-Refunded, 7.25%, 03/01/06 .......................... 544,630
St. Charles Public Facility Authority, Leasehold Revenue, AMBAC Insured,
$ 3,000,000 Refunding, 5.80%, 02/01/10 ................................................................ $ 3,075,240
1,500,000 Series 1990, Pre-Refunded, 7.20%, 03/01/10 ................................................ 1,625,145
2,000,000 St. Louis Airport Revenue, Lambert-St. Louis International Airport, Refunding & Improvement,
FGIC Insured, 6.125%, 07/01/15 .............................................................. 2,065,800
St. Louis County Housing Authority, MFHR, Kensington Square Apartments Project, Refunding,
1,000,000 6.55%, 03/01/14 ........................................................................... 1,048,520
2,750,000 6.65%, 03/01/20 ........................................................................... 2,882,825
St. Louis County IDA, Health Facilities Revenue,
1,930,000 Mother of Perpetual Help, 6.40%, 08/01/35 ................................................. 2,029,530
295,000 Refunding & Improvement, First Mortgage, Normandy Osteopathic Hospitals, 9.125%, 08/01/13 . 307,883
25,000 St. Louis County Mortgage Revenue, GNMA Secured, 8.125%, 09/01/19 ............................ 26,087
St. Louis County Regional Convention and Sports Complex Authority, Convention and Sports Project,
Series B, Pre-Refunded,
5,050,000 7.00%, 08/15/21 ........................................................................... 5,749,274
4,765,000 Refunding, 5.50%, 08/15/13 ................................................................ 4,595,032
5,565,000 Refunding, 5.75%, 08/15/21 ................................................................ 5,353,085
1,000,000 St. Louis IDA, Sewer and Solid Waste Disposal Facilities Revenue, Anheuser-Busch Project, 5.875%,
11/01/26 .................................................................................... 1,010,560
250,000 St. Louis Land Clearance RDA, Leasehold Revenue, Capital Improvement, Pre-Refunded, 7.60%,
08/15/08 .................................................................................... 263,583
St. Louis Municipal Finance Corp., Leasehold Revenue, Series A, 6.00%,
5,370,000 City Justice Center Improvement, AMBAC Insured, 02/15/19 .................................. 5,508,385
10,000,000 Refunding, 07/15/13 ....................................................................... 10,097,200
St. Louis Parking Facilities Revenue, 12/15/21,
470,000 Pre-Refunded, 6.625%....................................................................... 528,825
2,450,000 Refunding, MBIA Insured, 5.375%............................................................ 2,370,008
St. Louis Regional Convention and Sports Complex Authority, Series C,
3,060,000 7.75%, 08/15/01 ........................................................................... 3,230,717
11,900,000 7.90%, 08/15/21 ........................................................................... 13,166,635
4,725,000 bRefunding, Convention and Sports Facilities, AMBAC Insured, 5.625%, 08/15/21 ............. 4,696,838
300,000 Sullivan County Public Water Supply District No. 1, Waterworks Revenue, Refunding, 7.70%, 12/15/13 313,232
5,000,000 University of Missouri, Health Facilities Revenue, Refunding, University of Missouri Health System,
Series A, AMBAC Insured, 5.60%, 11/01/26 .................................................... 4,978,050
500,000 Washington County GO, Pauwels Transformers Project, Series A, 7.60%, 12/01/09 ................ 518,750
1,115,000 Webb City School District No. R-VII, Facilities Group, Leasehold Revenue, Refunding & Improvement,
FSA Insured, 5.625%, 08/01/16 ............................................................... 1,103,894
2,000,000 West Plains IDA, Hospital Revenue, Ozarks Medical Center Project, Series A, 8.625%, 09/15/20 . 2,146,900
1,600,000 West Plains Improvement Authority, Leasehold Revenue, Civic Center, Inc. Project, FGIC Insured,
6.85%, 04/01/06 ............................................................................. 1,709,935
------------
Total Long Term Investments (Cost $259,959,986)......................................... 272,917,564
------------
aShort Term Investments 0.7%
1,900,000 Kansas City IDA, Hospital Revenue, Research Health Services System, MBIA Insured, Daily VRDN
and Put, 3.50%, 10/15/15 (Cost $1,900,000)................................................... 1,900,000
------------
Total Investments (Cost $261,859,986) 100.4% ...................................... 274,817,564
Liabilities In Excess Of Other Assets (0.4)% ...................................... (958,234)
------------
Net Assets 100.0% ................................................................. $273,859,330
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $261,860,672 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 13,189,314
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (232,422)
------------
Net unrealized appreciation................................................................. $ 12,956,892
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
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
HDC - Housing Development Corp.
HFC - Housing Finance Corp.
IDA - Industrial Development Authority/Agency
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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). bSee Note 1(g) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin North Carolina Tax-Free Income Fund (Note 1)
<C> <S> <C>
Long Term Investments 97.8%
$ 1,075,000 Appalachian State University Revenue, Appalachian State Teachers College Utility System
MBIA Insured, 6.10%, 05/15/13 ............................................................... $ 1,125,686
4,000,000 Asheville Water System Revenue, FGIC Insured, 5.70%, 08/01/25 ................................ 4,026,400
Buncombe County Metropolitan Sewage District System Revenue, Series B, 6.75%,
10,000 07/01/16 .................................................................................. 10,590
1,990,000 Pre-Refunded, 07/01/16..................................................................... 2,236,103
100,000 Charlotte Airport Revenue, 8.50%, 07/01/17 ................................................... 103,180
2,250,000 Charlotte COP, Convention Facility Project, AMBAC Insured, Pre-Refunded, 7.00%, 12/01/11 ..... 2,539,350
1,000,000 Charlotte GO, Water and Sewer, 5.90%, 02/01/18 ............................................... 1,045,830
Charlotte-Mecklenburg Hospital Authority, Health Care System Revenue,
6,100,000 Refunding, Series 1992, 6.25%, 01/01/20 ................................................... 6,297,213
150,000 Refunding, Series G, Pre-Refunded, 7.875%, 10/01/15 ....................................... 156,620
350,000 Refunding, Series I, Pre-Refunded, 7.80%, 10/01/18 ........................................ 377,752
5,000,000 Series A, 5.90%, 01/15/16 ................................................................. 5,091,900
Charlotte Special Facilities Revenue, Piedmont Aviation, Inc. Project, Douglas International Airport,
07/01/17,
260,000 8.375% .................................................................................... 264,883
1,255,000 9.00% ..................................................................................... 1,300,318
200,000 Chowan County Hospital Revenue, Refunding, 7.625%, 10/01/10 .................................. 201,478
3,100,000 Coastal Solid Waste Disposal System Authority Revenue, Refunding, Regional Solid Waste
Management, 6.50%, 06/01/08 ................................................................. 3,295,982
Concord COP, Series B, MBIA Insured,
1,475,000 5.75%, 06/01/16 ........................................................................... 1,484,558
2,180,000 6.125%, 06/01/21 .......................................................................... 2,252,223
1,000,000 County of Cleveland GO, AMBAC Insured, Pre-Refunded, 7.10%, 06/01/06 ......................... 1,102,750
1,400,000 Craven County Regional Medical Facility, MBIA Insured, Pre-Refunded, 7.20%, 10/01/19 ......... 1,559,572
Cumberland County COP, Civic Center Project, Series A, AMBAC Insured, 6.40%,
3,500,000 12/01/19 .................................................................................. 3,753,785
3,765,000 12/01/24 .................................................................................. 4,038,000
Cumberland County Hospital Facility System Revenue, MBIA Insured,
2,500,000 6.00%, 10/01/21 ........................................................................... 2,549,800
110,000 Pre-Refunded, 7.875%, 10/01/14 ............................................................ 118,847
1,000,000 Dare County Utility System Revenue, MBIA Insured, 5.75%, 06/01/14 ............................ 1,012,760
Davie County GO, North Carolina Water, Unlimited Tax, 7.10%,
350,000 04/01/10 .................................................................................. 381,084
250,000 04/01/11 .................................................................................. 271,750
2,000,000 Duplin County COP, Social Service Administrative Building, Solid Waste Project, FGIC Insured, 6.75%,
09/01/12 .................................................................................... 2,157,780
1,650,000 Durham COP, Series 1991, 6.875%, 04/01/09 .................................................... 1,803,038
Durham County COP, Hospital and Office Facilities Project, 6.00%,
3,000,000 05/01/14 .................................................................................. 3,115,230
3,200,000 05/01/17 .................................................................................. 3,269,728
3,000,000 Durham County COP, Jail Facilities and Computer Equipment Project, 6.625%, 05/01/14 .......... 3,194,520
Fayetteville Public Works Commission Revenue,
1,500,000 FGIC Insured, Pre-Refunded, 7.00%, 03/01/11 ............................................... 1,641,075
2,000,000 Series A, FSA Insured, 6.00%, 03/01/16 .................................................... 2,069,060
750,000 Gaston County Industrial Facilities and PCFA Revenue, 7.70%, 10/01/12 ........................ 818,850
2,200,000 Gastonia Combined Utilities System Revenue, MBIA Insured, 6.10%, 05/01/19 .................... 2,311,518
1,500,000 Gastonia COP, Police Station Project, FGIC Insured, 5.70%, 08/01/15 .......................... 1,515,150
Greensboro COP,
1,610,000 Coliseum Arena Expansion Project, 6.75%, 12/01/09 ......................................... 1,746,480
350,000 Greensboro Center City Corp., Pre-Refunded, 7.90%, 07/01/09 ............................... 375,438
1,320,000 Greensboro HDC, Mortgage Revenue, Refunding, Series A, MBIA Insured, 6.70%, 01/01/24 ......... 1,373,948
$ 1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08 ..................................... $ 1,038,500
400,000 Halifax County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp., 8.15%,
11/01/19 .................................................................................... 433,152
2,000,000 Haywood County Industrial Facilities and PCFA, Environmental Improvement Revenue, Champion
International Project, 6.25%, 09/01/25 ...................................................... 2,043,160
200,000 Haywood County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp., 8.10%,
11/01/09 .................................................................................... 215,610
1,500,000 Highpoint Special Obligation Sales Tax Revenue, Solid Waste Management Project, 7.15%, 07/01/01 1,542,555
1,700,000 Kinston Enterprise System Revenue, Combined Enterprise System, FSA Insured, 5.70%, 04/01/21 .. 1,727,829
3,155,000 Kinston Housing Authority Mortgage Revenue, Refunding, Kinston Towers Project, 6.75%, 12/01/18 3,247,505
Martin County Industrial Facilities and PCFA Revenue,
3,000,000 Refunding, 6.375%, 01/01/10 ............................................................... 3,200,070
4,000,000 Solid Waste, Weyerhaeuser Co. Project, 6.00%, 11/01/25 .................................... 4,015,200
1,000,000 Mooresville Grade School District, COP, AMBAC Insured, 6.35%, 10/01/14 ....................... 1,065,980
1,000,000 New Hanover County Industrial Facilities and PCFA Revenue, Refunding, 6.70%, 07/01/19 ........ 1,064,820
North Carolina Eastern Municipal Power Agency System Revenue,
400,000 Refunding, Series 1988-A, Pre-Refunded, 8.00%, 01/01/21 ................................... 422,036
750,000 Refunding, Series 1989-A, Pre-Refunded, 7.75%, 01/01/12 ................................... 812,843
9,000,000 Refunding, Series 1991-A, 6.50%, 01/01/17 ................................................. 9,202,500
3,000,000 Refunding, Series 1991-A, 6.50%, 01/01/18 ................................................. 3,184,050
5,000,000 Refunding, Series B, MBIA Insured, 5.875%, 01/01/21 ....................................... 5,039,800
6,000,000 Series 1993-A, 6.40%, 01/01/21 ............................................................ 6,095,040
North Carolina Educational Facilities Finance Agency Revenue, Highpoint College Project, 7.10%,
190,000 12/01/07 .................................................................................. 204,714
205,000 12/01/08 .................................................................................. 220,601
220,000 12/01/09 .................................................................................. 236,388
2,925,000 North Carolina HFA, MFR, Refunding, Series B, 6.90%, 07/01/24 ................................ 3,100,120
North Carolina HFA, Refunding,
3,000,000 MF, Series A, AMBAC Insured, 5.90%, 07/01/20 .............................................. 2,980,890
4,855,000 Series F, 6.70%, 01/01/27 ................................................................. 5,119,209
2,500,000 Series H-1984, Mortage Loan Resolution, 6.05%, 07/01/28 ................................... 2,539,425
3,000,000 SF, Series DD, 6.20%, 09/01/27 ............................................................ 3,044,550
4,935,000 SF, Series JJ, 6.45%, 09/01/27 ............................................................ 5,024,324
North Carolina HFA, SFMR,
80,000 Series H, 8.05%, 03/01/19 ................................................................. 82,375
185,000 Series J, 7.40%, 03/01/22 ................................................................. 192,613
430,000 Series M, 7.85%, 09/01/28 ................................................................. 449,010
North Carolina HFA, SFR,
3,105,000 Refunding, Series S, 6.95%, 03/01/17 ...................................................... 3,293,132
950,000 Series AA, 6.25%, 03/01/17 ................................................................ 982,053
2,135,000 Series X, 6.65%, 09/01/19 ................................................................. 2,233,317
1,250,000 North Carolina Medical Care Commission, Health Care Facilities Revenue, Stanley Memorial Hospital,
Pre-Refunded 7.80%, 10/01/19 ................................................................ 1,384,275
North Carolina Medical Care Commission, Hospital Revenue,
3,500,000 Halifax Memorial Hospital Project, 6.75%, 08/15/24 ........................................ 3,602,725
160,000 Memorial Mission Hospital Project, MBIA Insured, Pre-Refunded, 7.80%, 10/01/18 ............ 172,686
1,850,000 Presbyterian Hospital Project, Pre-Refunded, 7.375%, 10/01/20 ............................. 2,071,482
4,700,000 Refunding, Annie Pen Memorial Hospital Project, 7.50%, 08/15/21 ........................... 5,026,039
100,000 Refunding, Carolina Medicorp Project, Series A, Pre-Refunded, 7.875%, 05/01/15 ............ 102,675
4,830,000 Refunding, North Carolina Baptist Hospitals Project, Series A, 6.00%, 06/01/22 ............ 4,948,963
250,000 Refunding, St. Joseph's Hospital Project, AMBAC Insured, Pre-Refunded, 7.25%, 10/01/14 .... 267,745
5,000,000 bRefunding, Wilson Memorial Hospital Project, AMBAC Insured, 5.625%, 11/01/18 ............. 4,977,850
3,000,000 Roanoke-Chowan Hospital Project, 7.75%, 10/01/19 .......................................... 3,188,040
North Carolina Medical Care Commission, Hospital Revenue, (cont.)
$ 195,000 Scotland Memorial Hospital, MBIA Insured, Pre-Refunded, 8.625%, 10/01/11 .................. $ 212,579
1,000,000 Wayne Memorial Hospital Project, AMBAC Insured, 6.00%, 10/01/21 ........................... 1,021,690
3,240,000 Wilson Memorial Hospital Project, AMBAC Insured, Pre-Refunded, 6.50%, 11/01/20 ............ 3,539,732
10,500,000 North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue, Refunding, Series 1992,
6.25%, 01/01/17 ............................................................................. 10,615,185
North Carolina State Education Assistance Authority Revenue, Guaranteed, Student Loan,
Subordinated Lien,
3,310,000 Series A, 6.05%, 07/01/10 ................................................................. 3,345,086
1,500,000 Series A, 6.30%, 07/01/15 ................................................................. 1,532,940
4,500,000 Series C, 6.35%, 07/01/16 ................................................................. 4,586,805
400,000 Northampton County Insured Facility, PCR, Solid Waste Disposal, Champion International Corp.,
8.05%, 11/01/04 ............................................................................. 431,660
2,000,000 Onslow County Combined Enterprise System Revenue, MBIA Insured, 6.00%, 06/01/15 .............. 2,068,540
350,000 Orange County GO, Series 1989, Pre-Refunded, 7.20%, 05/01/08 ................................. 378,553
1,195,000 Pender County COP, Pre-Refunded, 7.70%, 06/01/11 ............................................. 1,365,730
2,165,000 Person County COP, Person County Law Enforcement Center Project, Series 1991, MBIA Insured,
7.125%, 06/01/11 ............................................................................ 2,392,065
Pitt County COP, FGIC Insured,
2,750,000 6.90%, 04/01/08 ........................................................................... 2,954,820
750,000 6.00%, 04/01/12 ........................................................................... 781,043
Polk County School GO, FGIC Insured, Pre-Refunded, 6.70%,
700,000 05/01/08 .................................................................................. 773,577
700,000 05/01/09 .................................................................................. 773,577
1,000,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
7.875%, 07/01/17 ............................................................................ 1,073,710
Puerto Rico Commonwealth GO,
8,050,000 6.45%, 07/01/17 ........................................................................... 8,661,881
500,000 Series 1990, Pre-Refunded, 7.25%, 07/01/10 ................................................ 555,495
Puerto Rico Commonwealth Highway Authority Revenue,
100,000 Refunding, Series N, Pre-Refunded, 8.00%, 07/01/03 ........................................ 107,463
1,250,000 Refunding, Series R, 7.15%, 07/01/00 ...................................................... 1,348,650
170,000 Series P, Pre-Refunded, 8.125%, 07/01/13 .................................................. 182,959
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
250,000 7.75%, 07/01/08 ........................................................................... 264,940
250,000 7.50%, 07/01/09 ........................................................................... 264,148
Puerto Rico Electric Power Authority Revenue,
250,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ........................................ 268,658
160,000 Refunding, Series N, 7.125%, 07/01/14 ..................................................... 170,691
850,000 Series O, 7.125%, 07/01/14 ................................................................ 908,735
1,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ................................................... 1,124,130
1,000,000 Series T, 6.375%, 07/01/24 ................................................................ 1,046,710
5,000,000 Series X, 6.125%, 07/01/21 ................................................................ 5,124,350
410,000 Puerto Rico HFC, MFMR, Portfolio A, Series I, 7.50%, 04/01/22 ................................ 432,058
Puerto Rico HFC, SFMR, Portfolio No. 1, GNMA Secured,
20,000 Series A, 7.80%, 10/15/21 ................................................................. 20,778
2,205,000 Series C, 6.85%, 10/15/23 ................................................................. 2,319,351
300,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Upjohn Co. Project,
7.50%, 12/01/23 ............................................................................. 324,564
125,000 Puerto Rico Municipal Finance Agency, Series A, 8.25%, 07/01/08 .............................. 133,749
Puerto Rico Telephone Authority Revenue, Refunding, Series L,
1,885,000 6.00%, 01/01/12 ........................................................................... 1,936,743
1,490,000 6.125%, 01/01/22 .......................................................................... 1,520,173
$ 1,440,000 Raeford HDC Revenue, First Lien, Refunding, Yadkin Trail, Series A, 6.00%, 07/15/22 .......... $ 1,452,744
Robeson County GO, Refunding,
110,000 7.20%, 06/01/10 ........................................................................... 117,459
115,000 7.20%, 06/01/11 ........................................................................... 122,697
120,000 7.20%, 06/01/12 ........................................................................... 126,979
145,000 Pre-Refunded, 7.80%, 06/01/11 ............................................................. 154,892
1,750,000 Robeson County Industrial Facilities and PCFA Revenue, Refunding, Campbell Soup Co. Project,
6.40%, 12/01/06 ............................................................................. 1,939,753
1,850,000 Rutherford County COP, Public Facilities Project, FGIC Insured, 6.25%, 06/01/23 .............. 1,941,057
1,000,000 Scotland County COP, Jail/Courthouse Project, FSA Insured, 6.75%, 03/01/11 ................... 1,074,850
1,000,000 Shelby Producing Facilities System Revenue, Capital Improvement, Pre-Refunded, 6.625%, 06/01/17 1,113,940
150,000 Southern Pines GO, Refunding, Pre-Refunded, 7.40%, 06/01/08 .................................. 159,418
1,000,000 Stokes County COP, MBIA Insured, 7.00%, 03/01/06 ............................................. 1,093,640
University of North Carolina at Charlotte Revenue,
100,000 Refunding, Series K, Pre-Refunded, 7.375%, 01/01/03 ....................................... 105,007
1,000,000 Student Activity Center, MBIA Insured, 5.50%, 06/01/16 .................................... 992,870
3,500,000 Student Activity Center, MBIA Insured, 5.50%, 06/01/21 .................................... 3,448,970
250,000 University of North Carolina at Wilmington, Student Union System Revenue, AMBAC Insured, 6.90%,
01/01/07 .................................................................................... 268,947
250,000 Wake County Hospital Revenue, MBIA Insured, Pre-Refunded, 7.40%, 10/01/16 .................... 259,564
10,000,000 Wake County Industrial Facilities and PCFA Revenue, Carolina Power and Light Co. Project, 6.90%,
04/01/09 .................................................................................... 10,765,600
400,000 Wilmington City GO, Sanitary Sewer, 6.90%, 03/01/05 .......................................... 430,067
405,000 Winston-Salem SFMR, 8.00%, 09/01/07 .......................................................... 428,219
2,250,000 Winston-Salem Water and Sewer System Revenue, Series B, 5.70%, 06/01/17 ...................... 2,247,074
------------
Total Long Term Investments (Cost $251,714,999)......................................... 264,593,345
------------
aShort Term Investments 2.3%
2,800,000 North Carolina Medical Care Commission, Hospital Revenue, ACES, Pooled Financing Project,
Series B, Daily VRDN and Put, 3.50%, 10/01/13 ............................................... 2,800,000
3,400,000 North Carolina Medical Care Commission Revenue, Carol Woods Project, Daily VRDN and Put, 3.50%,
04/01/21 .................................................................................... 3,400,000
------------
Total Short Term Investments (Cost $6,200,000).......................................... 6,200,000
------------
Total Investments (Cost $257,914,999) 100.1% ...................................... 270,793,345
Liabilities in Excess of Other Assets (0.1)% ...................................... (207,868)
------------
Net Assets 100.0% ................................................................. $270,585,477
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $257,916,819 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................... $ 12,888,688
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................... (12,162)
------------
Net unrealized appreciation................................................................. $ 12,876,526
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
ACES - Adjustable Convertible Exempt Securities
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFA - Housing Finance Agency/Authority
HFC - Housing Financial Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFMR - Multi-Family Mortgage Revenue
MFR - Multi-Family Revenue
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SF - Single Family
SFMR - Single Family Mortgage Revenue
SFR - Single Family Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). bSee Note 1(g) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Texas Tax-Free Income Fund (Note 1)
<C> <S> <C>
Long Term Investments 98.2%
$ 2,250,000 Alliance Airport Authority, Inc., Texas Special Facilities Revenue, American Airlines, Inc. Project,
7.00%, 12/01/11 .............................................................................. $ 2,484,113
Austin Combined Utility System Revenue,
3,000,000 Refunding, Series B, MBIA Insured, 5.625%, 11/15/25 ........................................ 2,972,280
800,000 Series A, AMBAC Insured, 6.75%, 11/15/07 ................................................... 871,600
50,000 Series A, Pre-Refunded, 8.00%, 11/15/16 .................................................... 56,719
3,000,000 Bexar County Health Facilities Development Corp. Revenue, Refunding, Incarnate Word Health
Services, FSA Insured, 6.00%, 11/15/15 ....................................................... 3,078,270
100,000 Bexar County HFC Revenue, GNMA Secured, 8.10%, 03/01/24 ....................................... 105,871
3,210,000 Bexar Metropolitan Water District, Waterworks System Revenue, Refunding, MBIA Insured, 6.35%,
05/01/25 ..................................................................................... 3,394,254
Brazos Higher Education Authority Revenue, Student Loan, Inc.,
1,000,000 Refunding, Series A-2, 6.80%, 12/01/04 ..................................................... 1,060,880
1,300,000 Series B-2, 8.25%, 06/01/23 ................................................................ 1,311,076
Brazos River Authority, PCR, Collateralized, Series A, Texas Utilities Electric Co. Project, 7.875%,
150,000 03/01/17 ................................................................................... 153,000
500,000 03/01/21 ................................................................................... 549,685
100,000 Brazos River Authority Revenue, Refunding, Collateralized, Houston Light and Power Co. Project,
Series A, 7.625%, 05/01/19 ................................................................... 108,034
80,000 Cameron County HFC, Collateralized Mortgage Obligation, Refunding, Series B, FGIC Insured, 7.85%,
03/01/24 ..................................................................................... 84,424
2,000,000 Castleberry ISD, Refunding, 6.00%, 08/15/25 ................................................... 2,044,720
Cimarron MUD, Waterworks and Sewer System, Asset Guaranteed, Refunding, Combined Tax and
Revenue, 7.50%,
2,775,000 03/01/15 ................................................................................... 2,953,488
1,225,000 Pre-Refunded, 03/01/15 ..................................................................... 1,332,053
4,000,000 Clinton ISD, Refunding, 7.00%, 03/01/15 ....................................................... 4,192,840
50,000 Coastal Water Authority, Water Conveyance System Revenue, Pre-Refunded, 8.20%, 12/15/07 ....... 51,744
1,750,000 Comal County Health Facilities Development Corp. Revenue, Refunding, McKenna Memorial Hospital,
FHA Insured, 7.375%, 01/15/21 ................................................................ 1,874,530
1,500,000 Coppell ISD, Refunding, 6.50%, 08/15/26 ....................................................... 1,560,135
1,195,000 Corpus Christi HFC, SFMR, Refunding, Series A, MBIA Insured, 7.70%, 07/01/11 .................. 1,275,304
Dallas Civic Center Convention Complex Revenue, Senior Lien, AMBAC Insured,
2,000,000 7.00%, 01/01/10 ............................................................................ 2,138,120
1,000,000 Refunding, 6.75%, 01/01/12 ................................................................. 1,040,360
Dallas-Ft. Worth International Airport Facilities Improvement Corp. Revenue,
1,000,000 American Airlines, Inc., 8.00%, 11/01/24 ................................................... 1,086,260
2,000,000 Delta Airlines, Inc., 7.625%, 11/01/21 ..................................................... 2,171,500
2,000,000 Refunding, American Airlines, Inc., 6.00%, 11/01/14 ........................................ 2,002,920
140,000 Dallas HFC, SFMR, GNMA Secured, 7.85%, 12/01/10 ............................................... 146,916
500,000 Dallas Housing Corp. Capital Projects Revenue, Refunding, Section Eight, Assisted Projects, 7.70%,
08/01/05 ..................................................................................... 523,465
1,250,000 Denison Hospital Authority Revenue, Texoma Medical Center, Inc. Project, 7.00%, 08/15/14 ...... 1,309,688
2,000,000 Ector County Hospital District Revenue, Medical Center Hospital, Pre-Refunded, 7.30%, 04/15/12 2,284,880
El Paso HFC, SFMR, Refunding,
60,000 Series 1988, GNMA Secured, 8.20%, 09/01/20 ................................................. 62,681
595,000 Series A, 8.75%, 10/01/11 .................................................................. 644,117
1,030,000 Ft. Worth HFC, HMR, Refunding, Series A, 8.50%, 10/01/11 ...................................... 1,117,529
25,000 Ft. Worth HFC, SFMR, GNMA Secured, 8.25%, 12/01/11 ............................................ 25,602
100,000 Gonzales County Hospital District GO, Refunding, MBIA Insured, 7.65%, 02/15/07 ................ 105,435
1,200,000 Gulf Coast Waste Disposal Authority, PCR, Union Carbide Chemical and Plastic Co., 7.45%, 08/01/04 1,214,040
1,000,000 Gulf Coast Waste Disposal Authority Revenue, Champion International Corp., Series A, 6.875%,
12/01/28 ..................................................................................... 1,045,570
$ 5,000,000 Harris County Health Facilities Development Corp., Health Care System Revenue, Sisters of Charity,
7.10%, 07/01/21 .............................................................................. $ 5,459,350
Harris County Health Facilities Development Corp., Hospital Revenue,
225,000 Memorial Hospital System, AMBAC Insured, Pre-Refunded, 7.00%, 06/01/12 ..................... 242,912
4,000,000 bRefunding, Memorial Hospital System Project, Series A, MBIA Insured, 5.75%, 06/01/19 ...... 3,925,760
45,000 The Herman Trust, Pre-Refunded, 9.00%, 10/01/17 ............................................ 47,244
750,000 Harris County Health Facilities Development Corp. Revenue, Herman Hospital Project, FSA Insured,
7.00%, 10/01/14 .............................................................................. 818,693
500,000 Harris County Health Facilities Development Corp., Special Facilities Revenue, Texas Medical Center
Project, MBIA Insured, Pre-Refunded, 7.375%, 05/15/20 ........................................ 554,115
80,000 Harris County MUD No. 208, Waterworks and Sewer System, Unlimited Tax, Pre-Refunded, 8.00%,
11/01/13 ..................................................................................... 85,136
70,000 Harris County Public Facilities Corp., Detention Facility Mortgage Revenue, Series 1988, MBIA Insured,
Pre-Refunded, 7.75%, 12/15/07 ................................................................ 75,949
Harris County, Toll Road, Pre-Refunded,
830,000 Multimode Senior Lien, Series C, 8.125%, 08/15/17 .......................................... 888,615
250,000 Senior Lien, Revenue, Refunding, 8.70%, 08/15/17 ........................................... 263,113
2,000,000 Houston Airport System Revenue, Subordinated Lien, FGIC Insured, Series B, 6.625%, 07/01/22 ... 2,136,080
Houston Water and Sewer System Revenue,
50,000 Exchange, Prior Lien, Pre-Refunded, 8.125%, 12/01/17 ....................................... 52,605
6,500,000 Junior Lien, Refunding, Series A, MBIA Insured, 6.20%, 12/01/20 ............................ 6,797,895
285,000 Irving Hospital Authority Revenue, Irving Health Care System, Series 1990, FGIC Insured,
Pre-Refunded, 7.25%, 07/01/15 ................................................................ 303,345
100,000 Joshua ISD, Refunding, Series B, Pre-Refunded, 6.125%, 02/15/26 ............................... 103,839
125,000 Keller Waterworks and Sewer System Revenue, Refunding, AMBAC Insured, Pre-Refunded, 7.70%,
01/01/10 ..................................................................................... 132,926
200,000 Laredo Airport, Certificates of Obligation, Limited Tax, AMBAC Insured, 7.00%, 08/01/09 ....... 210,150
400,000 Laredo International Toll Bridge System Revenue, Pre-Refunded, 7.40%, 10/01/06 ................ 458,648
2,000,000 Leon County PCR, Refunding, Nucor Corp. Project, Series A, 7.375%, 08/01/09 ................... 2,229,560
Lower Colorado River Authority Revenue, Refunding,
75,000 MBIA Insured, Pre-Refunded, 7.625%, 01/01/16 ............................................... 78,906
205,000 Series B, AMBAC Insured, 7.00%, 01/01/11 ................................................... 223,302
1,000,000 Lower Neches Valley Authority IDC, Marine Terminal Revenue, Refunding, Mobil Oil Refining Corp.
Project, 6.85%, 05/01/12 ..................................................................... 1,023,950
5,000 Lubbock HFC, SFMR, Refunding, Mortgage Extension Program, Series B, MBIA Insured, 8.875%,
12/01/12 ..................................................................................... 5,032
Matagorda County Navigation District No. 1, PCR, Central Power and Light Co. Project,
1,200,000 Collateralized, 7.50%, 12/15/14 ............................................................ 1,316,400
1,500,000 Refunding, Series E, MBIA Insured, 6.10%, 07/01/28 ......................................... 1,539,510
Matagorda County Navigation District No. 1 Revenue, Refunding, Houston Light and Power Co.,
100,000 Collateralized, Series B, 7.70%, 02/01/19 .................................................. 104,494
1,500,000 Series C, FGIC Insured, 7.125%, 07/01/19 ................................................... 1,606,965
Mesquite Health Facilities Developement, Refunding, Christian Retirement Facility, Series A, 6.40%,
1,000,000 02/15/16 ................................................................................... 1,008,560
2,000,000 02/15/20 ................................................................................... 2,003,000
1,000,000 Midland County Hospital District Revenue, Midland Memorial Hospital, 7.50%, 06/01/16 .......... 1,062,220
Montgomery County Library, Refunding, FGIC Insured, 6.75%,
775,000 09/01/10 ................................................................................... 837,853
825,000 09/01/11 ................................................................................... 887,816
North Central Health Facility Developement Corp. Revenue, Refunding, C. C. Young Memorial Home
Project,
$ 1,530,000 6.30%, 02/15/15 ............................................................................ $ 1,533,519
2,785,000 6.375%, 02/15/20 ........................................................................... 2,790,292
285,000 North Harris County, Junior College District, FGIC Insured, 7.20%, 08/15/10 ................... 307,028
1,000,000 Panhandle-Plains Higher Education Authority, Inc., Student Loan Revenue, Series B, 8.75%, 06/01/23 1,048,960
3,000,000 Red River Authority, PCR, Refunding, West Texas Utilities Co., Public Service Co., Oklahoma Central
Power and Light Co., MBIA Insured, 6.00%, 06/01/20 ........................................... 3,081,120
Sabine River Authority, PCR, Refunding,
1,200,000 Collateralized, Texas Utilities Electric Co. Project, FGIC Insured, 6.55%, 10/01/22 ........ 1,283,412
5,000,000 Southwestern Electric Power, MBIA Insured, 6.10%, 04/01/18 ................................. 5,195,550
San Antonio Electric and Gas Revenue, Refunding, 7.00%,
100,000 02/01/09 ................................................................................... 105,945
150,000 Pre-Refunded, 02/01/09 ..................................................................... 159,969
3,000,000 San Antonio Hotel Occupancy Revenue, Henry B. Gonzalez Convention Center Project, FGIC Insured,
5.70%, 08/15/26 .............................................................................. 2,970,300
20,000 San Antonio Sewer Improvement Revenue, Prior Lien, Pre-Refunded, 7.90%, 05/01/14 .............. 20,435
San Antonio Water Revenue,
300,000 Prior Lien, Refunding, Series A, Pre-Refunded, 7.35%, 05/01/07 ............................. 316,389
3,000,000 Refunding & Improvement, MBIA Insured, 5.60%, 05/15/21 ..................................... 2,952,840
350,000 South Padre Island, Certificate of Obligation, Pre-Refunded, 7.875%, 03/01/10 ................. 384,227
50,000 Texarkana Health Facilities Development Corp., Hospital Revenue, Refunding & Improvement,
Wadley Regional Medical Center Project, 8.50%, 10/01/12 ...................................... 51,616
500,000 Texas City IDC, Marine Terminal Revenue, Refunding, Arco Pipe Line Co. Project, 7.375%, 10/01/20 619,140
5,000 Texas HFA, SFMR, 03/01/16, Series 1987-B, 8.20%, 03/01/16 ..................................... 5,130
1,410,000 Texas Housing Agency, Residential Development Revenue, Series A, 7.60%, 07/01/16 .............. 1,469,685
1,650,000 Texas State Department of Housing and Community Affairs, HMR, Refunding, Series A, GNMA Secured,
6.95%, 07/01/23 .............................................................................. 1,736,510
1,000,000 Texas State GO, Veterans Housing Assistance Fund I, Refunding, Series A, 6.15%, 12/01/25 ...... 1,023,560
1,565,000 Texas State Higher Education Coordinating Board, College Student Loan Revenue, Senior Lien, 7.70%,
10/01/25 ..................................................................................... 1,648,681
Texas State Turnpike Authority Revenue, Dallas North Tollway, Pre-Refunded, 7.125%, 01/01/15,
225,000 Series 1989 ................................................................................ 235,721
1,000,000 Series 1990, AMBAC Insured.................................................................. 1,072,000
50,000 Texas State Turnpike Authority Revenue, Mountain Creek Lake Bridge, 7.00%, 01/01/07 ........... 51,525
3,275,000 Texas Water Development Board Revenue, State Revolving, Senior Lien, Series A, 5.75%, 07/15/16 3,322,062
945,000 Texas Water Resources Finance Authority Revenue, 7.625%, 08/15/08 ............................. 1,009,884
80,000 Travis County HFC, SFMR, GNMA Secured, 8.20%, 04/01/22 ........................................ 82,896
250,000 Trinity River Authority, Tex Big Bear Creek Interceptor, System Control, MBIA Insured, Pre-Refunded,
7.40%, 02/01/09 .............................................................................. 270,232
University of Texas Revenues, Refunding, Financing System,
665,000 Series A, 7.00%, 08/15/07 .................................................................. 741,328
1,300,000 Series B, 6.75%, 08/15/13 .................................................................. 1,415,921
500,000 Waco Health Facilities Development Corp., Hospital Revenue, Hillcrest Baptist Medical Center Project,
MBIA Insured, 7.125%, 09/01/14 ............................................................... 551,354
160,000 Webb County GO, Limited Tax, FSA Insured, Pre-Refunded, 7.25%, 02/15/09 ....................... 169,474
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 .................................................... 1,107,050
50,000 Wichita County, Wichita Falls General Hospital Revenue, Refunding, 7.50%, 09/01/09 ............ 51,553
1,000,000 Wylie GO, ISD, Taylor County, Refunding, 7.00%, 08/15/24 ...................................... 1,165,610
200,000 Ysleta GO, ISD, Unlimited Tax, AMBAC Insured, Pre-Refunded, 7.10%, 08/15/05 ................... 213,813
------------
Total Long Term Investments (Cost $118,214,714).......................................... 125,082,777
------------
aShort Term Investments 0.6%..................................................................
$ 200,000 Nueces River Authority PCR, DATES, Reynolds Metals Co. Project, Refunding, Daily VRDN and Put,
3.50%, 12/01/99 .............................................................................. $ 200,000
600,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.95%, 12/01/15 .............................................................................. 600,000
------------
Total Short Term Investments (Cost $800,000)............................................. 800,000
------------
Total Investments (Cost $119,014,714) 98.8%......................................... 125,882,777
Other Assets and Liabilities, Net 1.2%.............................................. 1,469,231
------------
Net Assets 100.0% ................................................................. $127,352,008
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $119,014,714 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 6,937,064
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (69,001)
------------
Net unrealized appreciation.................................................................. $ 6,868,063
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
DATES - Demand Adjustable Tax-Exempt Securities
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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate). bSee Note 1 (g) regarding securities
purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Statement of Investments in Securities and Net Assets, February 28, 1997
<TABLE>
<CAPTION>
Face Value
Amount Franklin Virginia Tax-Free Income Fund (Note 1)
<C> <S> <C>
Long Term Investments 97.4%
$ 5,000,000 Albermarle County IDA Revenue, Refunding, Martha Jefferson Hospital, 5.875%, 10/01/13 ......... $ 5,071,950
1,125,000 Albermarle County IDA Revenue, University of Virigina Health Services Foundation, 6.50%, 10/01/22 1,166,366
1,690,000 Alexandria IDA Revenue, Alexandria/Arlington Waste Resource Recovery, 7.40%, 01/01/08 ......... 1,708,675
2,085,000 Arlington County GO, 6.00%, 08/01/13 .......................................................... 2,202,948
2,000,000 Arlington County IDA, Hospital Facility Revenue, Arlington Hospital, Series A, Pre-Refunded, 7.125%,
09/01/21 ..................................................................................... 2,257,060
100,000 Ashland GO, Refunding, Pre-Refunded, 7.75%, 08/01/12 .......................................... 107,319
Augusta County IDA Revenue, Augusta Hospital Corp. Project,
1,000,000 AMBAC Insured, 6.625%, 09/01/12 ............................................................ 1,089,490
2,000,000 Pre-Refunded, 7.00%, 09/01/21 .............................................................. 2,242,620
1,230,000 Blacksburg Polytechnic Institute, Sanitation Authority Sewer System Revenue, 6.25%, 11/01/12 .. 1,276,002
950,000 Campbell County Utilities Services Authority, Water and Sewer Revenue, MBIA Insured, Pre-Refunded,
7.25%, 10/01/19 .............................................................................. 1,039,424
2,000,000 Charlottesville IDA Revenue, Martha Jefferson Hospital, Pre-Refunded, 7.375%, 10/01/20 ........ 2,239,440
Chesapeake Hospital Authority Facilities, Revenue, Chesapeake General Hospital,
2,500,000 8.20%, 07/01/05 ............................................................................ 2,779,350
450,000 MBIA Insured, Pre-Refunded, 7.625%, 07/01/18 ............................................... 481,127
235,000 Chesapeake IDA, Nursing Home Revenue, Sentara Life Care Corp. Project, 8.00%, 11/01/17 ........ 251,309
3,940,000 Chesapeake IDA, Public Facilities, Lease Revenue, Chesapeake Jail Project, MBIA Insured, 6.00%,
06/01/12 ..................................................................................... 4,118,521
50,000 Chesapeake Water and Sewer System Revenue, Pre-Refunded, 7.75%, 07/01/17 ...................... 51,675
5,000,000 Covington-Alleghany County IDA, PCR, Refunding, Westvaco Corp. Project, 6.65%, 09/01/18 ....... 5,434,950
2,000,000 Danville COP, Social Services, 7.625%, 04/01/13 ............................................... 2,190,500
Danville GO, Series 1991, 6.75%,
655,000 02/01/10 ................................................................................... 703,555
705,000 02/01/11 ................................................................................... 755,957
5,000,000 Danville IDA, Hospital Revenue, Danville Regional Medical Center, Refunding, FGIC Insured, 6.50%,
10/01/24 ..................................................................................... 5,351,950
500,000 Danville IDA, Solid Waste Disposal Revenue, International Paper Co., 6.50%, 03/01/19 .......... 525,860
1,000,000 Fairfax County EDA, Parking Revenue, Huntington Metrorail, 7.00%, 09/01/10 .................... 1,084,490
1,500,000 Fairfax County EDA, Resource Recovery Revenue, Ogden Martin System of Fairfax, Inc. Project,
Series 1988-A, 7.75%, 02/01/11 ............................................................... 1,614,075
5,000,000 Fairfax County IDA Revenue, Health Care, Inova Health System Project, 6.00%, 08/15/26 ......... 5,099,350
Fairfax County Redevelopment and Housing Authority, MFHR,
4,700,000 Cedar Ridge Apartments, GNMA Secured, 6.30%, 12/20/27 ...................................... 4,898,105
1,000,000 Refunding, Paul Spring Center, Series A, FHA Insured, 5.90%, 06/15/17 ...................... 1,007,930
1,000,000 Refunding, Paul Spring Center, Series A, FHA Insured, 6.00%, 12/15/28 ...................... 1,007,880
6,500,000 Fairfax County Sewer Revenue, MBIA Insured, 5.875%, 07/15/28 .................................. 6,653,725
2,040,000 Frederick County IDA Lease Revenue, Government Complex Facilities Project, MBIA Insured, 6.50%,
12/01/09 ..................................................................................... 2,230,291
250,000 Frederick Winchester Sewer Service Authority Revenue, Refunding, AMBAC Insured, Pre-Refunded,
7.20%, 10/01/08 .............................................................................. 273,230
165,000 Fredericksburg IDA Revenue, Crossover Refunding, Mary Washington Hospital, AMBAC Insured,
Pre-Refunded, 7.80%, 07/01/14 ................................................................ 176,781
25,000 Front Royal and Warren County IDA Revenue, Refunding, Mortgage, Heritage Hall No. 13, FHA Insured,
8.25%, 07/15/05 .............................................................................. 25,931
Guam Airport Authority Revenue, Series A, Refunding,
830,000 6.375%, 10/01/10 ........................................................................... 859,000
1,000,000 6.50%, 10/01/23 ............................................................................ 1,031,710
3,000,000 Halifax County IDA, Exempt Facilities Revenue, Old Dominion Electric Cooperative Project, 6.50%,
12/01/12 ..................................................................................... 3,161,580
Hampton Museum Revenue, Pre-Refunded, 01/01/14,
$ 1,200,000 Series 1989, 7.50%.......................................................................... $ 1,294,224
1,000,000 Series 1990, 7.30%.......................................................................... 1,096,580
1,100,000 Hampton Redevelopment and Housing Authority, Senior Living Association Revenue, Refunding,
Series 1996-A, GNMA Secured, 6.00%, 01/20/26 ................................................. 1,114,828
1,500,000 Hampton Roads Medical College General Revenue, Refunding, Series A, 6.875%, 11/15/16 .......... 1,601,610
10,000,000 Hampton Roads Regional Jail Authority, Regional Jail Facilities Revenue, Series A, MBIA Insured,
5.00%, 07/01/28 .............................................................................. 9,104,000
3,500,000 Hampton Roads Sanitation District, Primary Pledge Sewer Revenue, Pre-Refunded, 7.20%, 07/01/09 3,805,480
1,000,000 Hanover County IDA, Hospital Revenue, Bon Secours Health Systems Projects, MBIA Insured, 5.50%,
08/15/25 ..................................................................................... 961,090
1,275,000 Hanover County Water and Sewer System Revenue, MBIA Insured, 5.25%, 02/01/26 .................. 1,200,961
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 ..................................................... 296,007
250,000 Henrico County IDA Revenue, Bon Secours, Maryview Nursing Center, Series B, Pre-Refunded,
7.625%, 08/15/18 ............................................................................. 268,228
1,250,000 Leesburg Utilities System Revenue, MBIA Insured, 6.30%, 07/01/17 .............................. 1,321,813
Loudoun County IDA, Hospital Revenue, Loudoun Hospital Center, FSA Insured, 5.80%,
2,000,000 06/01/20 ................................................................................... 2,012,060
3,000,000 06/01/26 ................................................................................... 3,018,090
Loudoun County Sanitation Authority, Water and Sewer Revenue,
650,000 AMBAC Insured, Pre-Refunded, 7.50%, 01/01/10 ............................................... 701,636
1,500,000 Refunding, FGIC Insured, 5.125%, 01/01/26 .................................................. 1,384,470
3,500,000 Series 96, FGIC Insured, 5.25%, 01/01/26 ................................................... 3,292,170
1,000,000 Series 96, FGIC Insured, 5.25%, 01/01/30 ................................................... 937,660
190,000 Lynchburg IDA, Hospital Facilities Revenue, Refunding, First Mortgage, Central Health, Inc., 8.125%,
01/01/16 ..................................................................................... 200,591
1,000,000 Lynchburg Redevelopment and Housing Authority Revenue, Refunding, Waldon Pond III, Series A,
GNMA Secured, 6.20%, 07/20/27 ................................................................ 1,028,280
50,000 Manassas GO, Series 1988-A, 7.20%, 03/01/06 ................................................... 51,000
500,000 Manassas IDA, Hospital Revenue, Prince William Hospital, Pre-Refunded, 8.125%, 04/01/19 ....... 548,235
1,180,000 Martinsville IDA, Hospital Facility Revenue, Memorial Hospital of Martinsville and Henry, 7.00%,
01/01/11 ..................................................................................... 1,233,938
4,500,000 Mecklenburg County IDA Revenue, Exempt Facility, Series A, 7.35%, 05/01/08 .................... 4,786,470
1,000,000 Metropolitan Washington D.C. Airports, General Airport Authority Revenue, Series A, 7.60%, 10/01/14 1,093,910
3,000,000 Newport News IDA, Mortage Revenue, Mennowood Communities, Inc., GNMA Secured, Series A,
6.25%, 08/01/36 .............................................................................. 3,080,610
2,075,000 Norfolk GO, MBIA Insured, 5.75%, 06/01/14 ..................................................... 2,125,568
Norfolk IDA Revenue,
50,000 Children's Hospital of the Kings' Daughters, Inc., Series A, 8.375%, 06/01/12 .............. 51,436
3,000,000 Children's Hospital of the Kings' Group, Inc., AMBAC Insured, Pre-Refunded, 7.00%, 06/01/11 3,354,450
20,000 Medical Center Hospital Project, Series A, 7.00%, 11/01/07 ................................. 20,358
30,000 Medical Center Hospital Project, Series A, Pre-Refunded, 7.00%, 11/01/07 ................... 30,663
4,475,000 Norfolk Parking System Revenue, MBIA Insured, 5.55%, 02/01/27 ................................. 4,360,082
Norfolk Water Revenue,
1,500,000 AMBAC Insured, 5.375%, 11/01/23 ............................................................ 1,429,515
5,000,000 MBIA Insured, 5.875%, 11/01/20 ............................................................. 5,100,700
5,900,000 MBIA Insured, 5.90%, 11/01/25 .............................................................. 6,006,849
360,000 Northern Virginia Transportation District Commission, Commuter Rail Revenue, Railway Express
Project, FSA Insured, 7.00%, 07/01/05 ........................................................ 391,446
1,000,000 Peninsula Airport Commission Revenue, Airport Improvement, 7.25%, 07/15/11 .................... 1,087,200
5,480,000 Peninsula Ports Authority, Coal Terminal Revenue, Refunding, Coal Terminal Association Project,
7.375%, 06/01/20 ............................................................................. 5,858,339
$ 50,000 Peninsula Ports Authority, Hospital Facility Revenue, Refunding, Whittaker Memorial Hospital Project,
FHA Insured, 8.70%, 08/01/23 ................................................................. $ 51,714
6,000,000 Peninsula Ports Authority Revenue, Refunding, Riverside Health System Project, Series A, 6.625%,
07/01/18 ..................................................................................... 6,349,860
50,000 Portsmouth Public Utility, GO, Refunding, Pre-Refunded, 7.50%, 11/01/12 ....................... 52,487
5,500,000 Prince William County Service Authority, Water and Sewer Systems Revenue, FGIC Insured, 6.00%,
07/01/29 ..................................................................................... 5,582,885
1,000,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded, 7.90%,
07/01/07 ..................................................................................... 1,074,030
Puerto Rico Commonwealth GO,
10,000 Public Improvement, Refunding, 7.125%, 07/01/02 ............................................ 10,294
5,000 Public Improvement, Refunding, Pre-Refunded, 7.125%, 07/01/02 .............................. 5,160
75,000 Public Improvement, Series A, Pre-Refunded, 7.75%, 07/01/13 ................................ 80,409
1,000,000 Series 1990, Pre-Refunded, 7.30%, 07/01/20 ................................................. 1,114,180
2,000,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Y, 6.00%,
07/01/22 ..................................................................................... 2,034,320
Puerto Rico Commonwealth Highway Authority Revenue, Pre-Refunded,
225,000 Series P, 8.125%, 07/01/13 ................................................................. 242,152
1,000,000 Series Q, 8.00%, 07/01/18 .................................................................. 1,134,010
2,000,000 Series R, 7.20%, 07/01/01 .................................................................. 2,215,620
25,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ........................ 25,124
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
350,000 7.90%, 07/01/07 ............................................................................ 371,581
750,000 7.75%, 07/01/08 ............................................................................ 794,820
Puerto Rico Electric Power Authority Revenue,
55,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15 ......................................... 56,965
600,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ......................................... 644,778
1,500,000 Refunding, Series Z, 5.25%, 07/01/21 ....................................................... 1,394,880
1,500,000 Series P, Pre-Refunded, 7.00%, 07/01/21 .................................................... 1,686,195
Puerto Rico HFC,
2,460,000 MFMR, Portfolio A, Series 1, 7.50%, 04/01/22 ............................................... 2,592,348
20,000 Revenue, FHA Mortgage Insured, Sixth Portfolio, Section 8, Pre-Refunded, 7.75%, 12/01/26 ... 24,007
290,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ............... 305,451
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
300,000 Baxter Travenol Labs., Series A, 8.00%, 09/01/12 ........................................... 323,514
250,000 Upjohn Co. Project, 7.50%, 12/01/23 ........................................................ 270,470
185,000 Puerto Rico Municipal Finance Agency, Series A, 8.25%, 07/01/08 ............................... 197,948
175,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded, 7.875%,
07/01/16 ..................................................................................... 181,018
5,000,000 Puerto Rico Telephone Authority Revenue, Refunding, Series L, 6.125%, 01/01/22 ................ 5,101,250
Richmond Metropolitan Authority, Expressway Revenue,
2,000,000 AMBAC Insured, 7.00%, 10/15/13 ............................................................. 2,126,380
2,500,000 Refunding, Series A, FGIC Insured, 6.375%, 07/15/16 ........................................ 2,644,675
5,000,000 Series B, FGIC Insured, 6.25%, 07/15/22 .................................................... 5,202,600
175,000 Richmond Public Utilities Revenue, Series A, Pre-Refunded, 8.00%, 01/15/18 .................... 184,930
3,000,000 Roanoke IDA Revenue, Roanoke Memorial Hospital, Pre-Refunded, 7.50%, 07/01/20 ................. 3,346,080
4,250,000 South Boston IDA Revenue, Halifax-Community Hospital, Inc. Project, 7.375%, 09/01/11 .......... 4,512,778
895,000 Staunton IDA, Facilities Revenue, Mary Baldwin College, Series B, Pre-Refunded, 8.00%, 11/01/17 1,025,518
200,000 Suffolk County GO, Series 1988, Pre-Refunded, 7.40%, 08/01/05 ................................. 207,126
325,000 Suffolk IDA Revenue, Louise Obici Memorial Hospital, 7.875%, 01/01/05 ......................... 342,375
50,000 Virginia Beach Development Authority, General Hospital Facility Revenue, Series A, Pre-Refunded,
8.75%, 12/01/17 .............................................................................. 52,830
Virginia College Building Authority, Educational Facilities Revenue,
$ 750,000 Hampton University Project, Series A, Pre-Refunded, 7.75%, 04/01/14 ........................ $ 817,605
1,750,000 Marymount University Project, 7.00%, 07/01/22 .............................................. 1,856,523
2,345,000 Refunding, Washington and Lee University Project, 5.75%, 01/01/19 .......................... 2,347,978
3,500,000 Refunding, Washington and Lee University Project, 5.80%, 01/01/24 .......................... 3,504,445
1,000,000 Twenty-first Century College Program, 5.25%, 08/01/16 ...................................... 966,870
175,000 Virginia Education Loan Authority, Guaranteed, Student Loan Program Revenue, Series B,
Pre-Refunded, 8.00%, 03/01/04 ................................................................ 185,260
900,000 Virginia Polytechnic Institute Revenue, Dormitory and Dining Hall, MBIA Insured, 7.00%, 06/01/09 960,426
400,000 Virginia Port Authority Revenue, Commonwealth Port Fund, 8.20%, 07/01/08 ...................... 427,044
Virginia State HDA, Commonwealth Mortgage,
1,000,000 Series A, 7.10%, 01/01/17 .................................................................. 1,047,630
5,500,000 Series A, 7.15%, 01/01/33 .................................................................. 5,746,015
5,000 Series A-1, 8.10%, 01/01/17 ................................................................ 5,158
5,000,000 Series B-1, 7.20%, 07/01/17 ................................................................ 5,405,700
250,000 Series B-3, 7.375%, 07/01/17 ............................................................... 261,475
2,000,000 Series B-3, 6.80%, 01/01/27 ................................................................ 2,098,520
5,000,000 Series B-4, 6.85%, 07/01/17 ................................................................ 5,194,150
1,000,000 Series B-4, 6.55%, 01/01/17 ................................................................ 1,046,300
2,000,000 Series C, Sub-Series C-3, 6.00%, 01/01/17 .................................................. 2,034,320
5,000,000 Series D-1, 6.40%, 07/01/17 ................................................................ 5,162,550
1,500,000 Series D-2, 7.35%, 07/01/17 ................................................................ 1,554,360
1,000,000 Series D-3, 7.375%, 07/01/17 ............................................................... 1,045,380
2,000,000 Series H-2, 6.55%, 01/01/27 ................................................................ 2,070,780
9,000,000 Virginia State HDA, MF, Series F, 7.10%, 05/01/13 ............................................. 9,540,090
2,000,000 Virginia State Resources Authority, Sewer System Revenue, Refunding, Harrisonburg Rockingham
Region, Series A, 6.00%, 05/01/22 ............................................................ 2,037,860
Virginia State Resources Authority, Water and Sewer System Revenue,
1,000,000 Lot #7, Rapidan Service Authority, 7.125%, 10/01/16 ........................................ 1,061,180
400,000 Pooled Loan Program, Series A, 7.35%, 11/01/16 ............................................. 419,808
100,000 Pooled Loan Program, Series A, 7.45%, 11/01/16 ............................................. 105,062
100,000 Pooled Loan Program, Series A, 7.85%, 11/01/17 ............................................. 109,375
190,000 Pooled Loan Program, Series A, Pre-Refunded, 7.35%, 11/01/16 ............................... 206,081
Virginia State Resources Authority, Water System Revenue,
1,000,000 Refunding, Series A, 6.125%, 04/01/19 ...................................................... 1,019,320
85,000 Series 1988, Pre-Refunded, 7.875%, 10/01/18 ................................................ 91,767
Virginia State Transportation Board, Transportation Contract Revenue,
9,000,000 Refunding, U.S. Route 28 Project, 6.50%, 04/01/18 .......................................... 9,488,610
475,000 U.S. Route 28 Project, Pre-Refunded, 7.80%, 03/01/16 ....................................... 502,896
2,500,000 U.S. Route 58 Corridor Development Program, 6.00%, 05/15/19 ................................ 2,540,900
3,295,000 Washington County IDA, College Facilities Revenue, Emory and Henry College Project, 6.375%,
04/01/23 ..................................................................................... 3,400,571
3,000,000 Washington County IDA, Hospital Facilities Revenue, First Mortgage, Johnston Memorial Hospital,
7.00%, 07/01/22 .............................................................................. 3,231,060
5,450,000 West Point IDA, Solid Waste Disposal Revenue, Refunding, Chesapeake Corp. Project, Series B,
6.25%, 03/01/19 .............................................................................. 5,627,561
2,000,000 Winchester IDA, Educational Facilities Revenue, Refunding, First Mortgage, Shenandoah University
Project, Asset Guaranteed, 6.80%, 10/01/24 ................................................... 2,193,500
------------
Total Long Term Investments (Cost $271,376,029).......................................... 286,297,565
------------
aShort Term Investments 0.9%..................................................................
$ 100,000 Hopewell IDA Revenue, Various Exempt Facilities, Hadson Power Plant 13-A, Daily VRDN and Put,
3.60%, 04/01/15 .............................................................................. $ 100,000
2,500,000 Peninsula Ports Authority Revenue Updates, Refunding, Port Facility, Shell Oil Co., Series A, Daily
VRDN and Put, 3.50%, 12/01/05 ................................................................ 2,500,000
------------
Total Short Term Investments (Cost $2,600,000) .......................................... 2,600,000
------------
Total Investments (Cost $273,976,029) 98.3%......................................... 288,897,565
Other Assets and Liabilities, Net 1.7%.............................................. 4,948,373
------------
Net Assets 100.0% .................................................................. $293,845,938
============
At Feburary 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $273,976,029 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 15,016,115
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (94,579)
------------
Net unrealized appreciation ................................................................. $ 14,921,536
============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
EDA - Economic Development Authority
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority
HFC - Housing Financial Corp.
IDA - Industrial Development Authority
IDC - Industrial Development Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a
floating or variable interest rate adjustment formula and an unconditional right
of demand to receive payment of the principal balance plus accrued interest upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
February 28, 1997
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin
Alabama Florida Georgia Kentucky Louisiana
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost ........................ $185,249,086 $1,370,694,454 $134,546,197 $42,245,271 $107,342,441
========== =========== ========== ========= ==========
At value .................................. 195,447,292 1,453,483,244 142,293,046 44,115,385 114,232,728
Cash ....................................... 521,012 1,035,967 254,660 36,769 107,196
Receivables:
Interest .................................. 3,445,682 27,025,010 2,082,379 639,494 1,903,164
Investment securities sold ................ -- -- -- 1,625,271 --
Capital shares sold ....................... 216,120 3,508,264 147,061 818 200,739
---------- ----------- ---------- --------- ----------
Total assets .......................... 199,630,106 1,485,052,485 144,777,146 46,417,737 116,443,827
---------- ----------- ---------- --------- ----------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1) ............... -- -- -- 1,999,018 --
Distributions payable to shareholders ..... 265,142 2,075,278 241,710 58,565 157,618
Capital shares repurchased ................ 75,199 455,954 38,741 56,399 211,093
Management fees ........................... 93,357 575,957 70,581 3,997 58,747
Distribution fees ......................... 32,846 199,759 25,135 5,489 20,255
Shareholder servicing costs ............... 6,819 44,688 5,540 1,510 3,955
Accrued expenses and other liabilities ..... 8,406 58,210 8,088 4,095 6,885
---------- ----------- ---------- --------- ----------
Total liabilities ..................... 481,769 3,409,846 389,795 2,129,073 458,553
---------- ----------- ---------- --------- ----------
Net assets, at value ........................ $199,148,337 $1,481,642,639 $144,387,351 $44,288,664 $115,985,274
========== =========== ========== ========= ==========
Net assets consist of:
Undistributed net investment income ........ $ 278,329 $ 1,660,453 $ 29,370 $ 29,569 $ 294,774
Net unrealized appreciation on investments . 10,198,206 82,788,790 7,746,849 1,870,114 6,890,287
Accumulated net realized gain (loss) from
investments ................................ 677,276 (4,386,987) (917,678) (1,145,431) (2,454,261)
Class I capital shares ..................... 182,361,327 1,378,100,590 133,078,772 43,534,412 108,267,022
Class II capital shares .................... 5,633,199 23,479,793 4,450,038 -- 2,987,452
---------- ----------- ---------- --------- ----------
Net assets, at value ....................... $199,148,337 $1,481,642,639 $144,387,351 $44,288,664 $115,985,274
========== =========== ========== ========= ==========
Class I shares:
Net assets, at value ....................... $193,465,737 $1,458,086,732 $139,903,247 $44,288,664 $112,981,359
========== =========== ========== ========= ==========
Shares outstanding ......................... 16,495,571 125,815,973 11,792,161 4,006,855 9,984,603
========== =========== ========== ========= ==========
Net asset value per share* ................. $11.73 $11.59 $11.86 $11.05 $11.32
========== =========== ========== ========= ==========
Maximum offering price per share (100/95.75
of net asset value per share) .............. $12.25 $12.10 $12.39 $11.54 $11.82
========== =========== ========== ========= ==========
Class II shares:
Net assets, at value ....................... $5,682,600 $23,555,907 $4,484,104 -- $3,003,915
========== =========== ========== ========= ==========
Shares outstanding ......................... 482,597 2,018,521 376,236 -- 264,131
========== =========== ========== ========= ==========
Net asset value per share* ................. $11.78 $11.67 $11.92 -- $11.37
========== =========== ========== ========= ==========
Maximum offering price per share (100/99 of
net asset value per share) ................. $11.90 $11.79 $12.04 -- $11.48
========== =========== ========== ========= ==========
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in securities:
At identified cost ........................... $178,094,312 $261,859,986 $257,914,999 $119,014,714 $273,976,029
========== ========== ========== ========== ==========
At value ..................................... 187,077,172 274,817,564 270,793,345 125,882,777 288,897,565
Cash .......................................... 331,652 147,623 600,149 98,195 282,395
Receivables:
Interest ..................................... 3,248,942 4,307,752 4,356,095 1,997,342 4,572,463
Investment securities sold ................... -- -- -- 3,412,548 --
Capital shares sold .......................... 573,756 461,668 362,108 247,339 752,326
---------- ---------- ---------- ---------- ----------
Total assets ............................. 191,231,522 279,734,607 276,111,697 131,638,201 294,504,749
---------- ---------- ---------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1) .................. -- 4,711,321 4,995,163 4,015,834 --
Distributions payable to shareholders ........ 248,724 354,787 338,841 178,610 386,349
Capital shares repurchased ................... 525,266 637,743 6,007 300 71,047
Management fees .............................. 89,783 123,730 122,192 63,484 130,941
Distribution fees ............................ 31,221 26,263 43,772 16,050 45,574
Shareholder servicing costs .................. 8,203 10,280 9,350 4,574 10,813
Accrued expenses and other liabilities ........ 9,527 11,153 10,895 7,341 14,087
---------- ---------- ---------- ---------- ----------
Total liabilities ........................ 912,724 5,875,277 5,526,220 4,286,193 658,811
---------- ---------- ---------- ---------- ----------
Net assets, at value ........................... $190,318,798 $273,859,330 $270,585,477 $127,352,008 $293,845,938
========== ========== ========== ========== ==========
Net assets consist of:
Undistributed net investment income ........... $ 42,905 $ 548,705 $ 137,710 $ 51,160 $ 533,631
Net unrealized appreciation on investments.... 8,982,860 12,957,578 12,878,346 6,868,063 14,921,536
Accumulated net realized gain (loss) from
investments ................................... (255,042) 196,677 (3,117,716) 347,091 856,652
Class I capital shares ........................ 176,504,294 255,887,674 251,166,272 119,338,160 270,891,953
Class II capital shares ....................... 5,043,781 4,268,696 9,520,865 747,534 6,642,166
---------- ---------- ---------- ---------- ----------
Net assets, at value .......................... $190,318,798 $273,859,330 $270,585,477 $127,352,008 $293,845,938
========== ========== ========== ========== ==========
Class I shares:
Net assets, at value .......................... $185,234,414 $269,564,024 $260,978,544 $126,612,398 $287,171,918
========== ========== ========== ========== ==========
Shares outstanding ............................ 16,347,421 22,789,317 22,245,981 11,131,224 24,653,916
========== ========== ========== ========== ==========
Net asset value per share* .................... $11.33 $11.83 $11.73 $11.37 $11.65
========== ========== ========== ========== ==========
Maximum offering price per share (100/95.75 of
net asset value per share) .................... $11.83 $12.36 $12.25 $11.87 $12.17
========== ========== ========== ========== ==========
Class II shares:
Net assets, at value .......................... $ 5,084,384 $ 4,295,306 $ 9,606,933 $ 739,610 $ 6,674,020
========== ========== ========== ========== ==========
Shares outstanding ............................ 445,910 362,419 814,708 64,374 569,870
========== ========== ========== ========== ==========
Net asset value per share* .................... $11.40 $11.85 $11.79 $11.49 $11.71
========== ========== ========== ========== ==========
Maximum offering price per share (100/99 of net
asset value per share) ........................ $11.52 $11.97 $11.91 $11.61 $11.83
========== ========== ========== ========== ==========
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
Statements of Operations
for the year ended February 28, 1997
Franklin Franklin Franklin Franklin Franklin
Alabama Florida Georgia Kentucky Louisiana
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest ............................................. $12,069,094 $89,318,577 $8,551,082 $2,476,586 $7,383,958
--------- --------- -------- -------- ---------
Expenses:
Management fees (Note 5) ............................. 1,079,285 6,567,507 812,505 260,610 692,158
Distribution fees - Class I (Note 5) ................. 151,869 1,100,030 110,645 35,969 90,409
Distribution fees - Class II (Note 5) ................ 23,892 98,517 19,628 -- 15,900
Shareholder servicing costs (Note 5) ................. 55,811 334,082 46,868 12,749 33,201
Reports to shareholders .............................. 34,178 219,132 27,597 7,777 20,092
Pricing service fees ................................. 14,166 43,026 15,386 11,669 16,143
Professional fees .................................... 5,757 36,782 4,539 2,034 3,832
Registration and filing fees ......................... 4,978 18,952 4,703 2,659 1,231
Trustees' fees and expenses .......................... 2,468 18,204 1,830 542 1,463
Custodian fees ....................................... 1,827 12,548 1,300 404 1,061
Other ................................................ 4,190 29,836 3,120 -- 1,827
Management fees waived by manager (Note 5) ........... -- -- -- (194,355) --
--------- --------- -------- -------- ---------
Total expenses .................................. 1,378,421 8,478,616 1,048,121 140,058 877,317
--------- --------- -------- -------- ---------
Net investment income .......................... 10,690,673 80,839,961 7,502,961 2,336,528 6,506,641
--------- --------- -------- -------- ---------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) ............................. 826,032 (1,969,420) (83,809) (266,464) 483,603
Net unrealized appreciation (depreciation) ........... (664,763) (7,137,684) 63,481 403,814 (403,628)
--------- --------- -------- -------- ---------
Net realized and unrealized gain (loss) on investments 161,269 (9,107,104) (20,328) 137,350 79,975
--------- --------- -------- -------- ---------
Net increase in net assets resulting from operations.. $10,851,942 $71,732,857 $7,482,633 $2,473,878 $6,586,616
========= ========= ======== ======== =========
Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest ............................................. $11,150,479 $16,161,858 $15,864,070 $8,239,586 $17,609,467
--------- --------- --------- --------- ---------
Expenses:
Management fees (Note 5) ............................. 1,033,178 1,416,882 1,410,760 762,188 1,519,947
Distribution fees - Class I (Note 5) ................. 154,173 194,650 206,315 98,032 225,735
Distribution fees - Class II (Note 5) ................ 17,804 17,753 39,092 2,544 28,501
Shareholder servicing costs (Note 5) ................. 68,407 88,613 79,308 38,771 91,883
Reports to shareholders .............................. 38,069 48,905 46,857 22,763 56,498
Pricing service fees ................................. 13,716 22,169 19,543 16,167 25,166
Registration and filing fees ......................... 7,357 7,299 7,955 12,761 4,259
Professional fees .................................... 5,544 7,371 7,367 4,198 8,220
Trustees' fees and expenses .......................... 2,347 3,345 3,332 1,655 3,646
Custodian fees ....................................... 1,810 2,418 2,397 1,218 2,808
Other ................................................ 2,624 2,530 4,322 2,312 4,886
--------- --------- --------- --------- ---------
Total expenses .................................. 1,345,029 1,811,935 1,827,248 962,609 1,971,549
--------- --------- --------- --------- ---------
Net investment income .......................... 9,805,450 14,349,923 14,036,822 7,276,977 15,637,918
--------- --------- --------- --------- ---------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss) ............................. 1,025,103 1,156,378 (187,812) 2,502,380 1,469,868
Net unrealized depreciation .......................... (1,388,666) (2,475,177) (124,286) (2,443,895) (2,766,723)
--------- --------- --------- --------- ---------
Net realized and unrealized gain (loss) on investments (363,563) (1,318,799) (312,098) 58,485 (1,296,855)
--------- --------- --------- --------- ---------
Net increase in net assets resulting from operations.. $ 9,441,887 $13,031,124 $13,724,724 $7,335,462 $14,341,063
========= ========= ========= ========= =========
Statements of Changes in Net Assets
for the years ended February 28, 1997 and February 29, 1996
Franklin Alabama Franklin Florida Franklin Georgia
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
---------------------- ------------------------ ----------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income ........ $ 10,690,673 $ 10,196,076 $ 80,839,961 $ 77,913,019 $ 7,502,961 $ 6,882,131
Net realized gain (loss) from
security transactions ......... 826,032 1,639,699 (1,969,420) 5,260,309 (83,809) 792,584
Net unrealized appreciation
(depreciation) on
investments ................... (664,763) 4,747,672 (7,137,684) 33,040,146 63,481 2,701,329
---------- ---------- ----------- ----------- ---------- ----------
Net increase in net
assets resulting from
operations .................... 10,851,942 16,583,447 71,732,857 116,213,474 7,482,633 10,376,044
Distributions to shareholders:
From undistributed net
investment income (Note 7):
Class I ..................... (10,601,182) (10,122,459) (81,984,156) (77,720,760) (7,369,738) (6,924,143)
Class II .................... (186,416) (24,970) (797,622) (136,954) (144,408) (16,079)
Increase in net assets from
capital share transactions
(Note 2) ...................... 11,441,179 11,155,927 131,507,233 57,810,132 12,703,584 11,508,122
---------- ---------- ----------- ----------- ---------- ----------
Net increase in net
assets........................ 11,505,523 17,591,945 120,458,312 96,165,892 12,672,071 14,943,944
Net assets:
Beginning of year ............. 187,642,814 170,050,869 1,361,184,327 1,265,018,435 131,715,280 116,771,336
---------- ---------- ----------- ----------- ---------- ----------
End of year ................... $199,148,337 $187,642,814 $1,481,642,639 $1,361,184,327 $144,387,351 $131,715,280
========== ========== =========== =========== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of year ............ $ 375,254 $ 326,607 $ 3,602,270 $ 3,546,965 $ 40,555 $ 98,646
========== ========== =========== =========== ========== ==========
End of year .................. $ 278,329 $ 375,254 $ 1,660,453 $ 3,602,270 $ 29,370 $ 40,555
========== ========== =========== =========== ========== ==========
Franklin Kentucky Franklin Louisiana Franklin Maryland
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
-------------------- ---------------------- ----------------------
1997 1996 1997 1996 1997 1996
--------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income ............. $ 2,336,528 $ 2,010,309 $ 6,506,641 $ 6,230,184 $ 9,805,450 $ 9,164,640
Net realized gain (loss) from security
transactions ....................... (266,464) (93,203) 483,603 315,845 1,025,103 (339,820)
Net unrealized appreciation
(depreciation) on investments ...... 403,814 1,657,762 (403,628) 2,327,110 (1,388,666) 6,976,565
--------- --------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations.......... 2,473,878 3,574,868 6,586,616 8,873,139 9,441,887 15,801,385
Distributions to shareholders:
From undistributed net investment
income (Note 7):
Class I .......................... (2,331,502) (2,006,847) (6,387,908) (6,126,121) (9,897,629) (9,178,594)
Class II ......................... -- -- (129,018) (13,421) (136,501) (14,480)
Increase in net assets from capital
share transactions (Note 2) ........ 5,155,164 4,591,799 7,016,420 1,185,776 14,919,803 16,238,350
--------- --------- ---------- ---------- ---------- ----------
Net increase in net assets .... 5,297,540 6,159,820 7,086,110 3,919,373 14,327,560 22,846,661
Net assets:
Beginning of year .................. 38,991,124 32,831,304 108,899,164 104,979,791 175,991,238 153,144,577
--------- --------- ---------- ---------- ---------- ----------
End of year ........................ $44,288,664 $38,991,124 $115,985,274 $108,899,164 $190,318,798 $175,991,238
========= ========= ========== ========== ========== ==========
Undistributed net investment income
included in net assets:
Beginning of year ................. $ 24,543 $ 21,081 $ 305,059 $ 214,417 $ 271,585 $ 300,019
========= ========= ========== ========== ========== ==========
End of year ....................... $ 29,569 $ 24,543 $ 294,774 $ 305,059 $ 42,905 $ 271,585
========= ========= ========== ========== ========== ==========
Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income ...................................... $ 14,349,923 $ 13,262,649 $ 14,036,822 $ 12,805,534
Net realized gain (loss) from security transactions ........ 1,156,378 2,429,032 (187,812) 55,992
Net unrealized appreciation (depreciation) on investments .. (2,475,177) 7,364,664 (124,286) 7,436,156
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations ... 13,031,124 23,056,345 13,724,724 20,297,682
Distributions to shareholders:
From undistributed net investment income (Note 7):
Class I .................................................... (14,073,629) (13,013,408) (13,584,397) (12,897,164)
Class II ................................................... (133,456) (22,756) (284,498) (33,638)
From undistributed net realized gain
Class I .................................................... (937,804) -- -- --
Class II ................................................... (13,403) -- -- --
In excess of net investment income Class I .................. -- -- -- (30,868)
Increase in net assets from capital share transactions (Note 2) 27,139,782 11,385,029 21,267,874 25,862,266
---------- ---------- ---------- ----------
Net increase in net assets ............................. 25,012,614 21,405,210 21,123,703 33,198,278
Net assets:
Beginning of year ........................................... 248,846,716 227,441,506 249,461,774 216,263,496
---------- ---------- ---------- ----------
End of year ................................................. $273,859,330 $248,846,716 $270,585,477 $249,461,774
========== ========== ========== ==========
Undistributed net investment income (accumulated distributions
in excess of net investment income) included in net assets:
Beginning of year .......................................... $ 405,867 $ 179,382 $ (30,217) $ 125,919
========== ========== ========== ==========
End of year ................................................ $ 548,705 $ 405,867 $ 137,710 $ (30,217)
========== ========== ========== ==========
Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ...................................... $ 7,276,977 $ 7,632,670 $ 15,637,918 $ 14,937,405
Net realized gain from security transactions ............... 2,502,380 1,250,561 1,469,868 2,856,048
Net unrealized appreciation (depreciation) on investments .. (2,443,895) 2,598,262 (2,766,723) 5,708,436
---------- ---------- ---------- ----------
Net increase in net assets resulting from operations ... 7,335,462 11,481,493 14,341,063 23,501,889
Distributions to shareholders:
From undistributed net investment income (Note 7):
Class I .................................................... (7,454,483) (7,659,213) (15,478,276) (14,797,398)
Class II ................................................... (20,024) (1,044) (217,282) (36,166)
From undistributed net realized gain:
Class I .................................................... (2,155,163) -- (96,953) --
Class II ................................................... (11,013) -- (2,027) --
Increase (decrease) in net assets from capital share transactions
(Note 2) .................................................... (123,878) (4,724,511) 21,853,321 8,813,058
---------- ---------- ---------- ----------
Net increase (decrease) in net assets .................. (2,429,099) (903,275) 20,399,846 17,481,383
Net assets:
Beginning of year ........................................... 129,781,107 130,684,382 273,446,092 255,964,709
---------- ---------- ---------- ----------
End of year ................................................. $127,352,008 $129,781,107 $293,845,938 $273,446,092
========== ========== ========== ==========
Undistributed net investment income included in net assets:
Beginning of year ........................................... $ 247,882 $ 275,469 $ 591,271 $ 487,430
========== ========== ========== ==========
End of year ................................................. $ 51,160 $ 247,882 $ 533,631 $ 591,271
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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-eight separate funds. This report
pertains only to the ten funds (the Funds) included in the accompanying
financial statements. Each of the Funds issues a separate series of the Trust's
shares and maintains a totally separate investment portfolio. All funds in this
report are diversified except the Franklin Maryland Tax-Free Income Fund. Each
fund seeks to provide tax-free income.
All of the funds within this report, except for the Franklin Kentucky Tax-Free
Income Fund, offer two classes of shares, Class I and Class II. Class I shares
are sold with a higher front-end sales charge than Class II shares. Each class
of shares may be subject to a contingent deferred sales charge and has the same
rights, except with respect to the effect of the respective sales charges, the
distribution fees borne by each class, voting rights on matters affecting a
single class and the exchange privilege of each class. The offering of Class II
shares began May 1, 1995, at which time all previously outstanding shares became
Class I shares.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
Tax-free bonds generally trade in the over-the-counter market rather than on a
national securities exchange. In the absence of a sale or reported bid and asked
prices, information with respect to bond and note transactions, quotations from
bond dealers, market transactions in comparable securities, and various
relationships between securities are used to determine the value of the
security. The Trust may utilize a pricing service, bank or broker/dealer
experienced in such matters to perform any of the pricing functions under
procedures approved by the Board of Trustees (the Board). Securities for which
market quotations are not available are valued in accordance with procedures
established by the Board.
b. Municipal Bonds or Notes with "Puts":
The Funds have purchased municipal bonds or notes with the right to resell the
bonds or notes to the seller at an agreed upon price or yield on a specified
date or within a specified period (which will be prior to the maturity date of
the bonds or notes). Such a right to resell is commonly known as a "put". In
determining the weighted average to maturity of the Fund's portfolio, municipal
bonds and notes as to which the Fund holds a put will be deemed to mature on the
first day on which the put may be exercisable.
c. Income Taxes:
The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to shareholders which will be sufficient to relieve the
Funds from income and excise taxes. Each Fund is treated as a separate entity in
the determination of compliance with the Internal Revenue Code.
d. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
e. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Original issue discount and
premium are amortized as required by the Internal Revenue Code. The Funds
normally declare dividends from their net investment income daily and distribute
monthly. Daily allocations of net investment income will commence on the day
following the receipt of an investor's funds. Dividends are normally declared
each day the New York Stock Exchange is open for business and are equal to an
amount per day set from time to time by the Board, and are payable to
shareholders of record at the beginning of business on the ex-dividend date.
Monthly dividends are reinvested in additional shares of the Funds, or paid in
cash as requested by the shareholders.
Realized and unrealized gains or losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale transactions.
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:
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 28, 1997, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in each of the Funds' shares for
the years ended February 28, 1997 and February 29, 1996 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
-------- ---------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997
Shares sold .............................. 1,942,732 $22,560,116 23,001,817 $265,470,186 2,139,522 $25,173,634
Shares issued in reinvestment of
distributions ............................ 372,840 4,328,659 1,884,098 21,720,755 310,722 3,654,123
Shares redeemed .......................... (1,676,632) (19,427,783) (14,883,522) (171,546,454) (1,635,886) (19,240,005)
-------- ---------- --------- ----------- -------- ----------
Net increase .............................. 638,940 $ 7,460,992 10,002,393 $115,644,487 814,358 $ 9,587,752
======== ========== ========= =========== ======== ==========
1996
Shares sold .............................. 2,001,806 $23,206,134 18,302,298 $212,348,253 2,163,964 $25,515,781
Shares issued in reinvestment of
distributions ............................ 342,773 3,965,753 1,715,131 19,860,564 285,166 3,357,019
Shares redeemed .......................... (1,525,925) (17,668,972) (15,697,038) (182,015,732) (1,586,419) (18,698,884)
-------- ---------- --------- ----------- -------- ----------
Net increase .............................. 818,654 $ 9,502,915 4,320,391 $ 50,193,085 862,711 $10,173,916
======== ========== ========= =========== ======== ==========
Class II Shares:
1997
Shares sold .............................. 355,918 $ 4,150,114 1,489,791 $ 17,278,719 272,485 $ 3,213,354
Shares issued in reinvestment of
distributions ............................ 6,865 80,183 38,788 450,543 7,721 91,370
Shares redeemed .......................... (21,459) (250,110) (160,270) (1,866,516) (15,969) (188,892)
-------- ---------- --------- ----------- -------- ----------
Net increase .............................. 341,324 $ 3,980,187 1,368,309 $ 15,862,746 264,237 $ 3,115,832
======== ========== ========= =========== ======== ==========
1996*
Shares sold .............................. 140,587 $ 1,644,981 686,966 $ 8,047,000 115,112 $ 1,371,417
Shares issued in reinvestment of
distributions ............................ 686 8,031 6,504 76,439 1,080 12,860
Shares redeemed .......................... -- -- (43,258) (506,392) (4,193) (50,071)
-------- ---------- --------- ----------- -------- ----------
Net increase .............................. 141,273 $ 1,653,012 650,212 $ 7,617,047 111,999 $ 1,334,206
======== ========== ========= =========== ======== ==========
*For the period May 1, 1995 to February 29, 1996.
2. TRUST SHARES (cont.)
Franklin Kentucky Franklin Louisiana Franklin Maryland
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
----------------- ------------------- -------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997
Shares sold ................................... 890,801 $9,695,973 1,474,073 $16,486,181 2,604,160 $29,219,599
Shares issued in reinvestment of distributions 100,867 1,099,535 234,695 2,631,214 444,248 4,988,597
Shares redeemed ............................... (517,693) (5,640,344) (1,216,948) (13,645,005) (2,087,746) (23,426,747)
------- --------- -------- ---------- -------- ----------
Net increase ................................... 473,975 $5,155,164 491,820 $ 5,472,390 960,662 $10,781,449
======= ========= ======== ========== ======== ==========
1996
Shares sold ................................... 601,004 $6,578,326 901,479 $10,128,261 2,688,694 $30,261,244
Shares issued in reinvestment of distributions 87,040 945,363 221,661 2,484,257 405,922 4,557,510
Shares redeemed ............................... (268,807) (2,931,890) (1,148,001) (12,870,164) (1,734,342) (19,485,831)
------- --------- -------- ---------- -------- ----------
Net increase (decrease) ........................ 419,237 $4,591,799 (24,861) $ (257,646) 1,360,274 $15,332,923
======= ========= ======== ========== ======== ==========
Class II Shares:
1997
Shares sold ................................... 193,161 $ 2,170,906 394,873 $ 4,464,492
Shares issued in reinvestment of distributions 5,780 65,217 7,393 83,785
Shares redeemed ............................... (61,281) (692,093) (36,209) (409,923)
-------- ---------- -------- ----------
Net increase ................................... 137,660 $ 1,544,030 366,057 $ 4,138,354
======== ========== ======== ==========
1996*
Shares sold ................................... 126,335 $ 1,441,883 83,626 $ 948,051
Shares issued in reinvestment of distributions 163 1,853 759 8,655
Shares redeemed ............................... (27) (314) (4,532) (51,279)
-------- ---------- -------- ----------
Net increase ................................... 126,471 $ 1,443,422 79,853 $ 905,427
======== ========== ======== ==========
Franklin Missouri Franklin North Carolina
Tax-Free Income Fund Tax-Free Income Fund
------------------- -------------------
Class I Shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
1997
Shares sold ............................................................ 3,966,235 $46,599,538 3,552,504 $41,297,199
Shares issued in reinvestment of distributions ......................... 594,955 6,994,954 573,276 6,662,552
Shares redeemed ........................................................ (2,503,773) (29,413,147) (2,910,471) (33,789,285)
-------- ---------- -------- ----------
Net increase ............................................................ 2,057,417 $24,181,345 1,215,309 $14,170,466
======== ========== ======== ==========
1996
Shares sold ............................................................ 2,530,350 $29,702,868 3,644,032 $42,477,836
Shares issued in reinvestment of distributions ......................... 492,617 5,775,215 534,072 6,211,974
Shares redeemed ........................................................ (2,165,784) (25,403,313) (2,170,445) (25,251,001)
-------- ---------- -------- ----------
Net increase ............................................................ 857,183 $10,074,770 2,007,659 $23,438,809
======== ========== ======== ==========
Class II Shares:
1997
Shares sold ............................................................ 269,876 $ 3,172,482 616,676 $ 7,189,961
Shares issued in reinvestment of distributions ......................... 9,403 110,971 14,587 170,617
Shares redeemed ........................................................ (27,585) (325,016) (22,519) (263,170)
-------- ---------- -------- ----------
Net increase ............................................................ 251,694 $ 2,958,437 608,744 $ 7,097,408
======== ========== ======== ==========
1996*
Shares sold ............................................................ 110,467 $ 1,307,175 204,503 $ 2,406,207
Shares issued in reinvestment of distributions ......................... 1,383 16,439 1,461 17,250
Shares redeemed ........................................................ (1,125) (13,355) -- --
-------- ---------- -------- ----------
Net increase ............................................................ 110,725 $ 1,310,259 205,964 $ 2,423,457
======== ========== ======== ==========
*For the period May 1, 1995 to February 29, 1996.
2. TRUST SHARES (cont.)
Franklin Texas Franklin Virginia
Tax-Free Income Fund Tax-Free Income Fund
------------------- -------------------
Class I Shares: Shares Amount Shares Amount
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
1997
Shares sold ........................................................... 891,121 $10,192,268 3,444,893 $39,877,525
Shares issued in reinvestment of distributions ........................ 372,717 4,259,781 601,492 6,965,421
Shares redeemed ....................................................... (1,329,365) (15,244,625) (2,557,004) (29,595,029)
-------- ---------- -------- ----------
Net increase (decrease)................................................. (65,527) $ (792,576) 1,489,381 $17,247,917
======== ========== ======== ==========
1996
Shares sold ........................................................... 908,569 $10,449,046 2,697,710 $31,279,664
Shares issued in reinvestment of distributions ........................ 259,186 2,975,696 570,171 6,603,993
Shares redeemed ....................................................... (1,588,268) (18,228,089) (2,687,517) (31,107,361)
-------- ---------- -------- ----------
Net increase (decrease)................................................. (420,513) $ (4,803,347) 580,364 $ 6,776,296
======== ========== ======== ==========
Class II Shares:
1997
Shares sold ........................................................... 55,787 $ 647,380 408,327 $ 4,752,900
Shares issued in reinvestment of distributions ........................ 2,377 27,381 10,741 125,196
Shares redeemed ....................................................... (521) (6,063) (23,383) (272,692)
-------- ---------- -------- ----------
Net increase ........................................................... 57,643 $ 668,698 395,685 $ 4,605,404
======== ========== ======== ==========
1996*
Shares sold ........................................................... 9,645 $ 113,077 173,487 $ 2,028,731
Shares issued in reinvestment of distributions ........................ 61 720 1,930 22,660
Shares redeemed ....................................................... (2,975) (34,961) (1,232) (14,629)
-------- ---------- -------- ----------
Net increase ........................................................... 6,731 $ 78,836 174,185 $ 2,036,762
======== ========== ======== ==========
*For the period May 1, 1995 to February 29, 1996.
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 28, 1997, for tax purposes, the Funds had accumulated net realized
capital gains or capital loss carryovers as follows:
Franklin Franklin Franklin Franklin
Alabama Missouri Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Accumulated net realized gains .......................................... $ 678,026 $197,363 $ 347,091 $ 856,652
======== ======== ======== ========
Franklin Franklin Franklin Franklin
Florida Georgia Kentucky Louisiana
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
-------- -------- -------- --------
Capital Loss carryovers expiring in:
<C> <C> <C> <C> <C>
2000 .................................................................... $-- $-- $ 495 $--
2001 .................................................................... -- -- 1,213 --
2002 .................................................................... -- -- 24,595 --
2003 .................................................................... 2,417,567 833,869 759,461 2,454,261
2004 .................................................................... -- -- 65,389 --
2005 .................................................................... 1,969,420 83,809 294,278 --
-------- -------- -------- --------
$4,386,987 $917,678 $1,145,431 $2,454,261
======== ======== ======== ========
3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS (cont.)
Franklin Franklin
Maryland North Carolina
Tax-Free Tax-Free
Income Fund Income Fund
--------- ---------
expiring in:
<C> <C> <C>
2000 .................................................................................. $-- $ 19,393
2001 .................................................................................. -- 147,462
2002 .................................................................................. -- 14,532
2003 .................................................................................. -- 2,746,697
2004 .................................................................................. 255,042 --
2005 .................................................................................. -- 187,812
--------- ---------
$255,042 $3,115,896
========= =========
</TABLE>
For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower) than for financial reporting purposes at February 28,
1997 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.
4. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended February 28, 1997 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 ............................................ $38,882,232 $279,682,864 $39,740,090 $15,537,231 $22,442,406
Sales ................................................ $28,934,298 $163,288,375 $23,420,546 $10,099,968 $15,210,819
Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Purchases ............................................ $37,338,860 $84,079,159 $48,262,097 $44,931,125 $72,411,101
Sales ................................................ $22,364,716 $55,512,648 $25,241,148 $49,330,585 $53,133,115
</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 date 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
Advisers agreed in advance to waive a portion of its management fees for the
Franklin Kentucky Tax-Free Income Fund in the amount of $194,355 for the year
ended February 28, 1997.
Under an agreement with Advisers, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Funds. The fee
is paid by Advisers and computed monthly based on average daily net assets. It
is not a separate expense of the Funds.
b. Shareholder Services Agreement:
Under the terms of a shareholder services agreement with Franklin/Templeton
Investors Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the year ended February 28, 1997 aggregated $849,693 of which $755,731 was paid
to Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Funds reimburse Franklin/Templeton
Distributors, Inc. (Distributors) in an amount up to a maximum of 0.10% per
annum for Class I and 0.65% per annum for Class II, of the average daily net
assets of such class for costs incurred in the promotion, offering and marketing
of the Funds' shares. The Plans do not permit nor require payments of excess
costs after termination. Fees incurred by the Funds under the Plans aggregated
$2,627,928 for the year ended February 28, 1997.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
c. Distribution Plans and Underwriting Agreement: (cont.)
In its capacity as underwriter for the shares of the Funds, Distributors
receives commissions on sales of the Funds' shares of beneficial interest.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Funds, and as such are not expenses of the Funds. Distributors may
also make payments, out of its own resources, to the dealers for certain sales
of the Funds' shares. Commissions received by Distributors, the amounts paid to
other dealers and any applicable contingent deferred sales charges for the year
ended February 28, 1997 were as follows:
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin
Alabama Florida Georgia Kentucky Louisiana
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total commissions received ................................. $714,659 $4,989,349 $589,639 $263,208 $503,212
Paid to other dealers ...................................... $715,891 $5,107,583 $638,741 $252,007 $499,751
Contingent deferred sales charge ........................... $ 859 $ 13,709 $ 688 $ -- $ 5,331
Franklin Franklin Franklin Franklin Franklin
Maryland Missouri North Carolina Texas Virginia
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Total commissions received ................................. $925,907 $1,133,635 $1,199,578 $254,884 $1,202,581
Paid to other dealers ...................................... $914,269 $1,163,350 $1,217,531 $245,280 $1,181,166
Contingent deferred sales charge ........................... $ 2,211 $ 2,759 $ 1,322 $-- $ 1,039
</TABLE>
d. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, FT Services, and Investor Services, all wholly-owned
subsidiaries of Franklin Resources, Inc.
6. CREDIT RISK
All of the Funds' investments are in the securities of issuers within their
respective states and U.S. territories and possessions. Such concentration may
subject the Funds more significantly to economic changes occuring within those
states and territories.
7. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period, by Fund, are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------------- --------------------------------
Distri- Ratio of
Net Distri- butions Net Net Invest-
Net Asset Net Realized & butions From Asset Ratio of ment In-
Year Value at Invest-Unrealized Total From From Net RealizedTotal Value Net Assets at Expenses come to Portfolio
Ended Beginning ment Gain (Loss) Investment InvestmentCapital Distri- at End Total End of Period to Average AverageTurnover
Feb.28,of Period Income on SecuritiesOperations Income Gains butions of Period Return1(in 000's) Net AssetsNet Assets Rate
Franklin Alabama Tax-Free Income Fund
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
1997 11.73 .65 .011 .661 (.661) -- (.661) 11.73 5.84 193,466 .71 5.62 15.47
Class II Shares:
1996+ 11.36 .49 .405 .895 (.485) -- (.485) 11.77 8.01 1,662 1.29* 5.09* 12.39
1997 11.77 .59 .011 .601 (.591) -- (.591) 11.78 5.28 5,683 1.28 5.05 15.47
Franklin Florida Tax-Free Income Fund
Class I Shares:
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
1997 11.69 .67 (.085) .585 (.685) -- (.685) 11.59 5.20 1,458,087 .60 5.78 12.00
Class II Shares:
1996+ 11.37 .52 $.382 .902 (.512) -- (.512) 11.76 8.05 7,644 1.18* 5.33* 11.78
1997 11.76 .60 (.072) .528 (.618) -- (.618) 11.67 4.65 23,556 1.17 5.17 12.00
7. FINANCIAL HIGHLIGHTS (cont.)
Franklin Georgia Tax-Free Income Fund
Class I Shares:
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
1997 11.88 .65 (.022) .628 (.648) -- (.648) 11.86 5.47 139,903 .75 5.49 17.47
Class II Shares:
1996+ 11.57 .50 .343 .843 (.493) -- (.493) 11.92 7.40 1,335 1.34* 5.04* 10.98
1997 11.92 .58 (.006) .574 (.574) -- (.574) 11.92 4.97 4,484 1.32 4.87 17.47
Franklin Kentucky Tax-Free Income Fund
Class I Shares:
1993 10.30 .57 .832 1.402 (.652) -- (.652) 11.05 13.81 11,678 --2 6.11 18.41
1994 11.05 .63 .164 .794 (.664) -- (.664) 11.18 7.07 28,057 --2 5.73 13.22
1995 11.18 .61 (.625) (.015) (.625) -- (.625) 10.54 0.11 32,831 .292 5.94 32.92
1996 10.54 .62 .495 1.115 (.615) -- (.615) 11.04 10.73 38,991 .332 5.65 31.89
1997 11.04 .61 .012 .622 (.612) -- (.612) 11.05 5.86 44,289 .342 5.63 24.81
Franklin Louisiana Tax-Free Income Fund
Class I Shares:
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
1997 11.32 .65 .001 .649 (.649) -- (.649) 11.32 5.94 112,981 .76 5.76 13.68
Class II Shares:
1996+ 11.01 .49 .351 .841 (.481) -- (.481) 11.37 7.76 1,438 1.35* 5.27* 5.23
1997 11.37 .58 (.001) .579 (.579) -- (.579) 11.37 5.27 3,004 1.33 5.29 13.68
Franklin Maryland Tax-Free Income Fund
Class I Shares:
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
1997 11.38 .61 (.035) .575 (.625) -- (.625) 11.33 5.24 185,234 .73 5.42 12.71
Class II Shares:
1996+ 10.93 .47 .506 .976 (.466) -- (.466) 11.44 9.06 913 1.31* 4.95* 8.11
1997 11.44 .55 (.033) .517 (.557) -- (.557) 11.40 4.68 5,084 1.27 4.78 12.71
Franklin Missouri Tax-Free Income Fund
Class I Shares:
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
1997 11.94 .65 (.069) .581 (.649) (.042) (.691) 11.83 5.06 269,564 .70 5.56 21.81
Class II Shares:
1996+ 11.47 .48 .497 .977 (.477) -- (.477) 11.97 8.66 1,325 1.27* 4.94* 18.27
1997 11.97 .57 (.072) .498 (.576) (.042) (.618) 11.85 4.32 4,295 1.27 4.92 21.81
Franklin North Carolina Tax-Free Income Fund
Class I Shares:
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
1997 11.75 .64 (.030) .610 (.630) -- (.630) 11.73 5.38 260,979 .70 5.47 9.98
7. FINANCIAL HIGHLIGHTS (cont.)
Franklin North Carolina Tax-Free Income Fund (cont.)
Class II Shares:
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996+ $11.41 $.49 $.384 $ .874 $ (.484) -- $ (.484) $11.80 7.77% $ 2,430 1.28%* 4.90%* 25.19%
1997 11.80 .57 (.018) .552 (.562) -- (.562) 11.79 4.83 9,607 1.26 4.85 9.98
Franklin Texas Tax-Free Income Fund
Class I Shares:
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 9.15 129,702 .76 5.86 18.38
1997 11.58 .66 .001 .661 (.673) (.198) (.871) 11.37 5.91 126,612 .75 5.70 35.57
Class II Shares:
1996+ 11.27 .51 .403 .913 (.503) -- (.503) 11.68 8.23 79 1.33* 5.23* 18.38
1997 11.68 .60 .019 .619 (.611) (.198) (.809) 11.49 5.48 740 1.32 5.03 35.57
Franklin Virginia Tax-Free Income Fund
Class I Shares:
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
1997 11.72 .65 (.067) .583 (.649) (.004) (.653) 11.65 5.15 287,172 .69 5.56 19.25
Class II Shares:
1996+ 11.35 .49 .412 .902 (.482) -- (.482) 11.77 8.07 2,050 1.26* 5.06* 12.72
1997 11.77 .58 (.055) .525 (.581) (.004) (.585) 11.71 4.61 6,674 1.25 4.94 19.25
</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. 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.
2During 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:
1993 ............................................ .81
1994 ............................................ .71
1995 ............................................ .80
1996 ............................................ .82
1997............................................. .81
Each Fund hereby designates 100% of the distributions paid from net investment
income for the taxable year ended February 28, 1997 as exempt-interest dividends
per Section 852(b)(5) of the Internal Revenue Code.
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, (ten of which are included in
this report) including each Fund's statement of investments in securities and
net assets, as of February 28, 1997, 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 presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1997, by correspondence with the custodian. 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 28, 1997, 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 their financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
April 4, 1997
Franklin Tax-Free Trust (Alabama Series) Annual Report February 28, 1997.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM
304 (a)OF REGULATION S-T)
GRAPHIC MATERIAL (1)
The following line graph compares the Federal Funds Rate to the Consumer
Price Index - Year over Year change from 3/31/94 to 2/28/97.
Period Ending Fed Funds CPI
Mar-94 2.50% 3.50%
Apr-94 2.40% 3.75%
May-94 2.30% 4.25%
Jun-94 2.50% 4.25%
Jul-94 2.80% 4.25%
Aug-94 2.90% 4.75%
Sep-94 3.00% 4.75%
Oct-94 2.60% 4.75%
Nov-94 2.70% 5.50%
Dec-94 2.70% 5.50%
Jan-95 2.80% 5.50%
Feb-95 2.90% 6.00%
Mar-95 2.90% 6.00%
Apr-95 3.10% 6.00%
May-95 3.20% 6.00%
Jun-95 3.00% 6.00%
Jul-95 2.80% 5.75%
Aug-95 2.60% 5.75%
Sep-95 2.50% 5.75%
Oct-95 2.80% 5.75%
Nov-95 2.60% 5.75%
Dec-95 2.50% 5.50%
Jan-96 2.70% 5.25%
Feb-96 2.70% 5.25%
Mar-96 2.80% 5.25%
Apr-96 2.90% 5.25%
May-96 2.90% 5.25%
Jun-96 2.80% 5.25%
Jul-96 3.00% 5.25%
Aug-96 2.90% 5.25%
Sep-96 3.00% 5.25%
Oct-96 3.00% 5.25%
Nov-96 3.30% 5.25%
Dec-96 3.30% 5.25%
Jan-97 3.00% 5.25%
Feb-97 3.00% 5.25%
GRAPHIC MATERIAL (2)
This bar chart shows the percentage of insured vs. Non-insured bonds issued
during the following years: 1994 (37% insured, 63% non-insured), 1995 (43%
insured, 57% non-insured), 1996 (47% insured, 53% non-insured).
GRAPHIC MATERIAL (3)
This bar chart shows new long-term municipal bond issuance from 1987 through
1996 in terms of billion: 1987/$105 billion; 1988/$117.3 billion; 1989/$125
billion; 1990/$127.8 billion; 1991/$172.4 billion; 1992/$234.7 billion;
1993/$292.2 billion; 1994/$164.8 billion; 1995/$160.3 billion; 1996/$183.5
billion.
GRAPHIC MATERIAL (4)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/28/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 64.2%
AA 3.3%
A 4.3%
BBB 28.2%
GRAPHIC MATERIAL (5)
This bar chart shows the comparison between the fund's Class I distribution
rate of 5.39% and the taxable equivalent rate of 9.39%.
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the
fund's Class I shares to that of the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
Period Ending Fund Index Index
9/1/87 9573 10000 10,000
9/30/87 8936 9631 10,052
10/31/87 8955 9665 10,078
11/30/87 9373 9917 10,087
12/31/87 9535 10061 10,087
1/31/88 9996 10419 10,113
2/29/88 10116 10529 10,140
3/31/88 9910 10407 10,183
4/30/88 9953 10486 10,236
5/31/88 9997 10456 10,271
6/30/88 10188 10609 10,315
7/31/88 10202 10678 10,359
8/31/88 10276 10687 10,402
9/30/88 10478 10881 10,472
10/31/88 10722 11072 10,506
11/30/88 10628 10970 10,515
12/31/88 10774 11082 10,533
1/31/89 11002 11311 10,585
2/28/89 10914 11183 10,629
3/31/89 10898 11156 10,690
4/30/89 11099 11420 10,760
5/31/89 11344 11658 10,821
6/30/89 11505 11816 10,847
7/31/89 11584 11977 10,873
8/31/89 11492 11859 10,891
9/30/89 11432 11824 10,925
10/31/89 11544 11968 10,978
11/30/89 11711 12178 11,004
12/31/89 11835 12277 11,022
1/31/90 11752 12220 11,135
2/28/90 11888 12329 11,188
3/31/90 11870 12332 11,249
4/30/90 11774 12243 11,267
5/31/90 12025 12510 11,293
6/30/90 12154 12620 11,354
7/31/90 12352 12807 11,397
8/31/90 12025 12622 11,502
9/30/90 12053 12629 11,599
10/31/90 12220 12858 11,668
11/30/90 12480 13116 11,694
12/31/90 12461 13174 11,694
1/31/91 12690 13350 11,764
2/28/91 12789 13466 11,782
3/31/91 12854 13472 11,799
4/30/91 13014 13652 11,817
5/31/91 13104 13774 11,853
6/30/91 13097 13760 11,887
7/31/91 13285 13928 11,905
8/31/91 13412 14112 11,939
9/30/91 13615 14295 11,992
10/31/91 13694 14424 12,010
11/30/91 13737 14464 12,045
12/31/91 14006 14775 12,053
1/31/92 14054 14809 12,071
2/29/92 14026 14814 12,115
3/31/92 14049 14820 12,176
4/30/92 14174 14952 12,193
5/31/92 14365 15128 12,211
6/30/92 14570 15382 12,254
7/31/92 15037 15844 12,280
8/31/92 14864 15688 12,315
9/30/92 14901 15790 12,349
10/31/92 14647 15636 12,392
11/30/92 14990 15915 12,410
12/31/92 15214 16078 12,401
1/31/93 15397 16264 12,462
2/28/93 15878 16853 12,505
3/31/93 15804 16674 12,549
4/30/93 15921 16843 12,584
5/31/93 15998 16937 12,602
6/30/93 16226 17220 12,620
7/31/93 16234 17242 12,620
8/31/93 16535 17601 12,655
9/30/93 16750 17802 12,681
10/31/93 16811 17836 12,733
11/30/93 16760 17679 12,742
12/31/93 17077 18052 12,742
1/31/94 17240 18257 12,777
2/28/94 16917 17785 12,820
3/31/94 16333 17061 12,864
4/30/94 16396 17206 12,882
5/31/94 16504 17355 12,891
6/30/94 16450 17250 12,935
7/31/94 16720 17565 12,970
8/31/94 16784 17627 13,021
9/30/94 16598 17368 13,057
10/31/94 16307 17058 13,066
11/30/94 15971 16750 13,083
12/31/94 16322 17118 13,083
1/31/95 16765 17608 13,135
2/28/95 17180 18120 13,188
3/31/95 17338 18328 13,231
4/30/95 17420 18350 13,275
5/31/95 17825 18936 13,301
6/30/95 17738 18771 13,328
7/31/95 17837 18949 13,328
8/31/95 18000 19190 13,363
9/30/95 18116 19311 13,389
10/31/95 18342 19591 13,433
11/30/95 18634 19916 13,424
12/31/95 18817 20107 13,415
1/31/96 18905 20260 13,494
2/29/96 18848 20122 13,537
3/31/96 18664 19865 13,607
4/30/96 18656 19809 13,660
5/31/96 18679 19801 13,686
6/30/96 18884 20017 13,695
7/31/96 19023 20199 13,721
8/31/96 19047 20195 13,747
9/30/96 19287 20478 13,791
10/31/96 19495 20709 13,835
11/30/96 19788 21088 13,861
12/31/96 19746 21000 13,861
1/31/97 19788 21040 13,905
2/28/97 19948 21233 13,949
Total Return 99.48% 112.33% 39.49%
GRAPHIC MATERIAL (7)
This bar chart shows the comparison between the fund's Class II distribution
rate of 4.94% and the taxable equivalent rate of 8.61%.
GRAPHIC MATERIAL (8)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9904 10000 10,000
5/31/95 10127 10319 10,020
6/30/95 10082 10229 10,040
7/31/95 10141 10326 10,040
8/31/95 10220 10458 10,066
9/29/95 10289 10523 10,086
10/31/95 10412 10676 10,120
11/30/95 10572 10853 10,112
12/29/95 10679 10957 10,105
1/31/96 10723 11041 10,165
2/29/96 10686 10966 10,198
3/29/96 10576 10825 10,251
4/30/96 10566 10795 10,291
5/31/96 10574 10791 10,310
6/28/96 10684 10908 10,316
7/31/96 10758 11008 10,336
8/30/96 10766 11005 10,356
9/30/96 10896 11159 10,389
10/31/96 11007 11286 10,422
11/29/96 11166 11492 10,442
12/31/96 11138 11444 10,442
1/31/97 11156 11466 10,475
2/28/97 11250 11571 10,508
Total Return 12.50% 15.71% 5.08%
GRAPHIC MATERIAL (9)
This chart shows in pie format the fund's quality breakdown on 2/28/97, based
on total net assets.
Quality Breakdown on February 28, 1997
AAA 63.2%
AA 12.1%
A 4.6%
BBB 18.1%
Below Investment Grade 2.0%
GRAPHIC MATERIAL (10)
This bar chart shows the comparison between the fund's Class I distribution
rate of 5.65% and the taxable equivalent rate of 9.35%.
GRAPHIC MATERIAL (11)
The following line graph hypothetically compares the performance of the
fund's Class I shares to that of the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
Period Ending Fund Index Index
9/1/87 9572 10000 10,000
9/30/87 9040 9631 10,052
10/31/87 9040 9665 10,078
11/30/87 9420 9917 10,087
12/31/87 9612 10061 10,087
1/31/88 10074 10419 10,113
2/29/88 10267 10529 10,140
3/31/88 10075 10407 10,183
4/30/88 10115 10486 10,236
5/31/88 10145 10456 10,271
6/30/88 10334 10609 10,315
7/31/88 10375 10678 10,359
8/31/88 10443 10687 10,402
9/30/88 10652 10881 10,472
10/31/88 10903 11072 10,506
11/30/88 10797 10970 10,515
12/31/88 10939 11082 10,533
1/31/89 11163 11311 10,585
2/28/89 11047 11183 10,629
3/31/89 11045 11156 10,690
4/30/89 11275 11420 10,760
5/31/89 11526 11658 10,821
6/30/89 11663 11816 10,847
7/31/89 11757 11977 10,873
8/31/89 11647 11859 10,891
9/30/89 11569 11824 10,925
10/31/89 11720 11968 10,978
11/30/89 11904 12178 11,004
12/31/89 12013 12277 11,022
1/31/90 11910 12220 11,135
2/28/90 12076 12329 11,188
3/31/90 12062 12332 11,249
4/30/90 11958 12243 11,267
5/31/90 12241 12510 11,293
6/30/90 12353 12620 11,354
7/31/90 12559 12807 11,397
8/31/90 12208 12622 11,502
9/30/90 12288 12629 11,599
10/31/90 12471 12858 11,668
11/30/90 12749 13116 11,694
12/31/90 12743 13174 11,694
1/31/91 12954 13350 11,764
2/28/91 13044 13466 11,782
3/31/91 13099 13472 11,799
4/30/91 13276 13652 11,817
5/31/91 13368 13774 11,853
6/30/91 13362 13760 11,887
7/31/91 13581 13928 11,905
8/31/91 13724 14112 11,939
9/30/91 13920 14295 11,992
10/31/91 14002 14424 12,010
11/30/91 14060 14464 12,045
12/31/91 14343 14775 12,053
1/31/92 14357 14809 12,071
2/29/92 14371 14814 12,115
3/31/92 14412 14820 12,176
4/30/92 14544 14952 12,193
5/31/92 14729 15128 12,211
6/30/92 14903 15382 12,254
7/31/92 15437 15844 12,280
8/31/92 15278 15688 12,315
9/30/92 15280 15790 12,349
10/31/92 15037 15636 12,392
11/30/92 15351 15915 12,410
12/31/92 15582 16078 12,401
1/31/93 15787 16264 12,462
2/28/93 16214 16853 12,505
3/31/93 16157 16674 12,549
4/30/93 16295 16843 12,584
5/31/93 16420 16937 12,602
6/30/93 16658 17220 12,620
7/31/93 16685 17242 12,620
8/31/93 16939 17601 12,655
9/30/93 17122 17802 12,681
10/31/93 17248 17836 12,733
11/30/93 17173 17679 12,742
12/31/93 17457 18052 12,742
1/31/94 17639 18257 12,777
2/28/94 17324 17785 12,820
3/31/94 16785 17061 12,864
4/30/94 16866 17206 12,882
5/31/94 16963 17355 12,891
6/30/94 16941 17250 12,935
7/31/94 17191 17565 12,970
8/31/94 17230 17627 13,021
9/30/94 17072 17368 13,057
10/31/94 16867 17058 13,066
11/30/94 16556 16750 13,083
12/31/94 16875 17118 13,083
1/31/95 17319 17608 13,135
2/28/95 17735 18120 13,188
3/31/95 17871 18328 13,231
4/30/95 17944 18350 13,275
5/31/95 18366 18936 13,301
6/30/95 18329 18771 13,328
7/31/95 18436 18949 13,328
8/31/95 18592 19190 13,363
9/30/95 18700 19311 13,389
10/31/95 18922 19591 13,433
11/30/95 19177 19916 13,424
12/31/95 19353 20107 13,415
1/31/96 19446 20260 13,494
2/29/96 19375 20122 13,537
3/31/96 19221 19865 13,607
4/30/96 19183 19809 13,660
5/31/96 19194 19801 13,686
6/30/96 19425 20017 13,695
7/31/96 19538 20199 13,721
8/31/96 19532 20195 13,747
9/30/96 19801 20478 13,791
10/31/96 19968 20709 13,835
11/30/96 20256 21088 13,861
12/31/96 20199 21000 13,861
1/31/97 20211 21040 13,905
2/28/97 20381 21233 13,949
Total Return 103.81% 112.33% 39.49%
GRAPHIC MATERIAL (12)
This bar chart shows the comparison between the fund's Class II distribution
rate of 5.33% and the taxable equivalent rate of 8.82%.
GRAPHIC MATERIAL (13)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9904 10000 10,000
5/31/95 10164 10319 10,020
6/30/95 10147 10229 10,040
7/31/95 10192 10326 10,040
8/31/95 10281 10458 10,066
9/29/95 10344 10523 10,086
10/31/95 10452 10676 10,120
11/30/95 10596 10853 10,112
12/29/95 10687 10957 10,105
1/31/96 10733 11041 10,165
2/29/96 10688 10966 10,198
3/29/96 10590 10825 10,251
4/30/96 10564 10795 10,291
5/31/96 10565 10791 10,310
6/28/96 10695 10908 10,316
7/31/96 10742 11008 10,336
8/30/96 10733 11005 10,356
9/30/96 10883 11159 10,389
10/31/96 10978 11286 10,422
11/29/96 11130 11492 10,442
12/31/96 11093 11444 10,442
1/31/97 11095 11466 10,475
2/28/97 11183 11571 10,508
Total Return 11.83% 15.71% 5.08%
GRAPHIC MATERIAL (14)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/28/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 61.1%
AA 20.9%
A 7.1%
BBB 8.2%
Below Investment Grade 2.7%
GRAPHIC MATERIAL (15)
This bar chart shows the comparison between the fund's Class I distribution
rate of 5.13% and the taxable equivalent rate of 9.04%.
GRAPHIC MATERIAL (16)
The following line graph hypothetically compares the performance of the
fund's Class I shares to that of the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
Period Ending Fund Index Index
9/1/87 9573 10000 10,000
9/30/87 8928 9631 10,052
10/30/87 8975 9665 10,078
11/30/87 9326 9917 10,087
12/31/87 9507 10061 10,087
1/29/88 9982 10419 10,113
2/29/88 10126 10529 10,140
3/31/88 9925 10407 10,183
4/29/88 9944 10486 10,236
5/31/88 9973 10456 10,271
6/30/88 10140 10609 10,315
7/29/88 10179 10678 10,359
8/31/88 10259 10687 10,402
9/30/88 10498 10881 10,472
10/31/88 10738 11072 10,506
11/30/88 10643 10970 10,515
12/30/88 10786 11082 10,533
1/31/89 10989 11311 10,585
2/28/89 10897 11183 10,629
3/31/89 10867 11156 10,690
4/28/89 11126 11420 10,760
5/31/89 11386 11658 10,821
6/30/89 11544 11816 10,847
7/31/89 11642 11977 10,873
8/31/89 11571 11859 10,891
9/29/89 11510 11824 10,925
10/31/89 11642 11968 10,978
11/30/89 11818 12178 11,004
12/29/89 11940 12277 11,022
1/31/90 11856 12220 11,135
2/28/90 12013 12329 11,188
3/30/90 12005 12332 11,249
4/30/90 11933 12243 11,267
5/31/90 12195 12510 11,293
6/29/90 12302 12620 11,354
7/31/90 12511 12807 11,397
8/31/90 12187 12622 11,502
9/28/90 12170 12629 11,599
10/31/90 12337 12858 11,668
11/30/90 12632 13116 11,694
12/31/90 12614 13174 11,694
1/31/91 12855 13350 11,764
2/28/91 12955 13466 11,782
3/29/91 12996 13472 11,799
4/30/91 13169 13652 11,817
5/31/91 13259 13774 11,853
6/28/91 13254 13760 11,887
7/31/91 13442 13928 11,905
8/30/91 13583 14112 11,939
9/30/91 13773 14295 11,992
10/31/91 13841 14424 12,010
11/29/91 13897 14464 12,045
12/31/91 14158 14775 12,053
1/31/92 14205 14809 12,071
2/28/92 14177 14814 12,115
3/31/92 14200 14820 12,176
4/30/92 14338 14952 12,193
5/29/92 14527 15128 12,211
6/30/92 14718 15382 12,254
7/31/92 15207 15844 12,280
8/31/92 15034 15688 12,315
9/30/92 15082 15790 12,349
10/30/92 14812 15636 12,392
11/30/92 15149 15915 12,410
12/31/92 15381 16078 12,401
1/29/93 15508 16264 12,462
2/26/93 15944 16853 12,505
3/31/93 15869 16674 12,549
4/30/93 16052 16843 12,584
5/31/93 16154 16937 12,602
6/30/93 16434 17220 12,620
7/30/93 16441 17242 12,620
8/31/93 16723 17601 12,655
9/30/93 16937 17802 12,681
10/29/93 16999 17836 12,733
11/30/93 16937 17679 12,742
12/31/93 17210 18052 12,742
1/31/94 17415 18257 12,777
2/28/94 17054 17785 12,820
3/31/94 16477 17061 12,864
4/29/94 16541 17206 12,882
5/31/94 16649 17355 12,891
6/30/94 16583 17250 12,935
7/29/94 16866 17565 12,970
8/31/94 16932 17627 13,021
9/30/94 16763 17368 13,057
10/31/94 16505 17058 13,066
11/30/94 16188 16750 13,083
12/30/94 16567 17118 13,083
1/31/95 17008 17608 13,135
2/28/95 17375 18120 13,188
3/31/95 17533 18328 13,231
4/28/95 17585 18350 13,275
5/31/95 17989 18936 13,301
6/30/95 17920 18771 13,328
7/31/95 18004 18949 13,328
8/31/95 18182 19190 13,363
9/29/95 18252 19311 13,389
10/31/95 18477 19591 13,433
11/30/95 18720 19916 13,424
12/29/95 18901 20107 13,415
1/31/96 18972 20260 13,494
2/29/96 18916 20122 13,537
3/29/96 18749 19865 13,607
4/30/96 18757 19809 13,660
5/31/96 18797 19801 13,686
6/28/96 18983 20017 13,695
7/31/96 19089 20199 13,721
8/30/96 19112 20195 13,747
9/30/96 19347 20478 13,791
10/31/96 19516 20709 13,835
11/29/96 19770 21088 13,861
12/31/96 19775 21000 13,861
1/31/97 19813 21040 13,905
2/28/97 19952 21233 13,949
Total Return 99.52% 112.33% 39.49%
GRAPHIC MATERIAL (17)
This bar shows the comparison between the fund's Class II distribution rate
of 4.78% and the taxable equivalent rate of 8.42%.
GRAPHIC MATERIAL (18)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9897 10000 10,000
5/31/95 10116 10319 10,020
6/30/95 10089 10229 10,040
7/31/95 10140 10326 10,040
8/31/95 10226 10458 10,066
9/29/95 10268 10523 10,086
10/31/95 10381 10676 10,120
11/30/95 10520 10853 10,112
12/29/95 10616 10957 10,105
1/31/96 10651 11041 10,165
2/29/96 10614 10966 10,198
3/29/96 10517 10825 10,251
4/30/96 10517 10795 10,291
5/31/96 10534 10791 10,310
6/28/96 10633 10908 10,316
7/31/96 10693 11008 10,336
8/30/96 10698 11005 10,356
9/30/96 10831 11159 10,389
10/31/96 10920 11286 10,422
11/29/96 11047 11492 10,442
12/31/96 11054 11444 10,442
1/31/97 11061 11466 10,475
2/28/97 11143 11571 10,508
Total Return 11.43% 15.71% 5.08%
GRAPHIC MATERIAL (19)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/28/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 50.8%
AA 11.2%
A 21.8%
BBB 16.2%
GRAPHIC MATERIAL (20)
This bar chart shows the comparison between the fund's distribution rate of
5.30% and the taxable equivalent rate of 9.33%.
GRAPHIC MATERIAL (21)
The following line graph hypothetically compares the performance of the
fund's shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 10/12/91 to
2/28/97.
Period Ending Fund Index Index
10/12/91 9579 10,000 10,000
10/31/91 9588 10,055 10,009
11/29/91 9598 10,083 10,038
12/31/91 9789 10,300 10,045
1/31/92 9856 10,324 10,060
2/28/92 9866 10,327 10,097
3/31/92 9890 10,331 10,148
4/30/92 9972 10,423 10,162
5/29/92 10122 10,546 10,176
6/30/92 10263 10,723 10,213
7/31/92 10679 11,045 10,235
8/31/92 10497 10,937 10,263
9/30/92 10522 11,008 10,292
10/30/92 10348 10,900 10,328
11/30/92 10643 11,095 10,342
12/31/92 10798 11,208 10,335
1/29/93 10925 11,338 10,386
2/26/93 11265 11,749 10,422
3/31/93 11188 11,624 10,459
4/30/93 11306 11,741 10,488
5/31/93 11393 11,807 10,503
6/30/93 11626 12,004 10,517
7/30/93 11663 12,020 10,517
8/31/93 11898 12,270 10,547
9/30/93 12071 12,410 10,569
10/29/93 12150 12,433 10,612
11/30/93 12018 12,324 10,620
12/31/93 12300 12,584 10,620
1/31/94 12435 12,727 10,648
2/28/94 12085 12,398 10,685
3/31/94 11396 11,893 10,721
4/29/94 11488 11,994 10,736
5/31/94 11614 12,099 10,743
6/30/94 11505 12,025 10,780
7/29/94 11771 12,245 10,809
8/31/94 11806 12,288 10,852
9/30/94 11528 12,107 10,882
10/31/94 11192 11,892 10,889
11/30/94 10913 11,676 10,903
12/30/94 11254 11,933 10,903
1/31/95 11700 12,275 10,947
2/28/95 12112 12,632 10,991
3/31/95 12240 12,777 11,027
4/28/95 12252 12,792 11,063
5/31/95 12694 13,200 11,086
6/30/95 12508 13,086 11,108
7/31/95 12580 13,210 11,108
8/31/95 12747 13,378 11,137
9/29/95 12854 13,462 11,159
10/31/95 13081 13,657 11,196
11/30/95 13333 13,884 11,188
12/29/95 13491 14,017 11,180
1/31/96 13552 14,124 11,246
2/29/96 13408 14,028 11,282
3/29/96 13215 13,848 11,341
4/30/96 13204 13,809 11,385
5/31/96 13217 13,804 11,406
6/28/96 13391 13,954 11,413
7/31/96 13479 14,081 11,435
8/30/96 13480 14,078 11,457
9/30/96 13694 14,276 11,493
10/31/96 13859 14,437 11,530
11/29/96 14100 14,701 11,552
12/31/96 14063 14,639 11,552
1/31/97 14065 14,667 11,589
2/28/97 14193 14,802 11,625
Total Return 41.93% 48.02% 16.25%
GRAPHIC MATERIAL (22)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/28/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 58.8%
AA 2.8%
A 14.9%
BBB 12.5%
Below Investment Grade 11.0%
GRAPHIC MATERIAL (23)
This bar chart shows the comparison between the fund's Class I distribution
rate of 5.48% and the taxable equivalent rate of 9.65%.
GRAPHIC MATERIAL (24)
The following line graph hypothetically compares the performance of the
fund's Class I shares to that of the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
Period Ending Fund Index Index
9/1/87 9,573 10000 10,000
9/30/87 8,955 9631 10,052
10/31/87 8,993 9665 10,078
11/30/87 9,307 9917 10,087
12/31/87 9,480 10061 10,087
1/31/88 9,962 10419 10,113
2/29/88 10,069 10529 10,140
3/31/88 9,868 10407 10,183
4/30/88 9,909 10486 10,236
5/31/88 9,961 10456 10,271
6/30/88 10,130 10609 10,315
7/31/88 10,152 10678 10,359
8/31/88 10,218 10687 10,402
9/30/88 10,405 10881 10,472
10/31/88 10,624 11072 10,506
11/30/88 10,549 10970 10,515
12/31/88 10,698 11082 10,533
1/31/89 10,911 11311 10,585
2/28/89 10,834 11183 10,629
3/31/89 10,830 11156 10,690
4/30/89 11,047 11420 10,760
5/31/89 11,317 11658 10,821
6/30/89 11,473 11816 10,847
7/31/89 11,586 11977 10,873
8/31/89 11,507 11859 10,891
9/30/89 11,448 11824 10,925
10/31/89 11,553 11968 10,978
11/30/89 11,735 12178 11,004
12/31/89 11,841 12277 11,022
1/31/90 11,748 12220 11,135
2/28/90 11,889 12329 11,188
3/31/90 11,895 12332 11,249
4/30/90 11,811 12243 11,267
5/31/90 12,092 12510 11,293
6/30/90 12,213 12620 11,354
7/31/90 12,417 12807 11,397
8/31/90 12,133 12622 11,502
9/30/90 12,105 12629 11,599
10/31/90 12,277 12858 11,668
11/30/90 12,580 13116 11,694
12/31/90 12,611 13174 11,694
1/31/91 12,834 13350 11,764
2/28/91 12,938 13466 11,782
3/31/91 12,982 13472 11,799
4/30/91 13,148 13652 11,817
5/31/91 13,254 13774 11,853
6/30/91 13,249 13760 11,887
7/31/91 13,456 13928 11,905
8/31/91 13,588 14112 11,939
9/30/91 13,785 14295 11,992
10/31/91 13,843 14424 12,010
11/30/91 13,915 14464 12,045
12/31/91 14,153 14775 12,053
1/31/92 14,189 14809 12,071
2/29/92 14,187 14814 12,115
3/31/92 14,223 14820 12,176
4/30/92 14,338 14952 12,193
5/31/92 14,520 15128 12,211
6/30/92 14,703 15382 12,254
7/31/92 15,245 15844 12,280
8/31/92 15,056 15688 12,315
9/30/92 15,080 15790 12,349
10/31/92 14,847 15636 12,392
11/30/92 15,157 15915 12,410
12/31/92 15,400 16078 12,401
1/31/93 15,575 16264 12,462
2/28/93 16,028 16853 12,505
3/31/93 15,942 16674 12,549
4/30/93 16,050 16843 12,584
5/31/93 16,117 16937 12,602
6/30/93 16,424 17220 12,620
7/31/93 16,447 17242 12,620
8/31/93 16,697 17601 12,655
9/30/93 16,863 17802 12,681
10/31/93 16,885 17836 12,733
11/30/93 16,851 17679 12,742
12/31/93 17,116 18052 12,742
1/31/94 17,251 18257 12,777
2/28/94 16,963 17785 12,820
3/31/94 16,350 17061 12,864
4/30/94 16,369 17206 12,882
5/31/94 16,507 17355 12,891
6/30/94 16,436 17250 12,935
7/31/94 16,710 17565 12,970
8/31/94 16,760 17627 13,021
9/30/94 16,613 17368 13,057
10/31/94 16,359 17058 13,066
11/30/94 15,983 16750 13,083
12/31/94 16,296 17118 13,083
1/31/95 16,765 17608 13,135
2/28/95 17,159 18120 13,188
3/31/95 17,243 18328 13,231
4/30/95 17,295 18350 13,275
5/31/95 17,710 18936 13,301
6/30/95 17,590 18771 13,328
7/31/95 17,707 18949 13,328
8/31/95 17,874 19190 13,363
9/30/95 18,009 19311 13,389
10/31/95 18,240 19591 13,433
11/30/95 18,506 19916 13,424
12/31/95 18,676 20107 13,415
1/31/96 18,748 20260 13,494
2/29/96 18,655 20122 13,537
3/31/96 18,497 19865 13,607
4/30/96 18,471 19809 13,660
5/31/96 18,527 19801 13,686
6/30/96 18,718 20017 13,695
7/31/96 18,859 20199 13,721
8/31/96 18,916 20195 13,747
9/30/96 19,144 20478 13,791
10/31/96 19,321 20709 13,835
11/30/96 19,620 21088 13,861
12/31/96 19,575 21000 13,861
1/31/97 19,600 21040 13,905
2/28/97 19,763 21233 13,949
Total Return 97.63% 112.33% 39.49%
GRAPHIC MATERIAL (25)
This bar chart shows the comparison between the fund's Class II distribution
rate of 4.98% and the taxable equivalent rate of 8.77%.
GRAPHIC MATERIAL (26)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 Investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9,901 10000 10,000
5/31/95 10,131 10319 10,020
6/30/95 10,066 10229 10,040
7/31/95 10,146 10326 10,040
8/31/95 10,236 10458 10,066
9/30/95 10,298 10523 10,086
10/30/95 10,434 10676 10,120
11/30/95 10,580 10853 10,112
12/31/95 10,680 10957 10,105
1/31/96 10,715 11041 10,165
2/29/96 10,657 10966 10,198
3/31/96 10,553 10825 10,251
4/30/96 10,542 10795 10,291
5/31/96 10,569 10791 10,310
6/30/96 10,663 10908 10,316
7/31/96 10,748 11008 10,336
8/31/96 10,775 11005 10,356
9/30/96 10,900 11159 10,389
10/31/96 10,994 11286 10,422
11/30/96 11,157 11492 10,442
12/31/96 11,125 11444 10,442
1/31/97 11,143 11466 10,475
2/28/97 11,219 11571 10,508
Total Return 12.19% 15.71% 5.08%
GRAPHIC MATERIAL (27)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/82/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 48.4%
AA 16.0%
A 27.1%
BBB 8.5%
GRAPHIC MATERIAL (28)
This bar chart shows the comparison between the fund's Class I distribution
rate of 5.27% and the taxable equivalent of 9.48%.
GRAPHIC MATERIAL (29)
The following line graph hypothetically compares the performance of the
fund's Class I shares to that of the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (CPI), based on a $10,000 investment from 10/3/88 to
2/28/97.
Period Ending Fund Index Index
10/3/88 9579 10000 10,000
10/31/88 9588 10176 10,033
11/30/88 9521 10082 10,041
12/30/88 9617 10185 10,058
1/31/89 9761 10396 10,108
2/28/89 9699 10278 10,150
3/31/89 9686 10253 10,209
4/28/89 9905 10496 10,275
5/31/89 10106 10714 10,334
6/30/89 10239 10860 10,358
7/31/89 10334 11008 10,383
8/31/89 10261 10900 10,400
9/29/89 10217 10867 10,433
10/31/89 10303 11000 10,483
11/30/89 10460 11192 10,508
12/29/89 10557 11284 10,525
1/31/90 10482 11231 10,634
2/28/90 10601 11331 10,684
3/30/90 10555 11334 10,742
4/30/90 10483 11253 10,760
5/31/90 10722 11498 10,784
6/29/90 10848 11599 10,843
7/31/90 11006 11771 10,884
8/31/90 10741 11600 10,984
9/28/90 10731 11607 11,076
10/31/90 10892 11817 11,143
11/30/90 11140 12055 11,167
12/31/90 11129 12108 11,167
1/31/91 11347 12270 11,234
2/28/91 11435 12377 11,251
3/29/91 11479 12382 11,268
4/30/91 11624 12548 11,285
5/31/91 11691 12659 11,319
6/28/91 11702 12647 11,351
7/31/91 11838 12801 11,368
8/30/91 11952 12970 11,401
9/30/91 12123 13138 11,452
10/31/91 12192 13257 11,469
11/29/91 12227 13294 11,502
12/31/91 12471 13580 11,510
1/31/92 12512 13611 11,527
2/28/92 12506 13615 11,569
3/31/92 12524 13620 11,628
4/30/92 12636 13742 11,644
5/29/92 12809 13904 11,660
6/30/92 12971 14137 11,702
7/31/92 13375 14561 11,727
8/31/92 13236 14419 11,760
9/30/92 13266 14512 11,793
10/30/92 13052 14370 11,834
11/30/92 13353 14627 11,851
12/31/92 13557 14777 11,842
1/29/93 13725 14948 11,900
2/26/93 14131 15489 11,942
3/31/93 14061 15325 11,984
4/30/93 14181 15480 12,017
5/31/93 14238 15566 12,034
6/30/93 14499 15826 12,051
7/30/93 14541 15847 12,051
8/31/93 14776 16177 12,085
9/30/93 14858 16361 12,110
10/29/93 14926 16392 12,160
11/30/93 14878 16248 12,168
12/31/93 15207 16591 12,168
1/31/94 15340 16780 12,201
2/28/94 15064 16345 12,243
3/31/94 14480 15680 12,284
4/29/94 14494 15813 12,301
5/31/94 14630 15951 12,310
6/30/94 14563 15854 12,352
7/29/94 14821 16144 12,385
8/31/94 14877 16200 12,435
9/30/94 14688 15962 12,468
10/31/94 14400 15678 12,477
11/30/94 14058 15394 12,493
12/30/94 14435 15733 12,493
1/31/95 14884 16183 12,543
2/28/95 15334 16654 12,593
3/31/95 15478 16845 12,635
4/28/95 15494 16865 12,677
5/31/95 15908 17403 12,702
6/30/95 15782 17252 12,727
7/31/95 16000 17416 12,727
8/31/95 16190 17637 12,761
9/29/95 16323 17748 12,786
10/31/95 16515 18006 12,828
11/30/95 16766 18304 12,819
12/29/95 16931 18480 12,810
1/31/96 16993 18621 12,886
2/29/96 16892 18494 12,927
3/29/96 16702 18257 12,994
4/30/96 16690 18206 13,045
5/31/96 16692 18199 13,070
6/28/96 16861 18397 13,078
7/31/96 17001 18565 13,103
8/30/96 16987 18561 13,127
9/30/96 17235 18821 13,169
10/31/96 17392 19033 13,212
11/29/96 17673 19382 13,237
12/31/96 17598 19300 13,237
1/31/97 17617 19337 13,279
2/28/97 17776 19515 13,320
Total Return 77.76% 95.15% 33.20%
GRAPHIC MATERIAL (30)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 4.81% and the taxable equivalent rate of 8.65%.
GRAPHIC MATERIAL (31)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9900 10000 10,000
5/31/95 10167 10319 10,020
6/30/95 10081 10229 10,040
7/31/95 10224 10326 10,040
8/31/95 10340 10458 10,066
9/29/95 10409 10523 10,086
10/31/95 10544 10676 10,120
11/30/95 10699 10853 10,112
12/29/95 10798 10957 10,105
1/31/96 10841 11041 10,165
2/29/96 10781 10966 10,198
3/29/96 10669 10825 10,251
4/30/96 10647 10795 10,291
5/31/96 10652 10791 10,310
6/28/96 10745 10908 10,316
7/31/96 10828 11008 10,336
8/30/96 10823 11005 10,356
9/30/96 10965 11159 10,389
10/31/96 11069 11286 10,422
11/29/96 11231 11492 10,442
12/31/96 11189 11444 10,442
1/31/97 11195 11466 10,475
2/28/97 11290 11571 10,508
Total Return 12.90% 15.71% 5.08%
GRAPHIC MATERIAL (32)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/28/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 60.2%
AA 12.2%
A 10.8%
BBB 16.7%
Below Investment Grade 0.1%
GRAPHIC MATERIAL (33)
This bar chart shows the comparison between the fund's Class I shares
distribution rate of 5.24% and the taxable equivalent rate of 9.23%.
GRAPHIC MATERIAL (34)
The following line graph hypothetically compares the performance of the
fund's Class I to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
Period Ending Fund Index Index
9/1/87 9,573 10000 10,000
9/30/87 8,967 9631 10,052
10/31/87 8,957 9665 10,078
11/30/87 9,289 9917 10,087
12/31/87 9,466 10061 10,087
1/31/88 9,902 10419 10,113
2/29/88 9,975 10529 10,140
3/31/88 9,788 10407 10,183
4/30/88 9,843 10486 10,236
5/31/88 9,888 10456 10,271
6/30/88 10,070 10609 10,315
7/31/88 10,116 10678 10,359
8/31/88 10,186 10687 10,402
9/30/88 10,387 10881 10,472
10/31/88 10,629 11072 10,506
11/30/88 10,539 10970 10,515
12/31/88 10,662 11082 10,533
1/31/89 10,868 11311 10,585
2/28/89 10,776 11183 10,629
3/31/89 10,767 11156 10,690
4/30/89 10,997 11420 10,760
5/31/89 11,238 11658 10,821
6/30/89 11,366 11816 10,847
7/31/89 11,462 11977 10,873
8/31/89 11,400 11859 10,891
9/30/89 11,338 11824 10,925
10/31/89 11,436 11968 10,978
11/30/89 11,601 12178 11,004
12/31/89 11,701 12277 11,022
1/31/90 11,616 12220 11,135
2/28/90 11,772 12329 11,188
3/31/90 11,763 12332 11,249
4/30/90 11,709 12243 11,267
5/31/90 11,969 12510 11,293
6/30/90 12,084 12620 11,354
7/31/90 12,268 12807 11,397
8/31/90 12,031 12622 11,502
9/30/90 11,999 12629 11,599
10/31/90 12,198 12858 11,668
11/30/90 12,479 13116 11,694
12/31/90 12,481 13174 11,694
1/31/91 12,671 13350 11,764
2/28/91 12,744 13466 11,782
3/31/91 12,806 13472 11,799
4/30/91 12,988 13652 11,817
5/31/91 13,075 13774 11,853
6/30/91 13,053 13760 11,887
7/31/91 13,263 13928 11,905
8/31/91 13,375 14112 11,939
9/30/91 13,562 14295 11,992
10/31/91 13,651 14424 12,010
11/30/91 13,716 14464 12,045
12/31/91 13,975 14775 12,053
1/31/92 14,009 14809 12,071
2/29/92 14,043 14814 12,115
3/31/92 14,078 14820 12,176
4/30/92 14,201 14952 12,193
5/31/92 14,364 15128 12,211
6/30/92 14,528 15382 12,254
7/31/92 15,029 15844 12,280
8/31/92 14,843 15688 12,315
9/30/92 14,892 15790 12,349
10/31/92 14,625 15636 12,392
11/30/92 14,977 15915 12,410
12/31/92 15,212 16078 12,401
1/31/93 15,395 16264 12,462
2/28/93 15,834 16853 12,505
3/31/93 15,789 16674 12,549
4/30/93 15,893 16843 12,584
5/31/93 15,985 16937 12,602
6/30/93 16,268 17220 12,620
7/31/93 16,346 17242 12,620
8/31/93 16,660 17601 12,655
9/30/93 16,889 17802 12,681
10/31/93 16,923 17836 12,733
11/30/93 16,833 17679 12,742
12/31/93 17,234 18052 12,742
1/31/94 17,397 18257 12,777
2/28/94 17,020 17785 12,820
3/31/94 16,398 17061 12,864
4/30/94 16,448 17206 12,882
5/31/94 16,585 17355 12,891
6/30/94 16,519 17250 12,935
7/31/94 16,774 17565 12,970
8/31/94 16,840 17627 13,021
9/30/94 16,609 17368 13,057
10/31/94 16,333 17058 13,066
11/30/94 16,013 16750 13,083
12/31/94 16,359 17118 13,083
1/31/95 16,828 17608 13,135
2/28/95 17,269 18120 13,188
3/31/95 17,409 18328 13,231
4/30/95 17,474 18350 13,275
5/31/95 17,936 18936 13,301
6/30/95 17,833 18771 13,328
7/31/95 17,930 18949 13,328
8/31/95 18,121 19190 13,363
9/30/95 18,203 19311 13,389
10/31/95 18,426 19591 13,433
11/30/95 18,715 19916 13,424
12/31/95 18,926 20107 13,415
1/31/96 19,106 20260 13,494
2/29/96 19,033 20122 13,537
3/31/96 18,800 19865 13,607
4/30/96 18,758 19809 13,660
5/31/96 18,748 19801 13,686
6/30/96 18,949 20017 13,695
7/31/96 19,086 20199 13,721
8/31/96 19,124 20195 13,747
9/30/96 19,393 20478 13,791
10/31/96 19,581 20709 13,835
11/30/96 19,870 21088 13,861
12/31/96 19,813 21000 13,861
1/31/97 19,837 21040 13,905
2/28/97 19,995 21233 13,949
Total Return 99.95% 112.33% 39.49%
GRAPHIC MATERIAL (35)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 4.78% and the taxable equivalent rate of 8.42%.
GRAPHIC MATERIAL (36)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9,896 10000 10,000
5/31/95 10,160 10319 10,020
6/30/95 10,096 10229 10,040
7/31/95 10,146 10326 10,040
8/31/95 10,249 10458 10,066
9/30/95 10,298 10523 10,086
10/30/95 10,419 10676 10,120
11/30/95 10,576 10853 10,112
12/31/95 10,690 10957 10,105
1/31/96 10,787 11041 10,165
2/29/96 10,740 10966 10,198
3/31/96 10,597 10825 10,251
4/30/96 10,577 10795 10,291
5/31/96 10,566 10791 10,310
6/30/96 10,674 10908 10,316
7/31/96 10,746 11008 10,336
8/31/96 10,763 11005 10,356
9/30/96 10,900 11159 10,389
10/31/96 11,009 11286 10,422
11/30/96 11,165 11492 10,442
12/31/96 11,109 11444 10,442
1/31/97 11,116 11466 10,475
2/28/97 11,208 11571 10,508
Total Return 12.08% 15.71% 5.08%
GRAPHIC MATERIAL (37)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/28/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 37.0%
AA 22.9%
A 23.0%
BBB 16.4%
Below Investment Grade 0.7%
GRAPHIC MATERIAL (38)
This bar chart shows the comparison between the fund's Class I shares
distribution rate of 5.09% and the taxable equivalent distribution rate of
9.14%.
GRAHPIC MATERIAL (39)
The following line graph hypothetically compares the performance of the
fund's Class I shares to that of the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
Period Ending Fund Index Index
9/1/87 9,579 10000 10,000
9/30/87 8,948 9631 10,052
10/31/87 9,006 9665 10,078
11/30/87 9,388 9917 10,087
12/31/87 9,578 10061 10,087
1/31/88 10,050 10419 10,113
2/29/88 10,175 10529 10,140
3/31/88 9,960 10407 10,183
4/30/88 9,988 10486 10,236
5/31/88 10,017 10456 10,271
6/30/88 10,234 10609 10,315
7/31/88 10,293 10678 10,359
8/31/88 10,354 10687 10,402
9/30/88 10,596 10881 10,472
10/31/88 10,819 11072 10,506
11/30/88 10,708 10970 10,515
12/31/88 10,862 11082 10,533
1/31/89 11,100 11311 10,585
2/28/89 11,017 11183 10,629
3/31/89 11,007 11156 10,690
4/30/89 11,270 11420 10,760
5/31/89 11,502 11658 10,821
6/30/89 11,662 11816 10,847
7/31/89 11,747 11977 10,873
8/31/89 11,672 11859 10,891
9/30/89 11,597 11824 10,925
10/31/89 11,694 11968 10,978
11/30/89 11,869 12178 11,004
12/31/89 11,980 12277 11,022
1/31/90 11,903 12220 11,135
2/28/90 12,047 12329 11,188
3/31/90 12,047 12332 11,249
4/30/90 11,970 12243 11,267
5/31/90 12,244 12510 11,293
6/30/90 12,374 12620 11,354
7/31/90 12,559 12807 11,397
8/31/90 12,285 12622 11,502
9/30/90 12,264 12629 11,599
10/31/90 12,442 12858 11,668
11/30/90 12,725 13116 11,694
12/31/90 12,739 13174 11,694
1/31/91 12,932 13350 11,764
2/28/91 13,005 13466 11,782
3/31/91 13,056 13472 11,799
4/30/91 13,227 13652 11,817
5/31/91 13,327 13774 11,853
6/30/91 13,305 13760 11,887
7/31/91 13,492 13928 11,905
8/31/91 13,617 14112 11,939
9/30/91 13,794 14295 11,992
10/31/91 13,871 14424 12,010
11/30/91 13,924 14464 12,045
12/31/91 14,204 14775 12,053
1/31/92 14,237 14809 12,071
2/29/92 14,232 14814 12,115
3/31/92 14,253 14820 12,176
4/30/92 14,363 14952 12,193
5/31/92 14,526 15128 12,211
6/30/92 14,716 15382 12,254
7/31/92 15,247 15844 12,280
8/31/92 15,071 15688 12,315
9/30/92 15,119 15790 12,349
10/31/92 14,928 15636 12,392
11/30/92 15,255 15915 12,410
12/31/92 15,477 16078 12,401
1/31/93 15,674 16264 12,462
2/28/93 16,128 16853 12,505
3/31/93 16,068 16674 12,549
4/30/93 16,185 16843 12,584
5/31/93 16,248 16937 12,602
6/30/93 16,504 17220 12,620
7/31/93 16,513 17242 12,620
8/31/93 16,855 17601 12,655
9/30/93 17,042 17802 12,681
10/31/93 17,089 17836 12,733
11/30/93 16,996 17679 12,742
12/31/93 17,285 18052 12,742
1/31/94 17,448 18257 12,777
2/28/94 17,096 17785 12,820
3/31/94 16,426 17061 12,864
4/30/94 16,518 17206 12,882
5/31/94 16,640 17355 12,891
6/30/94 16,514 17250 12,935
7/31/94 16,812 17565 12,970
8/31/94 16,877 17627 13,021
9/30/94 16,647 17368 13,057
10/31/94 16,326 17058 13,066
11/30/94 15,916 16750 13,083
12/31/94 16,296 17118 13,083
1/31/95 16,800 17608 13,135
2/28/95 17,275 18120 13,188
3/31/95 17,479 18328 13,231
4/30/95 17,499 18350 13,275
5/31/95 17,951 18936 13,301
6/30/95 17,818 18771 13,328
7/31/95 17,901 18949 13,328
8/31/95 18,080 19190 13,363
9/30/95 18,180 19311 13,389
10/31/95 18,453 19591 13,433
11/30/95 18,744 19916 13,424
12/31/95 18,925 20107 13,415
1/31/96 19,011 20260 13,494
2/29/96 18,873 20122 13,537
3/31/96 18,687 19865 13,607
4/30/96 18,677 19809 13,660
5/31/96 18,699 19801 13,686
6/30/96 18,899 20017 13,695
7/31/96 19,033 20199 13,721
8/31/96 19,035 20195 13,747
9/30/96 19,287 20478 13,791
10/31/96 19,473 20709 13,835
11/30/96 19,743 21088 13,861
12/31/96 19,696 21000 13,861
1/31/97 19,716 21040 13,905
2/28/97 19,888 21233 13,949
Total Return 98.88% 112.33% 39.49%
GRAPHIC MATERIAL (40)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 4.59% and the taxable equivalent rate of 8.24%.
GRAPHIC MATERIAL (41)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9,896 10000 10,000
5/31/95 10,144 10319 10,020
6/30/95 10,081 10229 10,040
7/31/95 10,132 10326 10,040
8/31/95 10,227 10458 10,066
9/30/95 10,287 10523 10,086
10/30/95 10,436 10676 10,120
11/30/95 10,594 10853 10,112
12/31/95 10,700 10957 10,105
1/31/96 10,734 11041 10,165
2/29/96 10,651 10966 10,198
3/31/96 10,543 10825 10,251
4/30/96 10,532 10795 10,291
5/31/96 10,540 10791 10,310
6/30/96 10,656 10908 10,316
7/31/96 10,717 11008 10,336
8/31/96 10,714 11005 10,356
9/30/96 10,859 11159 10,389
10/31/96 10,949 11286 10,422
11/30/96 11,104 11492 10,442
12/31/96 11,073 11444 10,442
1/31/97 11,078 11466 10,475
2/28/97 11,168 11571 10,508
Total Return 11.68% 15.71% 5.08%
GRAPHIC MATERIAL (42)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/28/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 63.8%
AA 10.8%
A 7.2%
BBB 18.2%
GRAPHIC MATERIAL (43)
This bar chart shows the comparison between the fund's Class I shares
distribution rate of 5.66% and the taxable equivalent rate of 9.37%.
GRAPHIC MATERIAL (44)
The following line graph hypothetically compares the performance of the
fund's Class I shares to that of the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
Period Ending Fund Index Index
9/1/87 9574 10000 10,000
9/30/87 8987 9631 10,052
10/31/87 9025 9665 10,078
11/30/87 9460 9917 10,087
12/31/87 9684 10061 10,087
1/31/88 10119 10419 10,113
2/29/88 10191 10529 10,140
3/31/88 9993 10407 10,183
4/30/88 10017 10486 10,236
5/31/88 10071 10456 10,271
6/30/88 10244 10609 10,315
7/31/88 10309 10678 10,359
8/31/88 10346 10687 10,402
9/30/88 10583 10881 10,472
10/31/88 10844 11072 10,506
11/30/88 10759 10970 10,515
12/31/88 10879 11082 10,533
1/31/89 11082 11311 10,585
2/28/89 11027 11183 10,629
3/31/89 11035 11156 10,690
4/30/89 11252 11420 10,760
5/31/89 11502 11658 10,821
6/30/89 11648 11816 10,847
7/31/89 11741 11977 10,873
8/31/89 11673 11859 10,891
9/30/89 11616 11824 10,925
10/31/89 11721 11968 10,978
11/30/89 11904 12178 11,004
12/31/89 12022 12277 11,022
1/31/90 11941 12220 11,135
2/28/90 12049 12329 11,188
3/31/90 12035 12332 11,249
4/30/90 11963 12243 11,267
5/31/90 12221 12510 11,293
6/30/90 12344 12620 11,354
7/31/90 12548 12807 11,397
8/31/90 12243 12622 11,502
9/30/90 12216 12629 11,599
10/31/90 12413 12858 11,668
11/30/90 12716 13116 11,694
12/31/90 12748 13174 11,694
1/31/91 12961 13350 11,764
2/28/91 13029 13466 11,782
3/31/91 13074 13472 11,799
4/30/91 13265 13652 11,817
5/31/91 13372 13774 11,853
6/30/91 13369 13760 11,887
7/31/91 13552 13928 11,905
8/31/91 13685 14112 11,939
9/30/91 13883 14295 11,992
10/31/91 13955 14424 12,010
11/30/91 14015 14464 12,045
12/31/91 14295 14775 12,053
1/31/92 14294 14809 12,071
2/29/92 14332 14814 12,115
3/31/92 14370 14820 12,176
4/30/92 14486 14952 12,193
5/31/92 14668 15128 12,211
6/30/92 14865 15382 12,254
7/31/92 15354 15844 12,280
8/31/92 15138 15688 12,315
9/30/92 15176 15790 12,349
10/31/92 14944 15636 12,392
11/30/92 15266 15915 12,410
12/31/92 15495 16078 12,401
1/31/93 15670 16264 12,462
2/28/93 16163 16853 12,505
3/31/93 16049 16674 12,549
4/30/93 16144 16843 12,584
5/31/93 16211 16937 12,602
6/30/93 16475 17220 12,620
7/31/93 16499 17242 12,620
8/31/93 16764 17601 12,655
9/30/93 16945 17802 12,681
10/31/93 16983 17836 12,733
11/30/93 17036 17679 12,742
12/31/93 17292 18052 12,742
1/31/94 17433 18257 12,777
2/28/94 17181 17785 12,820
3/31/94 16691 17061 12,864
4/30/94 16772 17206 12,882
5/31/94 16898 17355 12,891
6/30/94 16875 17250 12,935
7/31/94 17092 17565 12,970
8/31/94 17145 17627 13,021
9/30/94 17016 17368 13,057
10/31/94 16841 17058 13,066
11/30/94 16560 16750 13,083
12/31/94 16813 17118 13,083
1/31/95 17144 17608 13,135
2/28/95 17493 18120 13,188
3/31/95 17642 18328 13,231
4/30/95 17698 18350 13,275
5/31/95 18085 18936 13,301
6/30/95 18078 18771 13,328
7/31/95 18183 18949 13,328
8/31/95 18368 19190 13,363
9/30/95 18506 19311 13,389
10/31/95 18693 19591 13,433
11/30/95 18913 19916 13,424
12/31/95 19053 20107 13,415
1/31/96 19161 20260 13,494
2/29/96 19105 20122 13,537
3/31/96 19016 19865 13,607
4/30/96 19026 19809 13,660
5/31/96 19069 19801 13,686
6/30/96 19247 20017 13,695
7/31/96 19375 20199 13,721
8/31/96 19384 20195 13,747
9/30/96 19649 20478 13,791
10/31/96 19813 20709 13,835
11/30/96 20064 21088 13,861
12/31/96 20036 21000 13,861
1/31/97 20065 21040 13,905
2/28/97 20216 21233 13,949
Total Return 102.16% 112.33% 39.49%
GRAPHIC MATERIAL (45)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 5.20% and the taxable equivalent rate of 8.61%.
GRAPHIC MATERIAL (46)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9903 10000 10,000
5/31/95 10120 10319 10,020
6/30/95 10111 10229 10,040
7/31/95 10165 10326 10,040
8/31/95 10290 10458 10,066
9/30/95 10361 10523 10,086
10/30/95 10460 10676 10,120
11/30/95 10613 10853 10,112
12/31/95 10695 10957 10,105
1/31/96 10750 11041 10,165
2/29/96 10704 10966 10,198
3/31/96 10660 10825 10,251
4/30/96 10660 10795 10,291
5/31/96 10679 10791 10,310
6/30/96 10782 10908 10,316
7/31/96 10848 11008 10,336
8/31/96 10848 11005 10,356
9/30/96 10989 11159 10,389
10/31/96 11077 11286 10,422
11/30/96 11212 11492 10,442
12/31/96 11194 11444 10,442
1/31/97 11214 11466 10,475
2/28/97 11292 11571 10,508
Total Return 12.92% 15.71% 5.08%
GRAPHIC MATERIAL (47)
This chart shows in pie format the quality breakdown of the fund's securities
on 2/28/97, based on total net assets.
Quality Breakdown on February 28, 1997
AAA 44.2%
AA 30.7%
A 16.9%
BBB 8.2%
GRAPHIC MATERIAL (48)
This bar chart shows the comparison between the fund's Class I shares
distribution rate of 5.32% and the taxable equivalent rate of 9.35%.
GRAPHIC MATERIAL (49)
The following line graph hypothetically compares the performance of the
fund's Class I shares to that of the Lehman Brothers Municipal Bond Index and
the Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
Period Ending Fund Index Index
9/1/87 9,571 10000 10,000
9/30/87 8,980 9631 10,052
10/31/87 8,990 9665 10,078
11/30/87 9,447 9917 10,087
12/31/87 9,641 10061 10,087
1/31/88 10,048 10419 10,113
2/29/88 10,148 10529 10,140
3/31/88 9,937 10407 10,183
4/30/88 9,950 10486 10,236
5/31/88 9,993 10456 10,271
6/30/88 10,174 10609 10,315
7/31/88 10,237 10678 10,359
8/31/88 10,310 10687 10,402
9/30/88 10,505 10881 10,472
10/31/88 10,742 11072 10,506
11/30/88 10,653 10970 10,515
12/31/88 10,780 11082 10,533
1/31/89 10,979 11311 10,585
2/28/89 10,899 11183 10,629
3/31/89 10,881 11156 10,690
4/30/89 11,106 11420 10,760
5/31/89 11,363 11658 10,821
6/30/89 11,515 11816 10,847
7/31/89 11,615 11977 10,873
8/31/89 11,543 11859 10,891
9/30/89 11,481 11824 10,925
10/31/89 11,593 11968 10,978
11/30/89 11,761 12178 11,004
12/31/89 11,864 12277 11,022
1/31/90 11,800 12220 11,135
2/28/90 11,926 12329 11,188
3/31/90 11,918 12332 11,249
4/30/90 11,843 12243 11,267
5/31/90 12,107 12510 11,293
6/30/90 12,214 12620 11,354
7/31/90 12,413 12807 11,397
8/31/90 12,104 12622 11,502
9/30/90 12,084 12629 11,599
10/31/90 12,275 12858 11,668
11/30/90 12,562 13116 11,694
12/31/90 12,565 13174 11,694
1/31/91 12,772 13350 11,764
2/28/91 12,895 13466 11,782
3/31/91 12,935 13472 11,799
4/30/91 13,109 13652 11,817
5/31/91 13,198 13774 11,853
6/30/91 13,202 13760 11,887
7/31/91 13,404 13928 11,905
8/31/91 13,532 14112 11,939
9/30/91 13,735 14295 11,992
10/31/91 13,815 14424 12,010
11/30/91 13,869 14464 12,045
12/31/91 14,140 14775 12,053
1/31/92 14,160 14809 12,071
2/29/92 14,168 14814 12,115
3/31/92 14,189 14820 12,176
4/30/92 14,313 14952 12,193
5/31/92 14,478 15128 12,211
6/30/92 14,682 15382 12,254
7/31/92 15,191 15844 12,280
8/31/92 15,040 15688 12,315
9/30/92 15,088 15790 12,349
10/31/92 14,829 15636 12,392
11/30/92 15,159 15915 12,410
12/31/92 15,384 16078 12,401
1/31/93 15,568 16264 12,462
2/28/93 16,013 16853 12,505
3/31/93 15,952 16674 12,549
4/30/93 16,070 16843 12,584
5/31/93 16,162 16937 12,602
6/30/93 16,448 17220 12,620
7/31/93 16,456 17242 12,620
8/31/93 16,760 17601 12,655
9/30/93 16,951 17802 12,681
10/31/93 17,045 17836 12,733
11/30/93 17,011 17679 12,742
12/31/93 17,291 18052 12,742
1/31/94 17,458 18257 12,777
2/28/94 17,135 17785 12,820
3/31/94 16,547 17061 12,864
4/30/94 16,611 17206 12,882
5/31/94 16,705 17355 12,891
6/30/94 16,607 17250 12,935
7/31/94 16,879 17565 12,970
8/31/94 16,960 17627 13,021
9/30/94 16,757 17368 13,057
10/31/94 16,462 17058 13,066
11/30/94 16,092 16750 13,083
12/31/94 16,492 17118 13,083
1/31/95 16,986 17608 13,135
2/28/95 17,406 18120 13,188
3/31/95 17,566 18328 13,231
4/30/95 17,602 18350 13,275
5/31/95 18,027 18936 13,301
6/30/95 17,939 18771 13,328
7/31/95 18,087 18949 13,328
8/31/95 18,267 19190 13,363
9/30/95 18,368 19311 13,389
10/31/95 18,597 19591 13,433
11/30/95 18,859 19916 13,424
12/31/95 19,042 20107 13,415
1/31/96 19,129 20260 13,494
2/29/96 19,038 20122 13,537
3/31/96 18,866 19865 13,607
4/30/96 18,873 19809 13,660
5/31/96 18,895 19801 13,686
6/30/96 19,084 20017 13,695
7/31/96 19,206 20199 13,721
8/31/96 19,212 20195 13,747
9/30/96 19,453 20478 13,791
10/31/96 19,611 20709 13,835
11/30/96 19,888 21088 13,861
12/31/96 19,834 21000 13,861
1/31/97 19,858 21040 13,905
2/28/97 20,018 21233 13,949
Total Return 100.18% 112.33% 39.49%
GRAPHIC MATERIAL (50)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 4.90% and the taxable equivalent rate of 8.61%.
GRAPHIC MATERIAL (51)
The following line graph hypothetically compares the performance of the
fund's Class II shares to that of the Lehman Brothers Municipal Bond Index
and the Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95
to 2/28/97.
Period Ending Fund Index Index
5/1/95 9,904 10000 10,000
5/31/95 10,162 10319 10,020
6/30/95 10,117 10229 10,040
7/31/95 10,185 10326 10,040
8/31/95 10,290 10458 10,066
9/30/95 10,341 10523 10,086
10/30/95 10,464 10676 10,120
11/30/95 10,606 10853 10,112
12/31/95 10,703 10957 10,105
1/31/96 10,746 11041 10,165
2/29/96 10,690 10966 10,198
3/31/96 10,599 10825 10,251
4/30/96 10,588 10795 10,291
5/31/96 10,595 10791 10,310
6/30/96 10,695 10908 10,316
7/31/96 10,768 11008 10,336
8/31/96 10,757 11005 10,356
9/30/96 10,895 11159 10,389
10/31/96 10,978 11286 10,422
11/30/96 11,127 11492 10,442
12/31/96 11,091 11444 10,442
1/31/97 11,099 11466 10,475
2/28/97 11,183 11571 10,508
Total Return 11.83% 15.71% 5.08%
Amendment to the Franklin Tax-Free Trust Annual Report Dated February 28, 1997
This amendment reflects changes to the Franklin Tax-Free Trust Annual Report for
the period ended February 28, 1997, for the funds listed below:
Fund As Printed Correct Page
Franklin Connecticut Tax-Free Income - Class II
1-year average annual total return 2.87% 3.00% 28
Franklin Pennsylvania Tax-Free Income - Class II
1-year average annual total return 2.76% 2.90% 62
Please keep this amendment with the annual report for future reference. If you
have any questions, please contact Franklin Templeton Fund Information at
1-800/342-5236.
Table of Contents Page
Message from the Chairman 1
Special Feature:
Q&A with the Municipal Bond Department 2
Fund Reports
Franklin Arizona Tax-Free
Income Fund 5
Franklin Colorado Tax-Free
Income Fund 13
Franklin Connecticut Tax-Free
Income Fund 21
Franklin Indiana Tax-Free
Income Fund 29
Franklin Michigan Tax-Free
Income Fund 34
Franklin New Jersey Tax-Free
Income Fund 39
Franklin Oregon Tax-Free
Income Fund 47
Franklin Pennsylvania Tax-Free
Income Fund 55
Franklin Puerto Rico Tax-Free
Income Fund 63
Franklin Federal Intermediate-Term
Tax-Free Income Fund 71
Franklin High Yield Tax-Free
Income Fund 76
Glossary of Terms 84
Statement of Investments 85
Financial Statements 153
Notes to Financial Statements 164
Report of Independent Accountants 173
MESSAGE FROM THE CHAIRMAN
- --------------------------------------------------------------------------------
April 14, 1997
Dear Shareholder:
It is a pleasure to bring you the Franklin Tax-Free Trust annual report for the
period ended February 28, 1997.
Interest rates fluctuated within a narrow range during the year under review, as
investors reacted to various U.S. economic reports. The 30-year Treasury, for
example, yielded 6.48% early in the fiscal year. The yield rose a bit in
mid-year, following reports of a strong gross domestic product growth rate in
the second quarter, and then decreased when the economy appeared to be slowing
down in late summer. At the close of the period, 30-year Treasuries yielded
6.90%.
During this period, we witnessed a municipal market dominated by bond calls.
Bonds issued in the higher interest rate environment of the late 1980s continued
to be called or refunded. These calls returned cash to individual investors, as
well as to institutional investors such as the Franklin Tax-Free Trust. The
reinvestment of these proceeds in similar, high-quality or insured issues
resulted in the lower yields of the current market environment. Our investment
strategy has not changed, however, and we'll continue to manage our portfolios
to generate the highest tax-free income available in today's market.
Looking forward, we expect the supply of new issues in 1997 may be $170-$190
billion, close to what it was in 1996. We also anticipate a continuation of the
trend toward early redemptions of bonds. These bond calls will continue to
provide cash for reinvestment into municipal markets, and consequently, should
help sustain strong demand in this sector. Furthermore, we do not expect any
changes in tax codes that would negatively affect the municipal market.
As a Franklin Templeton fund shareholder, you receive the benefits of
professional management and dedicated service. If you have any questions
concerning the funds in the Franklin Tax-Free Trust, we welcome the opportunity
to answer them. A more detailed report on the specific fund or funds you own can
be found in the following pages.
Sincerely,
Charles B. Johnson
Chairman
Franklin Tax-Free Trust
- --------------------------------------------------------------------------------
-- Celebrating 50 Years --
This year marks 50 years of business for Franklin Templeton. Over these years,
the mutual fund industry has experienced profound changes in technology,
regulations and customer expectations. As one of the largest mutual fund
families, we're proud to be an innovative industry leader, providing people like
you with an opportunity to invest around the globe. We thank you for your past
support and look forward to serving your investment needs in the years ahead.
- --------------------------------------------------------------------------------
SPECIAL FEATURE: Q&A WITH THE MUNICIPAL BOND DEPARTMENT
- --------------------------------------------------------------------------------
Tom Kenny, director of Franklin's Municipal Bond Department, and portfolio
managers Don Duerson, Sheila Amoroso and Bernie Schroer discuss some issues
facing the municipal bond market.
1997 marks the start of a second presidential term for Bill Clinton. Do you
think his re-election was good news for the markets?
Tom Kenny: Market participants do not like uncertainty, so they appear
comfortable with the re-election of a Democratic president and a Republican
Congress. Alan Greenspan's reappointment as Federal Reserve Board Chairman was
also positive for the markets.
Why is that?
Tom: His monetary policy is designed to encourage low inflation with moderate
growth, which he has been able to accomplish.
Sheila Amoroso: We expect at least the first two quarters of 1997 to be similar
to 1996 with regard to growth and inflation, though it is difficult to predict.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Alan Greenspan maintained a relatively neutral stance on monetary policy
throughout most of 1996. Do you see this carrying over into 1997?
Bernie Schroer: Possibly. As you know, we do not try to predict where rates will
be in the future. But, I think Greenspan will continue to look for signs of
above-trend growth, and will probably focus on wages and commodity prices. At
this point, wage inflation is moderate and companies do not feel they can raise
prices.
Don Duerson: The "threat" of higher rates seems to be sufficient to control
market expectations. Also, the recent strength of the dollar should have a
moderating effect on the economy by slowing export growth while keeping import
price inflation under control.
Floods in the Western U.S.: What impact do you see this having on state
finances, bond issuance, and bond ratings?
Sheila: Historically, very few bond issues are affected negatively by natural
disasters. At worst, some types of issues may be called and paid off from
insurance proceeds. Bond ratings are generally long term in nature and are
usually not affected by such short-term events. Most of the repair costs are
covered by insurance companies, the Federal Emergency Management Agency, and
state disaster relief funds.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Bernie: Generally, these disasters create an increase in construction activity,
however, which can contribute to increased economic growth in those affected
areas. The states of California, Oregon and Washington are leading the country
in economic growth and shouldn't be adversely affected by the floods.
What kinds of bonds are you purchasing for your funds?
Don: We try to choose bonds whose coupons provide higher income with lower
volatility than, for example, deep discount bonds with lower coupons. We feel
that the best relative value in the market today is in the insured sector. The
narrow quality spreads in the market are due to the low interest-rate
environment and the increase in volume of insured issues in the market. Close to
50% of new issues came to market insured, taking more spread out of the market.
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. Because interest rates
have been relatively low for most of the 1990s, investor demand has increased
for higher-yielding, lower-quality securities, which drives the prices of these
securities higher. This results in lower relative yield differentials between
lower-quality issues and AAA-rated insured bonds. When this happens, it makes
more sense for us to buy insured bonds.
Do you plan on changing your investment strategy in 1997?
Tom: Franklin employs a long-term "buy and hold" strategy, and our major
objective for the tax-free funds is to pay out high tax-free income. Our
portfolio managers don't speculate on the market by trying to predict future
interest rates. We use a consistent and disciplined long-term relative value
strategy toward meeting our objectives, and we plan on maintaining this
approach.
PICTURE OMITTED
FRANKLIN ARIZONA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective
Seeks to provide high, current income exempt from regular federal and Arizona
state personal income taxes through a portfolio consisting primarily of Arizona
municipal bonds.*
State Update
During the 12-month reporting period, Arizona's financial operations remained
sound. Stronger-than-expected economic growth allowed the state to build a
budget stabilization fund that may protect against a future cyclical downturn.+
The state's economy continued to shift toward manufacturing and service sectors
and away from the original mainstays of cattle, cotton and copper. In addition,
plentiful land helped keep housing affordable and continued to factor into the
competitive wage structures that attract businesses into Arizona.
Arizona's creditworthiness remained high during the fiscal year. Standard &
Poor's(R), a national rating agency, granted ratings that ranged from A+ to AA
on the state's certificates of participation. In fact, Arizona's highway revenue
bonds are among the few AAA-rated highway bonds in the country. In light of
Arizona's improved financial operations and strong economic fundamentals,
Standard & Poor's holds a stable outlook on the state's certificates of
participation.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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 8, 1996.
Portfolio Notes
During 1996, about 46% of the Arizona bonds that came to market were insured.
This ratio of high-quality paper was reflected in the fund, in which 55% of
long-term investments was AAA-rated and approximately 44% was insured, as of
February 28, 1997.
The portfolio also contained fewer pre-refunded bonds, which we reduced from 20%
of total long-term investments on February 29, 1996, to 15% on February 28,
1997. We used the proceeds from the sales of these pre-refunded bonds to
purchase full-coupon bonds with better call protection than those we sold.
However, the sale of these bonds also resulted in a capital gains distribution
and, combined with generally lower interest rates, reduced the fund's earnings.
These lower earnings, in turn, necessitated a reduction in the monthly dividend
from 5.4 cents to 5.2 cents in September 1996.
During the reporting period, we participated in several attractive primary
market deals including Glendale Industrial Development Authority for Midwestern
University, Coconino County Pollution Control Revenue for Nevada Power, and Pima
County Certificate of Participation.
Franklin Arizona Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 33.6%
Pre-Refunded 15.0%
Education 11.0%
Hospitals 9.2%
Transportation 9.0%
Housing 6.4%
Other Revenue 6.0%
General Obligations 3.4%
Certificates of Participation 3.4%
Industrial 1.3%
Miscellaneous 1.0%
Sales Tax 0.7%
For a complete list of portfolio holdings, please see page 85 of this report.
Municipal supply in Arizona was $1.904 billion for 1996 -- 75% of what was
issued for all of 1995 ($2.457 billion). Looking forward, we expect the supply
of Arizona municipal issues should remain low in 1997. This reduced supply,
combined with strong demand, should help keep Arizona's bonds attractive
investments.
Performance Summary
Class I
The Franklin Arizona Tax-Free Income Fund's Class I share price, as measured by
net asset value, decreased 9.0 cents, from $11.34 on February 29, 1996, to
$11.25 on February 28, 1997.
In addition to distributing 63.60 cents ($0.6360) per share in dividend income
during the reporting period, your fund also paid out long-term capital gains of
4.57 cents ($0.0457) per share, including 2.58 cents ($0.0258) per share in
August, and 1.99 cents ($0.0199) per share in December 1996. Distributions will
vary depending on income earned by the fund and any profits realized from sales
of securities in the fund's portfolio. Past distributions are not predictive of
future trends. At the end of this reporting period, the distribution rate was
5.31%, based on an annualization of the current, monthly dividend of 5.2 cents
($0.052) per share and the maximum offering price of $11.75 on February 28,
1997.
Franklin Arizona Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.40 cents
April 5.40 cents
May 5.40 cents
June 5.40 cents
July 5.40 cents
August 5.40 cents
September 5.20 cents
October 5.20 cents
November 5.20 cents
December 5.20 cents
January 5.20 cents
February 5.20 cents
Total 63.60 cents
GRAPHIC MATERIAL 5 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.
This double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Arizona state personal income tax bracket of 43.0% would need to
earn 9.31% from a taxable investment to match the fund's tax-free distribution
rate.
As illustrated by the chart to the right, your fund's performance since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Arizona Tax-Free Income Fund - Class I
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year (9/1/87)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 5.43% 40.87% 104.98%
Average Annual Total Return2 0.98% 6.17% 7.36%
Distribution Rate3 5.31%
Taxable Equivalent Distribution Rate4 9.31%
30-Day Standardized Yield5 4.55%
Equivalent Taxable Yield4 7.98%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current, 5.2 cent per
share, monthly dividend and the maximum offering price of $11.75 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Arizona state personal income tax bracket of 43.0%, based on the
federal 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 28, 1997.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results.
Class II
The Franklin Arizona Tax-Free Income Fund's Class II share price, as measured by
net asset value, decreased 8.0 cents, from $11.38 on February 29, 1996, to
$11.30 on February 28, 1997.
In addition to distributing 57.04 cents ($0.5704) per share in dividend income
during the reporting period, your fund also paid out long-term capital gains of
4.57 cents ($0.0457) per share, including 2.58 cents ($0.0258) per share in
August, and 1.99 cents ($0.0199) per share in December 1996. Distributions will
vary depending on income earned by the fund and any profits realized from sales
of securities in the fund's portfolio. Past distributions are not predictive of
future trends. At the end of this reporting period, the distribution rate was
5.04%, based on an annualization of the current, monthly dividend of 4.77 cents
($0.0477) per share, plus an annual dividend adjustment of +.23 cent, and the
offering price of $11.41 on February 28, 1997.
Franklin Arizona Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.07 cents
April 4.85 cents
May 4.85 cents
June 4.85 cents
July 4.77 cents
August 4.77 cents
September 4.57 cents
October 4.59 cents
November 4.59 cents
December 4.59 cents
January 4.77 cents
February 4.77 cents
Total 57.04 cents
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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.
This double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Arizona state personal income tax bracket of 43.0% would need to
earn 8.84% from a taxable investment to match the fund's tax-free distribution
rate.
As illustrated by the chart to the right, your fund's performance since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. The fund's performance figures also include maximum
sales charges, all fund expenses and account fees. If operating expenses such as
the fund's had been applied to this index, the index's performance would have
been lower. Please remember that an index is simply a measure of performance,
and one cannot invest directly in an index. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Arizona Tax-Free Income Fund - Class II
Periods Ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 4.89% 12.68%
Average Annual Total Return2 2.90% 6.17%
Distribution Rate3 5.04%
Taxable Equivalent Distribution Rate4 8.84%
30-Day Standardized Yield5 4.14%
Equivalent Taxable Yield4 7.26%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Distribution rate is based on an annualization of the current, 4.77 cent per
share, monthly dividend, plus an annual dividend adjustment of +.23 cent, and
the offering price of $11.41 on February 28, 1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Arizona state personal income tax bracket of 43.0%, based on the
federal 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 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
FRANKLIN COLORADO TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and Colorado
state personal income taxes through a portfolio consisting primarily of Colorado
municipal bonds.*
State Update
During this reporting period, Colorado's growth continued to outpace national
trends. Since 1991, the state has added about 376,000 residents and created
nearly 259,000 jobs.+ The state's economy also continued to diversify away from
dependence on the energy sector. Growth in services, trade, construction, and
high technology have more than offset the closing of several military bases.
Colorado's strong economic performance has enhanced the state's financial
position. Personal income and sales-tax growth exceeded projections in each
fiscal year from 1992 through 1996. Furthermore, Colorado's debt ratios are low,
since the state relies mostly on a pay-as-you-go financing program. Looking
forward, Colorado's continued strong economic performance and prudent financial
management should keep the state's credit quality stable.
GRAPHIC MATERIAL 9 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, June 24, 1996.
Portfolio Notes
More than 50% of the Colorado bonds that came to market during 1996 were
insured. This ratio of higher-quality paper was reflected in the Franklin
Colorado Tax-Free Income Fund, in which 64.4% of long-term investments was in
AAA-rated issues on February 28, 1997, up from 58.8% on February 29, 1996. At
the close of the fund's fiscal period, approximately 42% of total long-term
investments was in insured issues.
Another portfolio change included a decrease in the fund's exposure to the
education sector, from 14.9% of long-term investments on February 29, 1996, to
6.7% on February 28, 1997. We also increased our exposure to the utilities
sector, from 4.3% to 8.8% over the same period.
During the reporting period, we participated in several attractive primary
issues, including three revenue bonds issued from: the Colorado Housing
Financing Authority Single Family Housing, the Colorado Springs Airport, and
Denver Airport. Overall, the supply of Colorado bonds was strong during the
reporting period, providing opportunities for portfolio diversification. We
expect the volume of bonds in 1997 should remain close to the level in 1996.
Franklin Colorado Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Pre-Refunded 16.0%
Hospitals 15.4%
Housing 14.7%
Transportation 13.3%
Utilities 8.8%
Education 6.7%
Health Care 6.1%
General Obligations 5.7%
Sales Tax 4.8%
Industrial 3.8%
Certificates of Participation 3.7%
Other Revenue 0.6%
Tax Allocation 0.4%
For a complete list of portfolio holdings, please see page 92 of this report.
Performance Summary
Class I
The Franklin Colorado Tax-Free Income Fund's Class I share price, as measured by
net asset value, decreased 4.0 cents, from $11.84 on February 29, 1996, to
$11.80 on February 28, 1997.
At the end of this reporting period, the distribution rate was 5.36%, based on
an annualization of the current, monthly dividend of 5.5 cents ($0.055) per
share and the maximum offering price of $12.32 on February 28, 1997.
Distributions will vary depending on the income earned by the fund, and past
distributions are not predictive of future trends. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable investment.
For example, an investor in the maximum combined federal and Colorado state
personal income tax bracket of 42.6% would need to earn 9.34% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Colorado Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.50 cents
April 5.50 cents
May 5.50 cents
June 5.50 cents
July 5.50 cents
August 5.50 cents
September 5.50 cents
October 5.50 cents
November 5.50 cents
December 5.50 cents
January 5.50 cents
February 5.50 cents
Total 66.00 cents
GRAPHIC MATERIAL 10 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 11 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Colorado Tax-Free Income Fund - Class I
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year (9/1/87)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 5.44% 43.50% 110.23%
Average Annual Total Return2 0.92% 6.56% 7.65%
Distribution Rate3 5.36%
Taxable Equivalent Distribution Rate4 9.34%
30-Day Standardized Yield5 4.62%
Equivalent Taxable Yield4 8.05%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. 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 $12.32 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Colorado state personal income tax bracket of 42.6%, based on the
federal 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 28, 1997.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results. Past expense reductions by the fund's manager increased the
fund's total returns.
Class II
The Franklin Colorado Tax-Free Income Fund's Class II share price, as measured
by net asset value, decreased 3.0 cents, from $11.87 on February 29, 1996, to
$11.84 on February 28, 1997.
Franklin Colorado Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 4.94 cents
April 4.93 cents
May 4.93 cents
June 4.93 cents
July 5.02 cents
August 5.02 cents
September 5.02 cents
October 4.95 cents
November 4.95 cents
December 4.95 cents
January 4.94 cents
February 4.94 cents
Total 59.52 cents
GRAPHIC MATERIAL 12 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of this reporting period, the distribution rate was 4.96%, based on
an annualization of the current, monthly dividend of 4.94 cents ($0.0494) per
share, plus an annual dividend adjustment of +.01 cent, and the offering price
of $11.96 on February 28, 1997. Distributions will vary depending on income
earned by the fund, and past distributions are not predictive of future trends.
This double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Colorado state personal income tax bracket of 42.6% would need to
earn 8.64% from a taxable investment to match the fund's tax-free distribution
rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. The fund's performance figures also include the
maximum sales charges, all fund expenses and account fees. If operating expenses
such as the fund's had been applied to this index, the index's performance would
have been lower. Please remember that an index is simply a measure of
performance, and one cannot invest directly in an index. Past performance is not
predictive of future results.
GRAPHIC MATERIAL 13 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Colorado Tax-Free Income Fund - Class II
Periods Ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 4.93% 13.77%
Average Annual Total Return2 2.89% 6.69%
Distribution Rate3 4.96%
Taxable Equivalent Distribution Rate4 8.64%
30-Day Standardized Yield5 4.20%
Equivalent Taxable Yield4 7.32%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Distribution rate is based on an annualization of the current, 4.94 cent per
share, monthly dividend, plus an annual dividend adjustment of +.01 cent, and
the offering price of $11.96 on February 28, 1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Colorado state personal income tax bracket of 42.6%, based on the
federal 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 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
FRANKLIN CONNECTICUT TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and
Connecticut state personal income taxes through a portfolio consisting primarily
of Connecticut municipal bonds.*
State Update
Connecticut's diversified economic base continued to show strength in 1996,
furthering its recovery from the steep loss of defense-related manufacturing
jobs in the late `80s and early `90s. The economy gradually has become less
dependent on this sector, which has helped buffer it from the boom-and-bust
swings of a decade ago.
During 1996, Connecticut boasted a low 4.8% unemployment rate and strong growth
in state income tax receipts. Furthermore, Native American casinos have created
thousands of jobs and are expected to create considerably more. The casino
business, combined with an expansion of Mystic Seaport, should help the state's
growing tourism industry expand even more. Although slower economic growth is
expected going forward, Connecticut remains the nation's richest state, with an
annual per capita income of $30,303 -- 133% of the U.S. average.+
GRAPHIC MATERIAL 14 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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, October 14, 1996.
Even though Connecticut faces challenges, such as phasing in personal and
corporate income-tax reductions over the next few years, the state enjoys
favorable credit ratings on its debt. During the 12-month reporting period,
Connecticut's general obligation debt maintained its rating of "AA-" from
Standard & Poor's(R), a national rating agency.
Portfolio Notes
Over the 12-month reporting period, the net asset value of the fund's Class I
shares fluctuated from a high of $11.00 on March 4, 1996, to a low of $10.67 on
June 10, 1996. Since June, the fund's net asset value has moved higher, albeit
erratically, and regained most of the ground lost earlier in the year.
During the fund's fiscal year, we made some moderate changes in investment
sectors. For example, at the beginning of this reporting period, nearly a fourth
of the portfolio's long-term investments was in housing-related bonds (24.6%),
since these bonds were mostly issued by Connecticut during the fund's prior
fiscal year (1995-96). As interest rates eased in 1996, however, many people
refinanced their mortgages, which caused housing bonds to underperform. Thus,
when appropriate, and without sacrificing income, we sold our housing bonds --
generally AA-rated issues -- and invested in AAA-rated education and hospital
bonds.
Franklin Connecticut Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Housing 19.5%
Hospitals 19.3%
Pre-Refunded 16.7%
Education 15.1%
Utilities 12.4%
General Obligations 11.2%
Health Care 3.7%
Industrial 1.2%
Transportation 0.9%
For a complete list of portfolio holdings, please see page 96 of this report.
The resulting portfolio changes in the fund's long-term investments included a
reduction in housing bonds, from 24.6% to less than 20.0%; an increase in
hospital bonds from 13.7% to 19.3%; and an increase in education bonds from 9.1%
to 15.1%, from February 28, 1996, to February 28, 1997. Some of our purchases
included the bonds issued by Trinity College, Taft School, and Yale New Haven
Hospital.
Performance Summary
Class I
The Franklin Connecticut Tax-Free Income Fund's Class I share price, as measured
by net asset value, decreased 4.0 cents, from $10.96 on February 29, 1996, to
$10.92 on February 28, 1997.
At the end of this reporting period, the distribution rate was 5.47%, based on
an annualization of the current, monthly dividend of 5.2 cents ($0.052) per
share and the maximum offering price of $11.40 on February 28, 1997.
Distributions will vary depending on income earned by the fund, and past
distributions are not predictive of future trends. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable investment.
For example, an investor in the maximum combined federal and Connecticut state
personal income tax bracket of 42.3% would need to earn 9.48% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Connecticut Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.20 cents
April 5.20 cents
May 5.20 cents
June 5.20 cents
July 5.20 cents
August 5.20 cents
September 5.20 cents
October 5.20 cents
November 5.20 cents
December 5.20 cents
January 5.20 cents
February 5.20 cents
Total 62.40 cents
GRAPHIC MATERIAL 15 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the unmanaged Lehman
Brothers Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% invested since they need to keep cash on hand to
redeem shares or pay for upcoming investments. 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,
the index's performance would have been lower. Please remember that an index is
simply a measure of performance, and one cannot invest directly in an index.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 16 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Connecticut Tax-Free Income Fund - Class I
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year (10/3/88)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 5.52% 38.72% 78.38%
Average Annual Total Return2 1.01% 5.83% 6.58%
Distribution Rate3 5.47%
Taxable Equivalent Distribution Rate4 9.48%
30-Day Standardized Yield5 4.56%
Equivalent Taxable Yield4 7.91%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charges. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current, 5.2 cent per
share, monthly dividend and the maximum offering price of $11.40 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Connecticut state personal income tax bracket of 42.3%, based on the
federal 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 28, 1997.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Connecticut Tax-Free Income Fund's Class II share price, as
measured by net asset value, decreased 3.0 cents, from $10.97 on February 29,
1996, to $10.94 on February 28, 1997.
At the end of this reporting period, the distribution rate was 5.05%, based on
an annualization of the current, monthly dividend of 4.65 cents ($0.0465) per
share, plus an annual dividend adjustment of +.01 cent, and the maximum offering
price of $11.05 on February 28, 1997. Distributions will vary depending on
income earned by the fund, and past distributions are not predictive of future
trends. This double tax-free rate is generally higher than the after-tax return
on a comparable taxable investment. For example, an investor in the maximum
combined federal and Connecticut state personal income tax bracket of 42.3%
would need to earn 8.75% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Connecticut Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.23 cents
April 4.67 cents
May 4.67 cents
June 4.67 cents
July 4.77 cents
August 4.77 cents
September 4.77 cents
October 4.69 cents
November 4.69 cents
December 4.69 cents
January 4.65 cents
February 4.65 cents
Total 56.92 cents
GRAPHIC MATERIAL 17 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. The fund's performance figures also include maximum
sales charges, all fund expenses and account fees. If operating expenses such as
the fund's had been applied to this index, the index's performance would have
been lower. Please remember that an index is simply a measure of performance,
and one cannot invest directly in an index. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 18 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Connecticut Tax-Free Income Fund - Class II
Periods Ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 5.03% 12.72%
Average Annual Total Return2 2.87% 6.16%
Distribution Rate3 5.05%
Taxable Equivalent Distribution Rate4 8.75%
30-Day Standardized Yield5 4.15%
Equivalent Taxable Yield4 7.19%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Distribution rate is based on an annualization of the current, 4.65 cent per
share, monthly dividend, plus an annual dividend adjustment of +.01 cent, and
the offering price of $11.05 on February 28, 1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Connecticut state personal income tax bracket of 42.3%, based on the
federal 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 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
FRANKLIN INDIANA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and Indiana
state personal income taxes through a portfolio consisting primarily of Indiana
municipal bonds.*
State Update
Indiana's economy continued to expand during the 12-month reporting period. In
fact, the state's cyclical employment growth exceeded that of most of its
neighboring Great Lakes states. Over the past 15 years, Indiana's manufacturing
industries have downsized and restructured, thereby reducing the potential
magnitude of manufacturing-based recessions.
Despite Indiana's favorable financial and economic performance in recent years,
its State Teachers Retirement Fund continues to carry unfunded liabilities of
$6.1 billion. To maintain its creditworthiness, Indiana must develop and
implement a realistic long-term plan to reduce this massive underfunding.+
Nonetheless, Indiana's financial position is one of the strongest in the nation.
Given the state's strong operating balances and the current administration's
willingness and ability to adjust state spending when revenues fall short, we
hold a favorable outlook for Indiana's municipal debt.
GRAPHIC MATERIAL 19 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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, February 3, 1997.
Portfolio Notes
During the reporting period, many fund purchases were concentrated in
essential-use education bonds. Consequently, this sector increased to 19.9% of
long-term investments on February 28, 1997, compared with 14.7% on February 29,
1996.
The fund also participated in an Indiana State Development Authority issue
backed by USX Corporation, a major steel producer. USX has returned to
profitability after net losses from 1991 to 1993. Previous operating losses were
compounded by restructuring, accounting and litigation charges. The company's
downsizing and modernization efforts, however, have begun to take hold. USX is
now much more efficient than before and consequently, better prepared to take
advantage of the steel industry's recovery.
Many of the fund's purchases during the fiscal year were made possible through
sales of pre-refunded bonds. By selling certain pre-refunded bonds, we maximized
profits in the securities and reduced the volatility of the fund's future income
stream by purchasing bonds with longer call periods. The fund's exposure to pre-
refunded bonds decreased from 19.3% of long-term investments on February 29,
1996, to just 11.7% on February 28, 1997.
Franklin Indiana Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Hospitals 26.7%
Education 19.9%
Other Revenue 16.1%
Pre-Refunded 11.7%
Industrial 7.6%
Certificates of Participation 7.5%
Utilities 4.0%
Housing 3.2%
Transportation 3.2%
Tax Assessment 0.1%
For a complete list of portfolio holdings, please see page 99 of this report.
Performance Summary
The Franklin Indiana Tax-Free Income Fund's share price, as measured by net
asset value, increased 1.0 cent, from $11.76 on February 29, 1996, to $11.77 on
February 28, 1997.
At the end of this reporting period, the 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 $12.29 on February 28, 1997.
Distributions will vary depending on income earned by the fund, and past
distributions are not predictive of future trends. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable investment.
For example, an investor in the maximum combined federal and Indiana state
personal income tax bracket of 41.7%* would need to earn 9.20% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Indiana Tax-Free Income Fund
Dividend Distributions 3/1/96 - 2/28/97+
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 20 OMITTED - SEE APPENDIX AT END OF DOCUMENT
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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.
*Credit for federal taxes paid assumed in calculating "maximum" state personal
income tax bracket.
As illustrated by the chart to the right, your fund's performance since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 21 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Indiana Tax-Free Income Fund
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year (9/1/87)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 5.91% 42.11% 111.52%
Average Annual Total Return2 1.43% 6.36% 7.71%
Distribution Rate3 5.37%
Taxable Equivalent Distribution Rate4 9.20%
30-Day Standardized Yield5 4.56%
Equivalent Taxable Yield4 7.81%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. 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 $12.29 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Indiana state personal income tax bracket of 41.7%, based on the
federal 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 28, 1997.
Note: Prior to July 1, 1994, fund shares were offered at a lower initial sales
charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results. Past expense reductions by the fund's manager increased the
fund's total returns.
FRANKLIN MICHIGAN TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and Michigan
state personal income taxes through a portfolio consisting primarily of Michigan
municipal bonds.*
State Update
Michigan's economy performed well during the reporting period. Realistic revenue
assumptions, moderate economic growth, and effective expenditure controls have
positively impacted the state's operations, enhancing Michigan's fiscal
position. Reserve funds -- particularly the budget stabilization fund -- have
been replenished well beyond their recessionary levels in the early 1990s.
Although these reserve funds will offset the increased cost of school finance
reform, Michigan also has large, unfunded pension liabilities that represent an
area of potential fiscal stress.+
GRAPHIC MATERIAL 22 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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, April 1, 1996.
Portfolio Notes
The Franklin Michigan Tax-Free Income Fund was seeded with $2.2 million on July
1, 1996. Since then, the funds have been fully invested, and total net assets
increased to approximately $3.9 million on February 28, 1997.
The portfolio's credit-quality breakdown changed significantly since the last
reporting period. For example, AAA-rated bonds decreased from 91.8% of total
long-term investments on August 31, 1996, to 74.2% on February 28, 1997, while
AA-rated bonds increased from 4.1% to 18.6%, over the same period. This shift in
credit quality was mainly a result of our purchase of the Michigan State Housing
& Development Authority Single Family Program issue. We also participated in
some attractive new issues, including the Michigan State Trunk Line and Lakeview
Michigan School District.
Going forward, our outlook for the fund remains positive. Because the fund's
average credit quality is so high, our investments are very liquid. This should
allow us to sell certain issues easily and reinvest in bonds with higher yields
when appropriate.
Franklin Michigan Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Education 39.2%
Housing 18.6%
Hospitals 17.7%
Utilities 17.0%
Transportation 7.5%
For a complete list of portfolio holdings, please see page 102 of this report.
Performance Summary
The Franklin Michigan Tax-Free Income Fund's share price, as measured by net
asset value, increased 42.0 cents, from $10.00 on July 1, 1996 -- the date the
fund began offering these shares -- to $10.42 on February 28, 1997.
We are pleased to report that your fund made its first dividend distribution of
4.5 cents ($0.045) per share on November 20, 1996. Distributions will vary
depending on the income earned by the fund, and past distributions are not
predictive of future trends.
The fund's monthly dividend rate was increased to 4.8 cents ($0.048) per share,
effective with the March distribution. At the end of this reporting period, the
distribution rate was 5.29%, based on an annualization of the March dividend of
4.8 cents ($0.048) per share and the maximum offering price of $10.88 on
February 28, 1997. This double tax-free rate is generally higher than the
after-tax return on a comparable taxable investment. For example, an investor in
the maximum combined federal and Michigan state personal income tax bracket of
42.3% would need to earn 9.17% from a taxable investment to match the fund's
tax-free distribution rate.
Franklin Michigan Tax-Free Income Fund
Dividend Distributions 7/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
November 4.5 cents
December 4.5 cents
January 4.5 cents
February 4.5 cents
Total 18.0 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 performance since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 24 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Michigan Tax-Free Income Fund
Periods Ended February 28, 1997
Since
Inception
(7/1/96)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggregate Total Return1 1.70%
Distribution Rate2 5.29%
Taxable Equivalent Distribution Rate3 9.17%
30-Day Standardized Yield4 5.25%
Equivalent Taxable Yield3 9.09%
- --------------------------------------------------------------------------------------------------
</TABLE>
1. Aggregate total return includes the current, maximum 4.25% sales charge and
represents the change in value of an investment since the inception date. Since
the fund has been in existence for less than one year, average annual total
returns are not provided.
2. Distribution rate is based on an annualization of the March, 4.8 cent per
share, monthly dividend and the maximum offering price of $10.88 on February 28,
1997.
3. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Michigan state personal income tax bracket of 42.3%, based on the
federal tax rate of 39.6%.
4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
The fund's manager agreed in advance to waive a portion of management expenses,
which reduces operating expenses and increases yield, distribution rate and
total return to shareholders. Without these reductions, the fund's distribution
rate would have been lower and yield for the period would have been 5.11%. The
fee waiver may be discontinued at any time upon notification to the fund's Board
of Trustees.
FRANKLIN NEW JERSEY TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective
Seeks to provide high, current income exempt from regular federal and New Jersey
state personal income taxes through a portfolio consisting primarily of New
Jersey municipal bonds.*
State Update
New Jersey's Education Law Center had been struggling with the issue of
disparities between wealthy and poor school districts for some time. In seeking
a solution, the Center filed a motion with the state Supreme Court, arguing that
New Jersey should enact a mechanism to close spending gaps among various school
districts. The Supreme Court turned this issue back to Governor Christine
Whitman, who implemented a new program to create another $268 million in
education funding for 1997.
These additional expenditures will make New Jersey the state with the highest
per capita education expenditures in the nation. This increase in spending
should have little impact on municipalities at the local level, however, because
all school district bond issues are supported by the New Jersey Fund for the
Support of Public Schools.
GRAPHIC MATERIAL 25 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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.
During this reporting period, New Jersey's general obligation debt maintained
its rating of AA+, according to Standard & Poor's(R), a national rating agency.
The rating reflects New Jersey's solid economic base, high wealth and income
levels, and sound financial management.
Portfolio Notes
The supply of New Jersey municipal bonds increased 23% between 1995 and 1996,
with the majority of new issuance in the higher-quality sector. Because
higher-credit-quality bonds tend to provide lower yields, we found a limited
opportunity to increase the fund's income. Nonetheless, we maintained our
portfolio objectives of providing shareholders with high, current, tax-free
income and preservation of capital.
Our outlook for the fund remains positive, and we expect the supply of municipal
bonds to remain stable. We also hold a favorable outlook for the state, which
has a planned budget of $16 billion for fiscal year 1998. Although we are
somewhat concerned about an $800 million non-recurring revenue source in the
1998 budget, the state's 1997 budget is balanced and designed to provide an
ample financial cushion.
Franklin New Jersey Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 19.6%
Hospitals 15.0%
Transportation 12.3%
Housing 12.2%
Pre-Refunded 11.1%
Education 10.6%
Other Revenue 7.3%
Certificates of Participation 4.0%
Industrial 3.6%
Health Care 3.1%
General Obligations 1.2%
For a complete list of portfolio holdings, please see page 103 of this report.
Performance Summary
Class I
The Franklin New Jersey Tax-Free Income Fund's Class I share price, as measured
by net asset value, decreased 7.0 cents, from $11.68 on February 29, 1996, to
$11.61 on February 28, 1997.
At the end of this reporting period, the distribution rate was 5.34%, based on
an annualization of the current, monthly dividend of 5.4 cents ($0.054) per
share and the maximum offering price of $12.13 on February 28, 1997.
Distributions will vary depending on income earned by the fund, and past
distributions are not predictive of future trends. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable investment.
For example, an investor in the maximum combined federal and New Jersey state
personal income tax bracket of 43.4% would need to earn 9.44% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin New Jersey Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.30 cents
April 5.30 cents
May 5.40 cents
June 5.40 cents
July 5.40 cents
August 5.40 cents
September 5.40 cents
October 5.40 cents
November 5.40 cents
December 5.40 cents
January 5.40 cents
February 5.40 cents
Total 64.60 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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. 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 - Class I
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year (5/12/88)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 5.13% 38.67% 97.69%
Average Annual Total Return2 . .64% 5.82% 7.53%
Distribution Rate3 5.34%
Taxable Equivalent Distribution Rate4 9.44%
30-Day Standardized Yield5 4.66%
Equivalent Taxable Yield4 8.24%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current, 5.4 cent per
share, monthly dividend and the maximum offering price of $12.13 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and New Jersey state personal income tax bracket of 43.4%, based on the
federal 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 28, 1997.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results.
Class II
The Franklin New Jersey Tax-Free Income Fund's Class II share price, as measured
by net asset value, decreased 6.0 cents, from $11.72 on February 29, 1996, to
$11.66 on February 28, 1997.
Franklin New Jersey Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 4.90 cents
April 4.74 cents
May 4.84 cents
June 4.84 cents
July 4.94 cents
August 4.94 cents
September 4.94 cents
October 4.65 cents
November 4.65 cents
December 4.65 cents
January 4.81 cents
February 4.81 cents
Total 57.71 cents
GRAPHIC MATERIAL 28 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of this reporting period, the distribution rate was 4.91%, based on
an annualization of the current, monthly dividend of 4.81 cents ($0.0481) per
share, plus an annual dividend adjustment of +.08 cent, and the offering price
of $11.78 on February 28, 1997. Distributions will vary depending on income
earned by the fund, and past distributions are not predictive of future trends.
This double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and New Jersey state personal income tax bracket of 43.4% would need to
earn 8.68% from a taxable investment to match the fund's tax-free distribution
rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the unmanaged Lehman
Brothers Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% invested since they need to keep cash on hand to
redeem shares or pay for upcoming investments. The fund's performance figures
also include maximum sales charges, all fund expenses and account fees. If
operating expenses such as the fund's had been applied to this index, the
index's performance would have been lower. Please remember that an index is
simply a measure of performance, and one cannot invest directly in an index.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 29 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin New Jersey Tax-Free Income Fund - Class II
Periods Ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 4.57% 12.81%
Average Annual Total Return2 2.52% 6.24%
Distribution Rate3 4.91%
Taxable Equivalent Distribution Rate4 8.68%
30-Day Standardized Yield5 4.23%
Equivalent Taxable Yield4 7.48%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Distribution rate is based on an annualization of the current, 4.81 cent per
share, monthly dividend, plus an annual dividend adjustment of +.08 cent, and
the offering price of $11.78 on February 28, 1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and New Jersey state personal income tax bracket of 43.4%, based on the
federal 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 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
FRANKLIN OREGON TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and Oregon
state personal income taxes through a portfolio consisting primarily of Oregon
municipal bonds.*
State Update
Oregon's economy continued to grow and expand in 1996. In fact, the state's rate
of growth in per capita income, population and employment has exceeded the
national average for the past several years. Oregon's electronics and high-tech
industries, in particular, have experienced strong business and employment
growth. Furthermore, efforts at the state level to control expenses and trim
social programs has enhanced Oregon's positive financial position.
In November 1996, Oregon voters approved ballot Measure 47, which reduces local
governments' financing flexibility by limiting ad valorem property-tax increases
to an annual three percent maximum. While many aspects of the measure remain to
be interpreted in the courts, the overall effect will be to restrict borrowing
at the local and state levels.
GRAPHIC MATERIAL 30 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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
Throughout the reporting period, we continued to focus on maximizing the fund's
income-earning potential, and consequently, on providing shareholders with
current, consistent tax-free income. Although the fund's average credit quality
and sector breakdowns remained relatively constant during the fiscal period, we
slightly increased the percentage of long-term investments in issues rated BBB,
from 10.6% on February 29, 1996, to 14.7% on February 28, 1997. Since
lower-rated issues tend to provide higher yields, with somewhat greater risk,
this strategy contributed to the fund's earnings.
In general, we take a conservative approach to managing this portfolio. In
addition to reviewing bond ratings from national rating agencies, Franklin's 26
municipal analysts perform in-depth research for our municipal bond fund
managers. By conducting thorough credit research, we help to ensure our
purchases fulfill the fund's investment objectives and requirements.
Looking forward, we expect interest rates to remain relatively low, and believe
Oregon's economy should continue to perform well. As always, we will continue to
manage this fund with an emphasis on income and portfolio quality.
Franklin Oregon Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Hospitals 16.8%
Utilities 15.6%
Pre-Refunded 13.8%
Housing 13.2%
General Obligations 11.2%
Education 9.2%
Industrial 8.6%
Transportation 5.6%
Certificates of Participation 3.4%
Other Revenue 1.4%
Health Care 1.2%
For a complete list of portfolio holdings, please see page 108 of this report.
Performance Summary
Class I
The Franklin Oregon Tax-Free Income Fund's Class I share price, as measured by
net asset value, decreased 5.0 cents, from $11.60 on February 29, 1996, to
$11.55 on February 28, 1997.
At the end of this reporting period, the distribution rate was 5.17%, based on
an annualization of the current, monthly dividend of 5.2 cents ($0.052) per
share and the maximum offering price of $12.06 on February 28, 1997.
Distributions will vary depending on income earned by the fund, and past
distributions are not predictive of future trends. This double tax-free rate is
generally higher than the after-tax return on a comparable taxable investment.
For example, an investor in the maximum combined federal and Oregon state
personal income tax bracket of 45.0% would need to earn 9.41% from a taxable
investment to match the fund's tax-free distribution rate.
Franklin Oregon Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.20 cents
April 5.20 cents
May 5.20 cents
June 5.20 cents
July 5.20 cents
August 5.20 cents
September 5.20 cents
October 5.20 cents
November 5.20 cents
December 5.20 cents
January 5.20 cents
February 5.20 cents
Total 62.40 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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. 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 - Class I
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year (9/1/87)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 5.13% 38.32% 98.12%
Average Annual Total Return2 0.70% 5.78% 6.98%
Distribution Rate3 5.17%
Taxable Equivalent Distribution Rate4 9.41%
30-Day Standardized Yield5 4.57%
Equivalent Taxable Yield4 8.32%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current, 5.2 cent per
share, monthly dividend and the maximum offering price of $12.06 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Oregon state personal income tax bracket of 45.0%, based on the
federal 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 28, 1997.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results.
Class II
The Franklin Oregon Tax-Free Income Fund's Class II share price, as measured by
net asset value, decreased 4.0 cents, from $11.65 on February 29, 1996, to
$11.61 on February 28, 1997.
Franklin Oregon Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 4.98 cents
April 4.64 cents
May 4.64 cents
June 4.64 cents
July 4.68 cents
August 4.68 cents
September 4.68 cents
October 4.69 cents
November 4.69 cents
December 4.69 cents
January 4.61 cents
February 4.61 cents
Total 56.23 cents
GRAPHIC MATERIAL 33 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of this reporting period, the distribution rate was 4.70%, based on
an annualization of the current, monthly dividend of 4.61 cents ($0.0461) per
share, plus an annual dividend adjustment of -.14 cent, and the offering price
of $11.73 on February 28, 1997. Distributions will vary depending on income
earned by the fund, and past distributions are not predictive of future trends.
This double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Oregon state personal income tax bracket of 45.0% would need to earn
8.55% from a taxable investment to match the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the unmanaged Lehman
Brothers Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices,
mutual funds are never 100% invested since they need to keep cash on hand to
redeem shares or pay for upcoming investments. The fund's performance figures
also include maximum sales charges, all fund expenses and account fees. If
operating expenses such as the fund's had been applied to this index, the
index's performance would have been lower. Please remember that an index is
simply a measure of performance, and one cannot invest directly in an index.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 34 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Oregon Tax-Free Income Fund - Class II
Periods Ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 4.59% 12.74%
Average Annual Total Return2 2.54% 6.20%
Distribution Rate3 4.70%
Taxable Equivalent Distribution Rate4 8.55%
30-Day Standardized Yield5 4.14%
Equivalent Taxable Yield4 7.53%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Distribution rate is based on an annualization of the current, 4.61 cent per
share, monthly dividend, plus an annual dividend adjustment of -.14 cent, and
the offering price of $11.73 on February 28, 1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Oregon state personal income tax bracket of 45.0%, based on the
federal 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 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
FRANKLIN PENNSYLVANIA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and
Pennsylvania state personal income taxes through a portfolio consisting
primarily of Pennsylvania municipal bonds.* The fund's shares are also free from
Pennsylvania personal property taxes.
State Update
During the reporting period, Pennsylvania enjoyed a favorable economic
environment, with a moderate debt burden and diverse economic base.
Pennsylvania's positive economic performance should continue throughout 1997,
fueled by growth in the service, government and trade sectors. For fiscal year
1997, Pennsylvania projects a budget of $16.4 billion, including an expected
operating deficit of $141 million, but excluding a $211 million cushion.
For fiscal year 1998, Pennsylvania Governor Tom Ridge has three priorities:
increase funding for education programs, reduce taxes for the working poor, and
improve conditions in underdeveloped neighborhoods. Governor Ridge also plans to
implement tax cuts for businesses and low-income families. Capital spending for
fiscal year 1998 should remain relatively unchanged, with approximately $320
million expected for jail, technology, and underdeveloped neighborhood projects.
Job growth in the state is anticipated to grow approximately 1%, from 1998 to
2001, compared with a national average of 1.5%.
GRAPHIC MATERIAL 35 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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
The supply of Pennsylvania municipal bonds during the reporting period was
strong, providing ample opportunities for portfolio diversification.
An ongoing strategy was to improve the fund's call exposure by selling certain
pre-refunded bonds at opportune times. As you can see from the table to the
right, the percentage of long-term investments allocated to pre-refunded bonds
was 16.9% at the close of the period, compared with 23.6% on February 29, 1996.
Furthermore, we kept the fund's weighting in various credit qualities relatively
stable. Looking forward, we hold a positive outlook for the fund and for
Pennsylvania's municipal debt market, in general.
Franklin Pennsylvania Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 22.4%
Hospitals 20.0%
Pre-Refunded 16.9%
Housing 10.8%
Education 8.3%
Other Revenue 4.8%
Industrial 4.8%
General Obligations 4.7%
Transportation 3.9%
Health Care 3.4%
For a complete list of portfolio holdings, please see page 113 of this report.
Performance Summary
Class I
The Franklin Pennsylvania Tax-Free Income Fund's Class I share price, as
measured by net asset value, decreased 5.0 cents, from $10.44 on February 29,
1996, to $10.39 on February 28, 1997.
Franklin Pennsylvania Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.20 cents
April 5.20 cents
May 5.20 cents
June 5.00 cents
July 5.00 cents
August 5.00 cents
September 5.00 cents
October 5.00 cents
November 5.00 cents
December 5.00 cents
January 5.00 cents
February 5.00 cents
Total 60.60 cents
GRAPHIC MATERIAL 36 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of this reporting period, the distribution rate was 5.53%, based on
an annualization of the current, monthly dividend of 5.0 cents ($0.05) per share
and the maximum offering price of $10.85 on February 28, 1997. Distributions
will vary depending on income earned by the fund, and past distributions are not
predictive of future trends. This double tax-free rate is generally higher than
the after-tax return on a comparable taxable investment. For example, an
investor in the maximum combined federal and Pennsylvania state personal income
tax bracket of 41.3% would need to earn 9.42% from a taxable investment to match
the fund's tax-free distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. 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 - Class I
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year 10-Year (12/1/86)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 5.53% 42.82% 98.56% 103.13%
Average Annual Total Return2 1.08% 6.45% 6.64% 6.71%
Distribution Rate3 5.53%
Taxable Equivalent Distribution Rate4 9.42%
30-Day Standardized Yield5 4.77%
Equivalent Taxable Yield4 8.12%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current, 5.0 cent per
share, monthly dividend and the maximum offering price of $10.85 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Pennsylvania state personal income tax bracket of 41.3%, based on
the federal 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 28, 1997.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results. Past expense reductions by the fund's manager increased the
fund's total returns.
Class II
The Franklin Pennsylvania Tax-Free Income Fund's Class II share price, as
measured by net asset value, decreased 4.0 cents, from $10.47 on February 29,
1996, to $10.43 on February 28, 1997.
Franklin Pennsylvania Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 4.68 cents
April 4.69 cents
May 4.69 cents
June 4.49 cents
July 4.53 cents
August 4.53 cents
September 4.53 cents
October 4.40 cents
November 4.40 cents
December 4.40 cents
January 4.49 cents
February 4.49 cents
Total 54.32 cents
GRAPHIC MATERIAL 38 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of this reporting period, the distribution rate was 5.11%, based on
an annualization of the current, monthly dividend of 4.49 cents ($0.0449) per
share, plus an annual dividend adjustment of +.03 cent, and the offering price
of $10.54 on February 28, 1997. Distributions will vary depending on income
earned by the fund, and past distributions are not predictive of future trends.
This double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. For example, an investor in the maximum combined
federal and Pennsylvania state personal income tax bracket of 41.3% would need
to earn 8.70% from a taxable investment to match the fund's tax-free
distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. The fund's performance figures also include maximum
sales charges, all fund expenses and account fees. If operating expenses such as
the fund's had been applied to this index, the index's performance would have
been lower. Please remember that an index is simply a measure of performance,
and one cannot invest directly in an index. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 39 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Pennsylvania Tax-Free Income Fund - Class II
Periods Ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 4.98% 12.92%
Average Annual Total Return2 2.76% 6.29%
Distribution Rate3 5.11%
Taxable Equivalent Distribution Rate4 8.70%
30-Day Standardized Yield5 4.36%
Equivalent Taxable Yield4 7.43%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Distribution rate is based on an annualization of the current, 4.49 cent per
share, monthly dividend, plus an annual dividend adjustment of +.03 cent, and
the offering price of $10.54 on February 28, 1997.
4. Taxable equivalent distribution rates and yields assume the maximum combined
federal and Pennsylvania state personal income tax bracket of 41.3%, based on
the federal 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 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
FRANKLIN PUERTO RICO TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal and many
states' individual income taxes through a portfolio consisting primarily of
Puerto Rico municipal bonds.*
Commonwealth Update
Puerto Rico continued to enjoy steady economic growth and a falling unemployment
rate throughout the reporting period, partly due to the commonwealth's efforts
to diversify its economy and build its tourism industry. Tourism, in fact, is
contributing increasingly to Puerto Rico's gross national product (GNP), with
hotel guest registration reaching a record 1.2 million in 1996 -- an increase of
7.6% over 1995. Tourism is expected to increase again in 1997, while the GNP for
1997 is projected to be around 3.0%.+
On the other hand, Puerto Rico has a high, but manageable, debt level and large,
unfunded pension liabilities, which it is working to reduce. As long as Puerto
Rico sustains its economic growth and prudent reserve policy, its near-term
credit outlook should remain unchanged.+
GRAPHIC MATERIAL 40 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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, December 16, 1996.
Portfolio Notes
During the reporting period, we continued to diversify the portfolio. We
purchased several new issues, including the Highway Authority, Puerto Rico Port
Authority for American Airlines, Mennonite General Hospital, Teachers Retirement
System, and general obligation bonds. In the secondary market, we purchased the
University of Puerto Rico, which is an insured issue.
To extend the portfolio's income-earning potential, we sold a percentage of the
fund's pre-refunded bonds and reinvested the proceeds in bonds that offered
longer call protection. As a result, pre-refunded bonds dropped from 18.0% of
the fund's long-term investments on February 29, 1996, to 5.9% on February 28,
1997. Likewise, the fund's call protection, as measured by its weighted average
life-to-first-call, remained relatively stable and ended the fiscal period at
6.19 years. Weighted average life-to-first-call is the weighting of the
portfolio's maturity, based on its bonds first possible call dates.
Franklin Puerto Rico Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 24.8%
Transportation 20.8%
Other Revenue 12.2%
General Obligations 9.8%
Housing 8.1%
Hospitals 7.6%
Pre-Refunded 5.9%
Education 5.1%
Industrial 4.0%
Sales Tax Revenue 1.7%
For a complete list of portfolio holdings, please see page 119 of this report.
Performance Summary
Class I
The Franklin Puerto Rico Tax-Free Income Fund's Class I share price, as measured
by net asset value, decreased 8.0 cents, from $11.59 on February 29, 1996, to
$11.51 on February 28, 1997.
In addition to distributing 65.10 cents ($0.6510) per share in dividend income
during the reporting period, your fund also paid out a long-term capital gain of
10.25 cents ($0.1025) per share and a short-term capital gain of .11 cent
($0.0011) per share in December 1996. Distributions will vary depending on
income earned by the fund and any profits realized from the sales of securities
in the fund's portfolio. Past distributions are not predictive of future trends.
At the end of this reporting period, the distribution rate was 5.39%, based on
an annualization of the current, monthly dividend of 5.4 cents ($0.054) per
share and the maximum offering price of $12.02 on February 28, 1997.
Franklin Puerto Rico Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.50 cents
April 5.50 cents
May 5.50 cents
June 5.40 cents
July 5.40 cents
August 5.40 cents
September 5.40 cents
October 5.40 cents
November 5.40 cents
December 5.40 cents
January 5.40 cents
February 5.40 cents
Total 65.10 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.
This tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum federal income tax
bracket of 39.6% would need to earn 8.92% from a taxable investment to match the
fund's tax-free distribution rate. Additionally, the fund's income dividends are
also free from some states' personal income taxes, which may further increase
the taxable equivalent rate.
As illustrated by the chart to the right, your fund's performance since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. 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 - Class I
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year 10-Year (4/3/85)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 6.03% 40.24% 97.03% 149.00%
Average Annual Total Return2 1.56% 6.08% 6.55% 7.57%
Distribution Rate3 5.39%
Taxable Equivalent Distribution Rate4 8.92%
30-Day Standardized Yield5 4.68%
Equivalent Taxable Yield4 7.75%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current, 5.4 cent per
share, monthly dividend and the maximum offering price of $12.02 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum federal
income tax bracket of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin Puerto Rico Tax-Free Income Fund's Class II share price, as
measured by net asset value, decreased 9.0 cents, from $11.62 on February 29,
1996, to $11.53 on February 28, 1997.
In addition to distributing 58.63 cents ($0.5863) per share in dividend income
during the reporting period, your fund also paid out a long-term capital gain of
10.25 cents ($0.1025) per share and a short-term capital gain of .11 cent
($0.0011) per share in December 1996. Distributions will vary depending on
income earned by the fund and any profits realized from the sales of securities
in the fund's portfolio. Past distributions are not predictive of future trends.
At the end of this reporting period, the distribution rate was 4.98%, based on
an annualization of the current, monthly dividend of 4.83 cents ($0.0483) per
share and the offering price of $11.65 on February 28, 1997.
Franklin Puerto Rico Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.00 cents
April 4.94 cents
May 4.94 cents
June 4.84 cents
July 4.91 cents
August 4.91 cents
September 4.91 cents
October 4.84 cents
November 4.84 cents
December 4.84 cents
January 4.83 cents
February 4.83 cents
Total 58.63 cents
GRAPHIC MATERIAL 43 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.
This tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum federal income tax
bracket of 39.6% would need to earn 8.25% from a taxable investment to match the
fund's tax-free distribution rate. Additionally, the fund's income dividends are
also free of some states' personal income taxes, which may further increase the
taxable equivalent rate.
As illustrated by the chart to the right, your fund's performance since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. The fund's performance figures also include maximum
sales charges, all fund expenses and account fees. If operating expenses such as
the fund's had been applied to this index, the index's performance would have
been lower. Please remember that an index is simply a measure of performance,
and one cannot invest directly in an index. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 44 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Puerto Rico Tax-Free Income Fund - Class II
Periods Ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 5.33% 12.78%
Average Annual Total Return2 3.27% 6.22%
Distribution Rate3 4.98%
Taxable Equivalent Distribution Rate4 8.25%
30-Day Standardized Yield5 4.28%
Equivalent Taxable Yield4 7.09%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Distribution rate is based on an annualization of the current, 4.83 cent per
share, monthly dividend and the offering price of $11.65 on February 28, 1997.
4. Taxable equivalent distribution rates and yields assume the maximum federal
income tax bracket of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
FRANKLIN FEDERAL INTERMEDIATE-TERM TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular, federal income tax
through a portfolio of municipal bonds with an average weighted maturity (the
time in which a debt must be repaid) between three and 10 years.*
Portfolio Notes
During the reporting period, relatively stable interest rates provided a
beneficial investment environment for municipal bonds. In general, municipal
securities outperformed Treasury bonds of similar maturities, especially when
considering municipals' attractive, taxable equivalent yields. Additionally, a
high demand for municipal securities, combined with a low supply, enhanced this
sector's performance.
We found several opportunities to make beneficial changes to the portfolio
during the fiscal year. For example, we were able to sell a portion of the
fund's lower-coupon bonds and reinvest the proceeds in higher-coupon issues.
Such changes, which ultimately enhanced the fund's income-earning potential,
were made after carefully considering the effects on the fund's average
maturity. As of February 28, 1997, the average maturity of the fund stood at 8.0
years, versus 7.3 years on February 29, 1996.
GRAPHIC MATERIAL 45 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*For investors subject to the federal alternative minimum tax, a 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.
In general, we take a conservative approach to managing this portfolio. In
addition to reviewing bond ratings from national rating agencies, Franklin's 26
municipal analysts perform in-depth research for our municipal bond fund
managers. By conducting thorough credit research, we help to ensure our
purchases fulfill the fund's investment objectives and requirements.
Looking ahead, we believe interest rates should remain within a fairly narrow
band over the next few months, and we expect inflation to stay in check over the
near term. Given the fund's intermediate-term weighted average maturity, an
environment of stable interest rates and mild inflation should allow its share
value to remain relatively steady.
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 16.0%
Hospitals 11.7%
Industrial 10.7%
Certificates of Participation 9.6%
Housing 8.9%
General Obligations 8.6%
Other Revenue 8.2%
Special Assessments 7.2%
Education 6.4%
Transportation 6.4%
Marks-Roos 3.1%
Health Care 2.9%
Pre-Refunded 0.3%
For a complete list of portfolio holdings, please see page 122 of this report.
Performance Summary
The Franklin Federal Intermediate-Term Tax-Free Income Fund's share price, as
measured by net asset value, decreased 1.0 cent, from $10.95 on February 29,
1996, to $10.94 on February 28, 1997.
At the end of this reporting period, the 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 $11.19 on February 28, 1997.
Distributions will vary depending on income earned by the fund, and past
distributions are not predictive of future trends. This tax-free rate is
generally higher than the after-tax return on a comparable taxable investment.
For example, an investor in the maximum federal income tax bracket of 39.6%
would need to earn 8.16% from a taxable investment to match the fund's tax-free
distribution rate.
Franklin Federal Intermediate-Term
Tax-Free Income Fund
Dividend Distributions 3/1/96 - 2/28/97+
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 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 performance since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. Past
performance is not predictive of future results.
GRAPHIC MATERIAL 47 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin Federal Intermediate-Term Tax-Free Income Fund
Periods Ended February 28, 1997
Since
Inception
1-Year 3-Year (9/23/92)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 5.12% 17.96% 35.21%
Average Annual Total Return2 2.78% 4.86% 6.49%
Distribution Rate3 4.93%
Taxable Equivalent Distribution Rate4 8.16%
30-Day Standardized Yield5 4.69%
Equivalent Taxable Yield4 7.76%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect 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 $11.19 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum federal
income tax bracket of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
The fund's manager has agreed in advance to waive a portion of management
expenses, which reduces operating expenses and increases yield, distribution
rate and total return to shareholders. Without these reductions, the fund's
distribution rate would have been lower, and yield for the period would have
been 4.62%. The fee waiver may be discontinued at any time upon notification to
the fund's Board of Trustees.
FRANKLIN HIGH YIELD TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
Your Fund's Objective:
Seeks to provide high, current income exempt from regular federal income tax
through a portfolio consisting primarily of higher-yielding, medium- to
lower-rated and non-rated municipal securities.* As discussed in the fund's
prospectus, these securities entail greater risk than higher-rated municipal
securities.
Portfolio Notes
During the 12-month reporting period, the insured sector generally represented
the greatest value in the municipal market. This was partly attributable to a
limited supply of new issues in the high-yield sector, which put some downward
pressure on their yields. Furthermore, the quality of many non-rated new issues
was weak.
Based on the yield spread between AAA- and BBB-rated revenue bonds, we were not
being compensated for the extra credit risks of lower-rated securities. Thus, we
made fewer purchases in the high-yield sector and increased our purchases of
insured securities. During the fiscal year, the average credit quality of the
portfolio improved dramatically, with insured securities increasing from 7.57%
of long-term investments on February 29, 1996, to 14.5% on February 28, 1997.
Overall, issues rated AAA increased, from 17.1% to 25.0%, over the same period.
GRAPHIC MATERIAL 48 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 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. In
general, an investor is paid a higher yield to assume a greater degree of credit
risk.
Much of Franklin's strength in the high-yield market lies in our research
capabilities. Our research analysts work with issuers and underwriters in
structuring deals with attractive credit qualities. During the fiscal period, we
added 11 new, non-rated issues to the portfolio, while adding 126 positions in
all, thus reducing the percentage of non-rated securities from 42.9% on February
29, 1996, to 34.4% on February 28, 1997.
Looking forward, we expect that the supply of new issues in 1997 will range
between $170 and $190 billion -- close to the amount issued in 1996 -- with bond
redemptions in the $150 billion range. We also believe the demand for municipal
issues will remain strong, especially given the attractive taxable-equivalent
yields they offer certain investors.
Franklin High Yield Tax-Free Income Fund
Portfolio Breakdown on February 28, 1997
Based on Total Long-Term Investments
% of Total
Long-Term
Sector Investments
- --------------------------------------------------------------------------------
Utilities 21.7%
Transportation 12.3%
Hospitals 10.6%
Pre-Refunded 10.0%
General Obligations 9.9%
Special Assessment 8.3%
Industria l5.7%
Housing 5.0%
Health Care 4.6%
Other Revenue 4.2%
Education 2.6%
Mello-Roos 2.0%
Certificates of Participation 1.8%
Tax Allocation 0.8%
Sales Tax 0.3%
Marks-Roos 0.2%
For a complete list of portfolio holdings, please see page 128 of this report.
Performance Summary
Class I
The Franklin High Yield Tax-Free Income Fund's Class I share price, as measured
by net asset value, increased 1.0 cent, from $11.19 on February 29, 1996, to
$11.20 on February 28, 1997.
Franklin High Yield Tax-Free Income Fund
Class I
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 6.10 cents
April 6.10 cents
May 6.10 cents
June 6.10 cents
July 6.10 cents
August 6.10 cents
September 6.10 cents
October 6.10 cents
November 6.10 cents
December 6.10 cents
January 6.10 cents
February 6.10 cents
Total 73.20 cents
GRAPHIC MATERIAL 49 OMITTED - SEE APPENDIX AT END OF DOCUMENT
At the end of this reporting period, the distribution rate 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 $11.70 on February 28, 1997.
Distributions will vary depending on income earned by the fund, and past
distributions are not predictive of future trends. This tax-free rate is
generally higher than the after-tax return on a comparable taxable investment.
For example, an investor in the maximum federal income tax bracket of 39.6%
would need to earn 10.36% from a taxable investment to match the fund's tax-free
distribution rate.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. 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, the index's
performance would have been lower. Please remember that an index is simply a
measure of performance, and one cannot invest directly in an index. 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 - Class I
Periods Ended February 28, 1997
Since
Inception
1-Year 5-Year 10-Year (3/18/86)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return1 6.92% 50.93% 127.22% 146.37%
Average Annual Total Return2 2.34% 7.63% 8.09% 8.16%
Distribution Rate3 6.26%
Taxable Equivalent Distribution Rate4 10.36%
30-Day Standardized Yield5 5.35%
Equivalent Taxable Yield4 8.86%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the sales charge. See Note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See Note below.
3. Distribution rate is based on an annualization of the current, 6.1 cent per
share, monthly dividend and the maximum offering price of $11.70 on February 28,
1997.
4. Taxable equivalent distribution rates and yields assume the maximum federal
income tax bracket of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
Note: Prior to July 1, 1994, Class I shares were offered at a lower initial
sales charge with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and any capital gains at net asset value, and
12b-1 fees from the date of the plan's implementation. Your investment return
and principal value will fluctuate with market conditions, and you may have a
gain or loss when you sell your shares. Past performance is not predictive of
future results.
Past expense reductions by the fund's manager increased the fund's total
returns.
Class II
The Franklin High Yield Tax-Free Income Fund's Class II share price, as measured
by net asset value, increased 2.0 cents, from $11.24 on February 29, 1996, to
$11.26 on February 28, 1997.
At the end of this reporting period, the distribution rate was 5.83%, based on
an annualization of the current, monthly dividend of 5.53 cents ($0.0553) per
share, plus an annual dividend adjustment of -.04 cent, and the offering price
of $11.37 on February 28, 1997. Distributions will vary depending on income
earned by the fund, and past distributions are not predictive of future trends.
This tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. For example, an investor in the maximum federal income tax
bracket of 39.6% would need to earn 9.65% from a taxable investment to match the
fund's tax-free distribution rate.
Franklin High Yield Tax-Free Income Fund
Class II
Dividend Distributions 3/1/96 - 2/28/97+
Dividend
Month per Share
- --------------------------------------------------------------------------------
March 5.70 cents
April 5.56 cents
May 5.56 cents
June 5.56 cents
July 5.60 cents
August 5.60 cents
September 5.60 cents
October 5.56 cents
November 5.56 cents
December 5.56 cents
January 5.53 cents
February 5.53 cents
Total 66.92 cents
GRAPHIC MATERIAL 51 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 since
inception has exceeded the rate of inflation, as measured by the Consumer Price
Index, maintaining your purchasing power -- a primary goal of any investment.
Although the fund's shares have slightly underperformed the Lehman Brothers
Municipal Bond Index, 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 to buy and sell bonds. Unlike unmanaged indices, mutual funds are
never 100% invested since they need to keep cash on hand to redeem shares or pay
for upcoming investments. The fund's performance figures also include maximum
sales charges, all fund expenses and account fees. If operating expenses such as
the fund's had been applied to this index, the index's performance would have
been lower. Please remember that an index is simply a measure of performance,
and one cannot invest directly in an index. Past performance is not predictive
of future results.
GRAPHIC MATERIAL 52 OMITTED - SEE APPENDIX AT END OF DOCUMENT
<TABLE>
<CAPTION>
Franklin High Yield Tax-Free Income Fund - Class II
Periods Ended February 28, 1997
Since
Inception
1-Year (5/1/95)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return1 6.36% 16.06%
Average Annual Total Return2 4.34% 7.87%
Distribution Rate3 5.83%
Taxable Equivalent Distribution Rate4 9.65%
30-Day Standardized Yield5 4.96%
Equivalent Taxable Yield4 8.21%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
1. Cumulative total returns measure the change in value of an investment over
the specified periods and do not include sales charges.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the 1.0% initial sales
charge and 1.0% contingent deferred sales charge, applicable to shares redeemed
within the first 18 months of investment.
3. Distribution rate is based on an annualization of the current, 5.53 cent per
share, monthly dividend, plus an annual dividend adjustment of -.04 cent, and
the offering price of $11.37 on February 28, 1997.
4. Taxable equivalent distribution rates and yields assume the maximum federal
income tax bracket of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended February 28, 1997.
All total return calculations assume reinvestment of dividends and any capital
gains at net asset value. Your investment return and principal value will
fluctuate with market conditions, and you may have a gain or loss when you sell
your shares. Past performance is not predictive of future results.
GLOSSARY OF INVESTMENT TERMS
- --------------------------------------------------------------------------------
Call Protection: the length of time during which a bond cannot be redeemed by
its issuer.
Coupon: the interest rate on a bond that the issuer promises to pay to the
holder until the bond matures.
Full-Coupon Bond: a bond with a coupon rate that is at, or near, current market
interest rates.
High-Grade Bond/High-Quality Bond: a bond rated AAA or AA by Standard &
Poor's(R) or Aaa or Aa by Moody's Investors Service -- two national
credit-rating agencies.
Investment-Grade Bond: a bond with a rating of AAA to BBB-, usually within the
top-four rating categories assigned to bonds.
Non-Rated Bonds: a bond that has not been rated by one or more of the major
rating agencies. Issues are usually non-rated because they are too small to
justify the expense of getting a rating. In many instances, just because a bond
is non-rated by an agency, it does not mean it has a lower credit rating.
Pre-Refunded Bond: A bond that will be paid off at its first call date with
proceeds of the sale of a second bond carrying a lower interest rate.
Primary Market: the market for new issues of securities; a market is "primary"
if the issuer of the securities receives the proceeds of the sale.
Secondary Market: a market where previously issued securities are bought and
sold; the selling dealers and investors receive the proceeds, not the issuer.
Underwriter: an investment banker who agrees to purchase a new issue of
securities from an issuer and distribute it to investors, making a profit on the
underwriting spread.
Weighted Average Maturity: the weighted average of all individual maturities in
the portfolio based on their par values.
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin Arizona Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.8%
Arizona Educational Loan Marketing Corp. Revenue,
$ 10,000,000 Senior Series, 6.375%, 09/01/05 .............................................................. $ 10,483,100
1,000,000 Series B, 7.00%, 03/01/03 .................................................................... 1,080,000
1,000,000 Series B, 7.00%, 03/01/05 .................................................................... 1,070,940
1,000,000 Series B, MBIA Insured, 7.35%, 09/01/04 ...................................................... 1,067,660
775,000 Series B, MBIA Insured, 7.375%, 09/01/05 ..................................................... 826,011
1,000,000 Sub-Series, 6.625%, 09/01/05 ................................................................. 1,061,070
2,000,000 Arizona Health Facilities Authority, Hospital System Revenue, Phoenix Baptist Hospital,
MBIA Insured, ETM, 6.25%, 09/01/11............................................................ 2,165,820
Arizona Health Facilities Authority Revenue, Arizona Voluntary Hospital, Series B, FGIC Insured,
5,000,000 7.25%, 10/01/13............................................................................... 5,337,100
770,000 Hospital Federal Pooled Loan Revenue, 7.75%, 10/01/07......................................... 834,387
5,000,000 Arizona State COP, Refunding, Series B, AMBAC Insured, 6.25%, 09/01/10......................... 5,368,000
5,000,000 Arizona State Department of Administration, COP, FSA Insured, 6.625%, 09/01/08................. 5,441,100
Arizona State Municipal Financing Program, COP, MBIA Insured,
1,350,000 Dysart School, Series 22, ETM, 7.875%, 08/01/05............................................... 1,634,270
85,000 Flagstaff School, Series 15, 8.75%, 08/01/07.................................................. 86,827
500,000 Peoria School, Series 19, ETM, 7.75%, 08/01/04................................................ 597,870
825,000 Series 10, Pre-Refunded, 7.90%, 08/01/17...................................................... 848,240
3,250,000 Series 20, ETM, 7.625%, 08/01/06 ............................................................. 3,751,605
500,000 Series 25, 7.875%, 08/01/14................................................................... 639,135
2,500,000 Series 29, Pre-Refunded, 7.125%, 08/01/14..................................................... 2,700,075
1,750,000 Arizona State Transportation Board, Excise Tax Revenue, Maricopa County Regional Area Road Fund,
Series A, Pre-Refunded, 7.60%, 07/01/05 ...................................................... 1,871,660
Arizona State Waste Management Authority, Wastewater Financial Assistance Revenue,
4,000,000 6.80%, 07/01/11............................................................................... 4,409,760
1,000,000 Series A, AMBAC Insured, 5.625%, 07/01/15..................................................... 1,006,150
930,000 Casa Grande Excise Tax Revenue, 6.20%, 04/01/15 ............................................... 977,486
Casa Grande IDA, PCR, Frito Lay/PepsiCo,
1,800,000 6.60%, 12/01/10............................................................................... 1,958,976
500,000 6.65%, 12/01/14............................................................................... 542,520
3,000,000 Central Arizona Water Conservation District Contract Revenue, Central Project, Series A,
Pre-Refunded, 7.65%, 11/01/09 ................................................................ 3,393,180
Chandler GO, FGIC Insured, Pre-Refunded,
1,750,000 6.80%, 07/01/13 .............................................................................. 1,924,930
1,625,000 6.85%, 07/01/14............................................................................... 1,787,126
1,000,000 Refunding, 7.00%, 07/01/12 ................................................................... 1,099,990
4,055,000 Chandler IDA, MFHR, Refunding, Hacienda Apartments, Project A, GNMA Secured, 6.05%, 07/20/30... 4,099,727
Chandler Street and Highway Revenue, MBIA Insured, Pre-Refunded,
1,250,000 6.85%, 07/01/13 .............................................................................. 1,372,325
2,200,000 6.90%, 07/01/14............................................................................... 2,428,910
Chandler Water and Sewage Revenue, Refunding, FGIC Insured,
6,715,000 7.00%, 07/01/12............................................................................... 7,386,433
2,165,000 6.25%, 07/01/13 .............................................................................. 2,301,763
City of Bullhead, Municipal Property Corp., Facilities Revenue, Pre-Refunded,
4,000,000 FGIC Insured, 7.20%, 07/01/10 ................................................................ 4,409,520
2,125,000 MBIA Insured, 7.20%, 07/01/09 ................................................................ 2,293,576
Cochise County, Palominas Elementary School District No. 49, School Improvement, GO,
Series A, Pre-Refunded,
155,000 7.70%, 07/01/00............................................................................... 160,193
165,000 7.80%, 07/01/01............................................................................... 170,580
175,000 7.85%, 07/01/02............................................................................... 180,947
$ 5,000,000 Cochise County USD No. 68, Sierra Vista, Series B, FGIC Insured, Pre-Refunded, 7.625%, 07/01/10 $ 5,568,950
1,095,000 Coconino County, Flagstaff USD No. 1, AMBAC Insured, 6.20%, 07/01/06 .......................... 1,150,823
3,500,000 Coconino County PCC Revenue, 6.375%, 10/01/36 ................................................. 3,544,065
5,275,000 Coconino County PCC Revenue, Refunding, Arizona Public Service Co.,Series A, MBIA Insured,
5.875%, 08/15/28.............................................................................. 5,346,529
1,475,000 Eloy Municipal Property Corp., Facilities Revenue, 7.80%, 07/01/09............................. 1,587,941
3,320,000 Gila County IDAR, PCR, ASARCO, Inc. Project, Refunding, 8.90%, 07/01/06........................ 3,464,354
1,500,000 Gilbert Improvement District No. 11, FGIC Insured, 7.60%, 01/01/05............................. 1,560,885
Gilbert Water and Sewer Revenue, Refunding, FGIC Insured, 6.50%,
1,500,000 07/01/12 ..................................................................................... 1,631,460
3,250,000 07/01/22 ..................................................................................... 3,499,828
Glendale IDA, Educational Facilities Revenue, Refunding, American Graduate School
International, Connie Lee Insured,
2,200,000 5.875%, 07/01/15.............................................................................. 2,234,650
1,000,000 Pre-Refunded, 7.00%, 07/01/14 ................................................................ 1,163,610
1,250,000 Pre-Refunded, 7.125%, 07/01/20................................................................ 1,465,175
Glendale IDAR, Midwestern University, Series A, Connie Lee Insured, 6.00%,
1,940,000 05/15/16 ..................................................................................... 1,992,322
2,000,000 05/15/26 ..................................................................................... 2,045,620
2,400,000 Glendale Municipal Property Corp., MBIA Insured, 7.00%, 07/01/09 .............................. 2,545,224
Guam Power Authority Revenue, Series A, 6.30%,
3,630,000 10/01/12 ..................................................................................... 3,715,196
4,000,000 10/01/22 ..................................................................................... 4,064,640
2,700,000 Lake Havasu City, Wastewater COP, FGIC Insured, 7.00%, 06/01/05................................ 2,961,333
8,000,000 Maricopa County COP, 6.00%, 06/01/04........................................................... 8,294,720
50,000 Maricopa County Hospital District No. 1, Facilities Revenue, East Valley Behavioral Health Facility,
FGIC Insured, Pre-Refunded, 7.80%, 06/01/14................................................... 51,518
Maricopa County IDA,
1,445,000 FSA Insured, 7.50%, 12/01/13 ................................................................. 1,595,800
2,105,000 MFHR, Madera Pointe Apts, FSA Insured, 5.90%, 06/01/26 ....................................... 2,121,966
1,305,000 Pre-Refunded, FSA Insured, 7.50%, 12/01/13 ................................................... 1,474,689
1,050,000 SFMR, GNMA Secured, 8.00%, 09/01/09........................................................... 1,096,704
Maricopa County IDAR,
5,000,000 Citizens Utilities Co. Project, 6.20%, 05/01/30............................................... 5,210,050
17,800,000 Hospital Facility Revenues, Samaritan Hospital Health Services, Refunding, Series A,
MBIA Insured, 7.00%, 12/01/13 ............................................................... 19,473,378
1,890,000 Hospital Facility Revenues, Samaritan Hospital Health Services, Refunding, Series A,
MBIA Insured, 7.00%, 12/01/16 ............................................................... 2,223,528
1,730,000 Mercy Health System, MBIA Insured, Pre-Refunded, Series A, 7.125%, 07/01/07................... 1,878,157
750,000 Mercy Health System, MBIA Insured, Pre-Refunded, Series C, 7.15%, 07/01/15.................... 815,513
Maricopa County School District No. 4, Mesa Unified, FGIC Insured,
1,500,000 5.65%, 07/01/11............................................................................... 1,543,605
2,000,000 5.70%, 07/01/12............................................................................... 2,061,200
2,000,000 Maricopa County School District No. 28, Kyrene Elementary, Series B, FGIC Insured,
6.00%, 07/01/14............................................................................... 2,076,500
3,000,000 Maricopa County Stadium District Revenue, MBIA Insured, 5.75%, 07/01/16 ....................... 3,038,580
500,000 Maricopa County UHSD No. 210, Phoenix, Series A, 5.70%, 07/01/15 .............................. 509,725
600,000 Maricopa County UHSD No. 216, Series A, Pre-Refunded, 7.80%, 07/01/07.......................... 620,292
Maricopa County USD No. 8, Osborn School Improvement Project,
3,500,000 Series A, FGIC Insured, 5.875%, 07/01/14...................................................... 3,636,115
500,000 Series B, Pre-Refunded, 7.10%, 07/01/05....................................................... 537,990
1,075,000 Series B, Pre-Refunded, 7.15%, 07/01/07....................................................... 1,157,861
1,885,000 Series B, Pre-Refunded, 7.20%, 07/01/09....................................................... 2,032,350
Maricopa County USD No. 11, Peoria, Refunding,
$ 6,300,000 AMBAC Insured, 6.10%, 07/01/10 ............................................................... $ 6,751,899
2,800,000 MBIA Insured, 7.00%, 07/01/10 ................................................................ 3,061,576
2,000,000 Maricopa County USD No. 41, Gilbert, 6.25%, 07/01/15........................................... 2,043,740
1,175,000 Maricopa County USD No. 65, Littleton School Improvement, Series B, FGIC Insured, 6.40%, 07/01/14 1,270,234
4,000,000 Maricopa County USD No. 68, Alhambra, Refunding and Improvement, AMBAC Insured,
5.625%, 07/01/13 ............................................................................. 4,053,040
1,000,000 Maricopa County USD No. 69 GO, Paradise Valley, Series A, 7.10%, 07/01/05 ..................... 1,138,010
1,600,000 Maricopa County USD No. 80, Chandler, FGIC Insured, 6.00%, 07/01/13 ........................... 1,678,176
Maricopa County USD No. 89, Dysart, Refunding & Improvement, FGIC Insured,
240,000 6.70%, 07/01/05 .............................................................................. 257,558
1,760,000 6.75%, 07/01/06 .............................................................................. 1,885,822
1,300,000 Maricopa County USD No. 98, Fountain Hills School, Improvement Bond, Refunding, FGIC Insured,
6.625%, 07/01/10 ............................................................................. 1,395,251
Maricopa County USD No. 214, Tolleson GO,
1,000,000 FGIC Insured, 5.75%, 07/01/14 ................................................................ 1,026,530
500,000 Pre-Refunded, 7.30%, 07/01/03 ................................................................ 516,115
Mesa IDA, Health Care Facilities Revenue, Western Health Network, MBIA Insured,
750,000 Refunding, Series B-2, 7.50%, 01/01/08 ....................................................... 799,020
5,250,000 Series A-2, 7.625%, 01/01/13 ................................................................. 5,657,190
250,000 Series A-3, 7.625%, 01/01/13 ................................................................. 269,390
2,190,000 Series A-4, 7.625%, 01/01/09 ................................................................. 2,337,847
7,750,000 Mesa Utility Systems Revenue, FGIC Insured, 5.125%, 07/01/15................................... 7,416,440
Mohave County, Hospital District No. 1, Kingman Regional Medical Center Project,
1,500,000 FGIC Insured, 6.50%, 06/01/15 ................................................................ 1,601,145
6,350,000 Pre-Refunded, 8.375%, 06/01/15 ............................................................... 7,203,504
Mohave County IDA,
4,100,000 Citizens Utilities Project, 6.60%, 05/01/29 .................................................. 4,349,403
10,000,000 Citizens Utilities Project, Series A, 7.15%, 02/01/26 ........................................ 10,685,900
5,000,000 Citizens Utilities Project, Series B, 7.15%, 02/01/26 ........................................ 5,342,950
1,585,000 Health Care Revenue, Chris Ridge and Silver Insured, Refunding, GNMA Secured,
6.375%, 11/01/31............................................................................. 1,661,064
1,500,000 Hospital Systems Revenue, Baptist Hospital, MBIA Insured, 5.50%, 09/01/21..................... 1,474,230
3,425,000 Hospital Systems Revenue, Baptist Hospital, MBIA Insured, 5.75%, 09/01/26 .................... 3,459,387
1,595,000 Hospital Systems Revenue, Medical Environments, Inc., Phoenix Hospital and Medical Center,
ETM, 5.80%, 07/01/99......................................................................... 1,657,955
54,500,000 Navajo County PCR, Refunding, Arizona Public Service Co., Series A, 5.875%, 08/15/28 .......... 54,623,170
Nogales Municipal Development Authority, Inc., Municipal Facilities Revenue, Refunding, MBIA Insured,
6,350,000 7.20%, 06/01/08 .............................................................................. 7,025,831
500,000 Pre-Refunded, 8.00%, 06/01/08 ................................................................ 530,530
Northern Arizona University System Revenue,
3,700,000 Pre-Refunded, 7.50%, 06/01/06 ................................................................ 3,974,355
2,750,000 Refunding, FGIC Insured, 6.40%, 06/01/07...................................................... 2,945,168
Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Port Saipan
Harbor Improvement, Series A,
310,000 5.35%, 10/01/98 .............................................................................. 311,327
330,000 5.45%, 10/01/99............................................................................... 331,082
345,000 5.55%, 10/01/00............................................................................... 347,087
365,000 5.65%, 10/01/01............................................................................... 366,876
385,000 5.75%, 10/01/02............................................................................... 387,345
7,150,000 6.85%, 10/01/25............................................................................... 7,327,749
1,000,000 Oro Valley, COP, MBIA Insured, 5.750%, 07/01/17................................................ 1,017,820
Oro Valley Municipal Property Corp. Revenue, Municipal Water System, MBIA Insured,
$ 1,650,000 5.55%, 07/01/17............................................................................... $ 1,654,472
1,000,000 5.375%, 07/01/26 ............................................................................. 971,890
1,000,000 Peoria Municipal Development Authority, Water and Sewer Revenue, Refunding, FGIC Insured,
6.625%, 07/01/06 ............................................................................. 1,065,460
Phoenix Airport Revenue, MBIA Insured,
700,000 Refunding, Series B, 6.20%, 07/01/10.......................................................... 745,808
1,680,000 Refunding, Series C, 6.30%, 07/01/10.......................................................... 1,802,170
1,785,000 Refunding, Series C, 6.40%, 07/01/11.......................................................... 1,914,216
570,000 Refunding, Series C, 6.40%, 07/01/12.......................................................... 611,696
1,800,000 Series D, 6.30%, 07/01/10 .................................................................... 1,930,896
3,825,000 Series D, 6.40%, 07/01/11..................................................................... 4,116,427
820,000 Series D, 6.40%, 07/01/12 .................................................................... 879,983
Phoenix Civic Improvement Corp.,
5,000,000 Airport Terminal Excise Tax Revenue, 7.80%, 07/01/11 ......................................... 5,141,700
3,500,000 Airport Terminal Excise Tax Revenue, 7.875%, 07/01/14 ........................................ 3,601,850
275,000 Airport Terminal Excise Tax Revenue, Refunding, Pre-Refunded, 8.375%, 07/01/09 ............... 293,296
1,000,000 Municipal Facilities Excise Tax Revenue, MBIA Insured, Pre-Refunded, 6.90%, 07/01/21.......... 1,102,520
4,210,000 Parking Facilities, Series B, FGIC Insured, Pre-Refunded, 7.50%, 07/01/09 .................... 4,349,098
3,090,000 Water Systems Revenue, 5.95%, 07/01/15 ....................................................... 3,185,512
3,665,000 Water Systems Revenue, 5.95%, 07/01/16 ....................................................... 3,772,898
3,000,000 Water Systems Revenue, 6.00%, 07/01/19 ....................................................... 3,085,920
4,300,000 Phoenix Civic Plaza Building Corp., 6.00%, 07/01/14 ........................................... 4,483,438
Phoenix GO,
5,000,000 Refunding, 6.375%, 07/01/13 .................................................................. 5,328,850
1,000,000 Refunding, Pre-Refunded, 7.375%, 07/01/11..................................................... 1,032,470
5,000,000 Refunding, Series A, 5.50%, 07/01/15.......................................................... 5,068,700
2,775,000 Series B, 5.25%, 07/01/15 .................................................................... 2,736,233
Phoenix HFC, Mortgage Revenue, Refunding, MBIA Insured,
2,750,000 Project A, 6.50%, 07/01/24 ................................................................... 2,815,340
1,750,000 Section 8 Project, Series A, 6.90%, 01/01/23 ................................................. 1,817,690
2,260,000 Section 8 Project, Series A, 7.25%, 01/01/23 ................................................. 2,298,849
1,000,000 Phoenix IDA, SFMR, FNMA Insured, 6.30%, 12/01/12 .............................................. 1,033,400
1,575,000 Phoenix IDAR, Home Purchase Mortgage, GNMA Secured, Series B, 8.20%, 04/01/22 ................. 1,633,433
1,500,000 Phoenix Municipal Housing Revenue, Refunding, Fillmore Gardens Project, 6.30%, 06/01/09 ....... 1,553,610
Phoenix Street and Highway Revenue,
1,000,000 ETM, 6.80%, 07/01/03 ......................................................................... 1,122,330
1,000,000 Pre-Refunded, 7.375%, 07/01/05 ............................................................... 1,032,470
3,310,000 Pre-Refunded, 7.375%, 07/01/06 ............................................................... 3,417,476
5,000,000 Refunding, 6.60%, 07/01/07.................................................................... 5,441,300
2,470,000 Phoenix Water System Revenue, Refunding, 5.500%, 07/01/22 ..................................... 2,423,441
1,750,000 ePima County, COP, MBIA Insured, 5.250%, 01/01/12 ............................................. 1,712,830
Pima County IDA,
65,000 Health Care Revenue, Carondelet St. Joseph's and St. Mary's, 8.00%, 07/01/13 ................. 69,325
2,250,000 Health Care Revenue, Carondelet St. Joseph's and St. Mary's, MBIA Insured, 6.75%, 07/01/10 ... 2,448,495
535,000 Health Care Revenue, Carondelet St. Joseph's and St. Mary's, Pre-Refunded, 8.00%, 07/01/13 ... 574,569
2,720,000 MF Revenue, Series A, FNMA Insured, 6.000%, 12/01/21.......................................... 2,726,501
1,350,000 SFMR, GNMA Secured, 6.40%, 11/01/09 .......................................................... 1,418,513
1,555,000 SFMR, GNMA Secured, 8.125%, 09/01/20 ......................................................... 1,613,826
6,050,000 SFMR, GNMA Secured, 6.750%, 11/01/27.......................................................... 6,309,182
4,955,000 SFMR, Refunding, Series A, 7.625%, 02/01/12 .................................................. 5,177,480
835,000 SFMR, Refunding, Series A, 6.50%, 02/01/17.................................................... 855,858
1,410,000 Pima County Sewer Revenue, Refunding, FGIC Insured, 6.75%, 07/01/15 ........................... 1,526,381
$ 21,000,000 Pima County USD No. 1, Tucson Project, FGIC Insured, 5.875%, 07/01/14 ......................... $ 21,721,140
500,000 Pima County USD No. 10, Amphitheater School, Refunding & Improvement, Pre-Refunded,
7.70%, 07/01/03 .............................................................................. 511,805
Pinal County USD No. 43, Apache Junction, Refunding & Improvement, FGIC Insured,
500,000 7.15%, 07/01/05............................................................................... 531,095
700,000 Pre-Refunded, 7.20%, 07/01/07................................................................. 755,531
2,500,000 Series A, 5.85%, 07/01/15 .................................................................... 2,585,575
5,000,000 Price Elliott Resh Park, Inc. Revenue, Refunding, Arizona State University Research Park,
MBIA Insured, Pre-Refunded, 7.00%, 07/01/21................................................... 5,610,100
Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Pre-Refunded,
75,000 FSA Insured, Series A, 9.00%, 07/01/09........................................................ 95,211
6,000,000 Series A, 7.875%, 07/01/17.................................................................... 6,442,260
Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Y,
9,500,000 6.00%, 07/01/22 .............................................................................. 9,663,020
9,000,000 5.00%, 07/01/36 .............................................................................. 8,066,700
750,000 Puerto Rico Commonwealth Highway Authority Revenue, Series P, Pre-Refunded,
8.125%, 07/01/13 ............................................................................. 807,173
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
9,215,000 7.75%, 07/01/08............................................................................... 9,765,688
2,000,000 7.50%, 07/01/09............................................................................... 2,113,180
Puerto Rico Electric Power Authority Revenue,
125,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15............................................ 129,465
3,000,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08............................................ 3,223,890
745,000 Refunding, Series N, 7.00%, 07/01/07.......................................................... 792,755
2,205,000 Refunding, Series N, 7.125%, 07/01/14......................................................... 2,352,338
5,000,000 Refunding, Series U, 6.00%, 07/01/14.......................................................... 5,165,200
1,510,000 Series O, 7.125%, 07/01/14.................................................................... 1,614,341
600,000 Series P, Pre-Refunded, 7.00%, 07/01/11....................................................... 674,478
3,745,000 Series R, Pre-Refunded, 6.25%, 07/01/17....................................................... 3,905,174
25,720,000 Series X, 6.125%, 07/01/21.................................................................... 26,359,656
4,850,000 Puerto Rico GO, 6.50%, 07/01/23 ............................................................... 5,270,107
Puerto Rico HFC,
1,445,000 MFMR, Portfolio A, Series 1, 7.50%, 04/01/22.................................................. 1,522,741
1,085,000 SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22................................ 1,142,809
40,000 Puerto Rico HFC Revenue, FHA Mortgage Insured, Sixth Portfolio, Section 8, Pre-Refunded,
7.75%, 12/01/26 .............................................................................. 48,014
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities,
Financing Authority, Hospital Revenue, Series A,
1,950,000 Hospital Auxilio Mutuo Obligation Group, MBIA Insured, 6.25%, 07/01/24........................ 2,050,581
5,225,000 Refunding, Dr. Pila Hospital, FHA Insured, 5.875%, 08/01/12 .................................. 5,395,074
1,000,000 Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Series H, Pre-Refunded,
7.875%, 07/01/16 ............................................................................. 1,034,390
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
2,435,000 Refunding, Series A, 5.75%, 01/01/13 ......................................................... 2,491,687
4,750,000 Refunding, Series D, 5.50%, 01/01/25.......................................................... 4,630,728
6,000,000 Refunding, Series D, 6.25%, 01/01/27.......................................................... 6,235,260
2,000,000 Series A, 6.50%, 01/01/22 .................................................................... 2,109,620
4,600,000 Series A, 6.00%, 01/01/31..................................................................... 4,641,630
1,845,000 Series A, MBIA Insured, 6.00%, 01/01/31....................................................... 1,874,963
2,500,000 Series A, Pre-Refunded, 7.875%, 01/01/28...................................................... 2,637,325
9,975,000 Series B, 6.25%, 01/01/19 .................................................................... 10,412,105
5,925,000 Series C, 6.20%, 01/01/12 .................................................................... 6,167,925
5,760,000 Series C, 5.50%, 01/01/28 .................................................................... 5,609,434
Salt River Project, Agricultural Improvement and Power District, Electric System Revenue, (cont.)
$ 110,000 Series E, Pre-Refunded, 8.25%, 01/01/13....................................................... $ 114,189
625,000 Series E, Pre-Refunded, 8.25%, 01/01/28....................................................... 648,800
3,220,000 San Luis Municipal Property Corp., Municipal Facilities Revenue, 8.125%, 07/01/19 ............. 3,378,327
8,000,000 Santa Cruz County IDAR, Citizens Utilities Co. Project, 6.60%, 05/01/29 ....................... 8,446,400
50,000 Scottsdale, City of, Municipal Property Corp., Refunding, Pre-Refunded, 7.75%, 07/01/05 ....... 51,692
Scottsdale IDA, Hospital Revenue, Scottsdale Memorial Hospital, AMBAC Insured,
7,000,000 Refunding, Series A, 5.625%, 09/01/12......................................................... 7,035,770
1,250,000 Refunding, Series A, 5.70%, 09/01/15.......................................................... 1,254,688
4,045,000 Refunding, Series A, 5.70%, 09/01/18.......................................................... 4,060,169
180,000 Refunding, Series A, Pre-Refunded, 8.50%, 09/01/17............................................ 187,097
Sedona Sewer Sales Tax Revenue,
3,800,000 Refunding, 6.75%, 07/01/07.................................................................... 4,175,744
5,000,000 Refunding, 7.00%, 07/01/12.................................................................... 5,358,350
6,500,000 Series A, Pre-Refunded, 7.50%, 07/01/20....................................................... 7,271,355
Tucson Airport Authority Revenue, MBIA Insured,
6,700,000 Refunding, 5.70%, 06/01/13 ................................................................... 6,791,589
1,090,000 Series A, 6.875%, 06/01/20 ................................................................... 1,157,754
1,175,000 Series B, 7.125%, 06/01/15 ................................................................... 1,275,333
1,125,000 Series B, 7.25%, 06/01/20 .................................................................... 1,225,238
1,885,000 Tucson IDA, MFHR, La Entrada, Refunding, 7.40%, 07/01/26 ...................................... 1,974,538
2,000,000 Tucson IDA, MF Revenue, Refunding, Los Portales, 5.90%, 12/20/31............................... 2,014,580
2,300,000 Tucson, Series A, 5.375%, 07/01/20............................................................. 2,244,570
Tucson Water Revenue,
2,250,000 Refunding, MBIA Insured, 7.00%, 07/01/10...................................................... 2,380,208
14,650,000 Series A, MBIA Insured, 6.00%, 07/01/21....................................................... 15,172,419
6,750,000 Series D, Pre-Refunded, 7.10%, 07/01/18....................................................... 7,585,718
1,500,000 University of Arizona COP, Telecommunications System, Pre-Refunded, 7.60%, 07/15/03............ 1,552,185
University of Arizona Medical Center Corp., Hospital Revenue, Pre-Refunded, 8.10%, 07/01/16
225,000 Series 1986................................................................................... 232,785
250,000 Series 1987................................................................................... 258,650
University of Arizona System Revenue,
1,000,000 6.25%, 06/01/11............................................................................... 1,066,330
1,300,000 6.35%, 06/01/14............................................................................... 1,369,433
1,700,000 Pre-Refunded, 7.625%, 06/01/11................................................................ 1,812,404
6,000,000 University of Puerto Rico Revenue, Series M, MBIA Insured, 5.25%, 06/01/25 .................... 5,810,700
2,650,000 Williams Municipal Development Authority, Inc., Municipal Facilities Revenue, 7.625%, 07/01/05 2,697,568
Yavapai County, USD No. 22, Humboldt,
1,500,000 Series A, FGIC Insured, 5.95%, 07/01/14....................................................... 1,558,470
1,825,000 Series B, MBIA Insured, 5.60%, 07/01/14 ...................................................... 1,860,095
1,500,000 Yuma County Elementary School District No. 1, Series A, MBIA Insured, 5.75%, 07/01/14 ......... 1,556,790
Yuma IDA, MFHR, Alexandrite Sands Apartments Project, FHA Insured,
1,000,000 7.60%, 12/01/15............................................................................... 1,048,290
2,000,000 7.70%, 12/01/29............................................................................... 2,101,240
------------
Total Long Term Investments (Cost $706,892,712)................................................ 748,730,962
------------
aShort Term Investments 0.3%
1,500,000 Maricopa County IDA, Hospital Facilities Revenue, Samaritan Health Service Hospital, Series B-2,
MBIA Insured, Daily VRDN and Put, 3.50%, 12/01/08 ............................................ 1,500,000
900,000 Phoenix Arizona Series 95-2, Purchase Agreement, Morgan Guarantee Trust Company, Daily VRDN
and Put, 3.45%, 06/01/20 ..................................................................... 900,000
200,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.95%, 12/01/15 .............................................................................. 200,000
------------
Total Short Term Investments (Cost $2,600,000) ................................................ 2,600,000
------------
Total Investments (Cost $709,492,712) 99.1% .................................................. $751,330,962
Other Assets and Liabilities, Net 0.9% ....................................................... 6,489,580
------------
Net Assets 100.0% ............................................................................ $757,820,542
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $709,496,494 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess value over tax cost ................................................................. $ 41,841,013
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (6,545)
------------
Net unrealized appreciation ................................................................. $ 41,834,468
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFC - Housing Finance Corp.
IDA - Industrial Development Authority /Agency
IDAR - Industrial Development Authority /Agency Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
PBA - Public Building Authority
PCC - Pollution Control Corp.
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
UHSD - Unified High School District
USD - Unified School District
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime interest rate or U.S. Treasury bills rate).
eSee note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- -------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin Colorado Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 101.3%
$ 770,000 Adams County PCR, Refunding, Public Service Co. of Colorado Project, Series A, 7.375%, 11/01/09 $ 788,288
1,000,000 Adams County School District No.12, FGIC Insured, 5.40%, 12/15/14 .............................. 994,260
8,000,000 Arapahoe County Capital Improvements Transportation Fund Highway Revenue, Vehicle Registration,
Series A, MBIA Insured, 6.15%, 08/31/26 ....................................................... 8,396,720
400,000 Arapahoe County COP, Arapahoe County Building Finance Corp., FSA Insured, Pre-Refunded,
7.50%, 12/01/10 ............................................................................... 444,464
805,000 Arapahoe County COP, Refunding, FSA Insured, 6.625%, 12/01/16 .................................. 874,286
Arapahoe County School District,
2,200,000 No. 2, Refunding, MBIA Insured, 5.70%, 06/01/19 ............................................. 2,214,300
500,000 No. 5, Cherry Creek, 7.125%, 12/15/10 ....................................................... 546,940
1,150,000 No. 5, Cherry Creek, 5.15%, 12/15/15 ........................................................ 1,114,914
3,000,000 Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 06/01/11 ........................ 3,349,620
1,000,000 Arvada MFHR, Refunding, Springwood Community Project, 6.35%, 08/20/16 .......................... 1,026,240
2,500,000 Auraria Higher Education Center, Parking Facilities Revenue, Refunding, Pre-Refunded, 7.875%,
04/01/12 ...................................................................................... 2,750,750
2,850,000 Aurora COP, Refunding, 6.25%, 12/01/09 ......................................................... 3,038,784
150,000 Aurora MFHR, Dayton Place Project, Series 1988-A, GNMA Secured, 8.25%, 01/20/29 ................ 155,631
750,000 Aurora Urban Renewal Authority, Tax Increment Revenue, Pre-Refunded, 7.50%, 11/15/07 ........... 800,813
1,000,000 Bayfield School District No. 10, MBIA Insured, 6.65%, 06/01/15 ................................. 1,088,370
Boulder County Hospital Revenue, Longmont United Hospital Project,
2,000,000 5.80%, 12/01/13 ............................................................................. 1,957,900
1,285,000 5.875%, 12/01/20 ............................................................................ 1,242,595
3,000,000 Pre-Refunded, 8.20%, 12/01/20 ............................................................... 3,414,240
1,250,000 Boulder GO, Refunding, 7.20%, 08/15/13 ......................................................... 1,332,475
2,900,000 Castle Pines Metropolitan District, Refunding and Improvement, FSA Insured, 7.625%, 12/01/15 ... 3,208,763
750,000 Colorado Association of School Boards, COP, Pueblo School District No. 60 Project, Series A,
MBIA Insured, Pre-Refunded, 7.25%, 12/01/09 ................................................... 815,220
Colorado Health Facilities Authority Revenue,
1,615,000 Birchwood Manor Project, Series A, GNMA Secured, 7.625%, 04/01/26 ........................... 1,672,236
1,500,000 Boulder Community Hospital, Refunding, Series B, MBIA Insured, 5.875%, 10/01/23 ............. 1,523,505
1,000,000 Children's Hospital Association Project, MBIA Insured, 5.25%, 10/01/26 ...................... 942,780
954,000 Community Provider Pooled Loan Program, FSA Insured, 6.75%, 07/15/17 ........................ 1,020,408
6,570,000 Community Provider Pooled Loan Program, Series A, FSA Insured, 7.25%, 07/15/17 .............. 7,132,195
1,750,000 Covenant Retirement Communities, 6.75%, 12/01/15 ............................................ 1,824,428
4,950,000 Covenant Retirement Communities, 6.75%, 12/01/25 ............................................ 5,121,270
1,250,000 Mercy Medical Center Durango, 6.20%, 11/15/15 ............................................... 1,282,888
405,000 Oakbrook I Manor, Series A, GNMA Secured, 7.25%, 04/01/11 ................................... 418,268
885,000 Oakbrook I Manor, Series A, GNMA Secured, 7.625%, 04/01/26 .................................. 921,648
6,000,000 PSL Health System Project, Series B, Pre-Refunded, 8.50%, 02/15/21 .......................... 6,970,860
775,000 Refunding, Porter Memorial Hospital Project, Series A, Pre-Refunded, 7.40%, 02/01/16 ........ 839,914
1,000,000 Sisters of Charity Health Care System, 5.25%, 05/15/14 ...................................... 966,940
Colorado HFA,
3,740,000 MF, Series A, 6.80%, 08/01/14 ............................................................... 3,893,826
6,070,000 MF, Series A, 6.85%, 08/01/24 ............................................................... 6,319,234
2,405,000 MF, Series A, 6.875%, 08/01/30 .............................................................. 2,502,932
1,000,000 eMF, Series A-2, 6.00%, 10/01/28 ............................................................ 995,730
100,000 Series A, Pre-Refunded, 8.375%, 01/01/30 .................................................... 105,768
1,000,000 SF, Series A, 7.50%, 05/01/29 ............................................................... 1,047,880
5,440,000 SF Program, Refunding, Series A-2, MBIA Insured, 5.625%, 11/01/23 ........................... 5,347,357
275,000 SF Program, Series A-1, 8.00%, 08/01/17 ..................................................... 286,369
855,000 SF Program, Series A-2, 7.70%, 02/01/23 ..................................................... 894,364
380,000 SF Program, Series A-3, 7.90%, 08/01/21 ..................................................... 397,051
1,680,000 SF Program, Series C-2, 7.375%, 08/01/10 .................................................... 1,752,156
Colorado HFA, (cont.)
$ 240,000 SF Program, Series C-2, 7.85%, 02/01/21 ..................................................... $ 249,338
15,000 SFMR, Series C, 8.75%, 09/01/17 ............................................................. 15,461
3,000,000 Colorado Mountain College Residence Hall Authority Revenue, MBIA Insured, 5.75%, 06/01/23 ...... 3,039,060
Colorado Postsecondary Educational Facilities Authority Revenue,
1,000,000 Auraria Foundation Project, FSA Insured, 6.00%, 09/01/15 .................................... 1,032,170
3,250,000 Regis University Project, Connie Lee Insured, 6.625%, 06/01/13 .............................. 3,412,273
300,000 University of Denver Project, Series B, Pre-Refunded, 9.00%, 12/01/07 ....................... 317,520
2,795,000 Colorado Springs Airport Revenue, Series A, MBIA Insured, 5.25%, 01/01/22 ...................... 2,675,234
Colorado Springs Hospital Revenue,
75,000 Memorial Hospital, Pre-Refunded, 8.75%, 12/15/07 ............................................ 79,358
5,575,000 Refunding, MBIA Insured, 6.00%, 12/15/15 .................................................... 5,771,296
10,955,000 Refunding, MBIA Insured, 6.00%, 12/15/24 .................................................... 11,251,333
Colorado Springs Utilities Revenue,
295,000 Series 1988-A, Pre-Refunded, 8.00%, 11/15/20 ................................................ 297,543
9,000,000 Series A, 6.10%, 11/15/24 ................................................................... 9,324,270
1,090,000 Colorado State, Board Community Colleges and Occupational Educational Revenue, Red Rocks
Community College Project, AMBAC Insured, 6.00%, 11/01/19 ..................................... 1,126,275
Colorado Water Resource and Power Development Authority,
1,765,000 Clean Water Revenue, Series A, 6.15%, 09/01/11 .............................................. 1,867,900
1,000,000 Clean Water Revenue, Series A, 6.30%, 09/01/14 .............................................. 1,061,140
750,000 Small Water Resource Revenue, Series A, FGIC Insured, 6.70%, 11/01/12 ....................... 809,010
65,000 Stagecoach Project, Pre-Refunded, 8.00%, 11/01/17 ........................................... 71,054
Denver City and County Airport Revenue,
4,000,000 Series A, 7.50%, 11/15/23 ................................................................... 4,444,520
4,000,000 Series A, 8.50%, 11/15/23 ................................................................... 4,581,360
2,000,000 Series A, 5.50%, 11/15/25 ................................................................... 1,927,220
7,500,000 Series A, Pre-Refunded, 7.50%, 11/15/12 ..................................................... 8,734,875
1,000,000 Series D, 7.75%, 11/15/13 ................................................................... 1,226,160
5,000,000 Series D, Refunding, MBIA Insured, 5.875%, 11/15/16 ......................................... 5,022,850
100,000 Denver City and County Excise Tax Revenue, MBIA Insured, Pre-Refunded, 8.30%, 09/01/14 ......... 103,313
1,880,000 Denver City and County IDR, University of Denver Project, 7.50%, 03/01/11 ...................... 2,030,644
Denver City and County Revenue,
3,150,000 Childrens Hospital Association Project, FGIC Insured, 6.00%, 10/01/15 ....................... 3,238,988
150,000 Refunding, St. Anthony's Hospital, Sisters of Charity Health Care System, Series A, MBIA Insured,
Pre-Refunded, 7.75%, 05/01/14 .............................................................. 162,710
250,000 Denver City and County SFMR, Series A, GNMA Secured, 8.125%, 12/01/20 .......................... 258,798
2,000,000 Denver City and County Special Facilities Airport Revenue, United Airlines Project, Series A, 6.875%,
10/01/32 ...................................................................................... 2,079,240
1,000,000 Donala Colorado Water and Sanitary District, Improvement Series B, 6.50%, 12/01/14 ............. 1,049,260
2,230,000 Douglas County, School District No. 1, Douglas and Elbert Counties, Improvement Series A,
MBIA Insured, 6.50%, 12/15/16 ................................................................. 2,502,045
El Paso County,
145,000 HMR, Series A, GNMA Secured, 8.00%, 03/01/21 ................................................ 150,377
100,000 HMR, Series B, GNMA Secured, 8.125%, 11/01/13 ............................................... 104,565
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 ................................................ 106,390
El Paso County, School District No. 20, GO, Series B,
30,000 8.00%, 12/01/06 ............................................................................. 30,940
20,000 Pre-Refunded, 8.00%, 12/01/06 ............................................................... 20,495
1,500,000 Estes Park Urban Renewal Authority, Tax Increment Revenue, Pre-Refunded, 7.625%, 05/15/08 ...... 1,621,815
1,035,000 Foothill Metropolitan Recreational and Park District, Golf Course Revenue, Series A, Pre-Refunded,
8.00%, 11/15/04 ............................................................................... 1,075,593
$ 190,000 Fort Collins IDR, Vipont Pharmaceutical, Inc. Project, Pre-Refunded, 9.25%, 08/01/13 ........... $ 207,083
5,000,000 Fort Collins PCR, Anheuser-Busch Co. Project, Refunding, 6.00%, 09/01/31 ....................... 5,145,000
250,000 Frisco Fire Protection District, Refunding and Improvement, 7.20%, 12/01/05 .................... 264,740
Guam Airport Authority Revenue, Series A, Refunding,
400,000 6.375%, 10/01/10 ............................................................................ 413,976
800,000 6.50%, 10/01/23 ............................................................................. 825,368
1,000,000 Guam Power Authority Revenue, Series A, 6.375%, 10/01/08 ....................................... 1,038,500
Jefferson County District Wide Sales Tax Revenue, Local Improvement District,
7,450,000 MBIA Insured, 6.30%, 06/01/22 ............................................................... 7,783,760
200,000 Pre-Refunded, 8.20%, 12/01/13 ............................................................... 214,128
1,000,000 Jefferson County School District No. R-001, AMBAC Insured, 6.25%, 12/15/12 ..................... 1,056,590
545,000 Jefferson County SFMR, Refunding, Series A, MBIA Insured, 8.875%, 10/01/13 ..................... 579,182
750,000 La Plata County School District No. 9-R, Durango COP, FGIC Insured, 7.40%, 11/15/07 ............ 801,368
Lakewood MFHR Mortgage, FHA Insured Mortgage,
1,235,000 6.65%, 10/01/25 ............................................................................. 1,279,485
3,025,000 6.70%, 10/01/36 ............................................................................. 3,121,891
250,000 Larimer County Health Care Facilities Revenue, Refunding, Western Health Network, Inc., MBIA Insured,
7.625%, 01/01/12 .............................................................................. 265,160
Las Animas County School District No. 1, Refunding,
1,000,000 6.15%, 12/01/08 ............................................................................. 1,017,460
935,000 6.20%, 12/01/10 ............................................................................. 952,672
Left Hand Water District Revenue, MBIA Insured,
1,400,000 5.70%, 11/15/15 ............................................................................. 1,427,006
735,000 Boulder and Weld Counties, Pre-Refunded, 7.40%, 11/15/09 .................................... 818,276
530,000 Logan County, SFMR, Refunding, Series A, 8.50%, 11/01/11 ....................................... 550,066
910,000 Louisville Water District GO, Refunding, FGIC Insured, 7.20%, 12/01/09 ......................... 945,790
350,000 Mesa County Sales Tax Revenue, Refunding, MBIA Insured, 7.75%, 12/01/13 ........................ 369,383
575,000 Metropolitan of Denver Revenue, Sewer Disposal District No. 1, Series A, MBIA Insured, Pre-Refunded,
7.60%, 04/01/14 ............................................................................... 607,562
1,850,000 Montrose County COP, 6.35%, 06/15/06 ........................................................... 1,951,991
8,490,000 ePlatte River Power Authority Revenue, Series D-2, Refunding, MBIA Insured, 5.375%, 06/01/17.... 8,386,167
540,000 Pueblo County COP, Public Parking, 6.90%, 07/01/15 ............................................. 553,343
4,395,000 Pueblo County, MBIA Insured, 6.00%, 06/01/16 ................................................... 4,555,286
1,000,000 Pueblo County School District No. 70, Pueblo Rural, GO, AMBAC Insured, 6.40%, 12/01/14 ......... 1,074,890
1,000,000 Pueblo Urban Renewal Authority Tax Increment Revenue, Refunding, AMBAC Insured, 6.10%, 12/01/15 1,051,440
55,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured,
Pre-Refunded, 9.00%, 07/01/09 ................................................................. 69,821
1,000,000 Puerto Rico Commonwealth Highway Authority Revenue, Series Q, Pre-Refunded, 8.00%, 07/01/18 .... 1,134,010
Puerto Rico Electric Power Authority Revenue, Refunding,
50,000 Series L, Pre-Refunded, 8.40%, 07/01/15 ..................................................... 51,786
155,000 Series N, 7.125%, 07/01/14 .................................................................. 165,357
15,000 Puerto Rico HFC, SFMR, Portfolio No. 1, Series A, GNMA Secured, 7.80%, 10/15/21 ................ 15,584
600,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue, Baxter Travenol Labs,
Series A, 8.00%, 09/01/12 ..................................................................... 647,028
1,335,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities, Financing
Authority, Industrial Revenue, Guaynabo Municipal Government Center, Series A, 5.625%, 07/01/22 1,253,605
145,000 Puerto Rico Municipal Finance Agency, Series A, 8.25%, 07/01/08 ................................ 155,149
Regional Transportation District Sales Tax Revenue,
1,080,000 Refunding and Improvement, FGIC Insured, 6.25%, 11/01/12 .................................... 1,141,301
100,000 Series 1988, Pre-Refunded, 8.00%, 11/01/08 .................................................. 106,420
640,000 Southwestern SFMR, Refunding, Series A, 7.375%, 09/01/11 ....................................... 665,965
3,000,000 Stonegate Village Metropolitan District, Refunding and Improvement, Series A, FSA Insured,
5.60%, 12/01/25 ............................................................................... 2,982,720
$ 200,000 Summit County SFMR, Series A, 7.50%, 12/01/11 .................................................. $ 208,802
2,750,000 Summit County Sports Facilities Revenue, Refunding, Keystone Resorts Project, Ralston Purina Co.,
7.875%, 09/01/08 .............................................................................. 3,269,668
7,000,000 University of Colorado, Hospital Authority Revenue, Series A, AMBAC Insured, 6.40%, 11/15/22 ... 7,426,230
2,000,000 Westminster City Sales and Use Tax Revenue, Refunding and Improvement, FGIC Insured, 7.00%,
12/01/08 ...................................................................................... 2,158,370
------------
Total Long Term Investments (Cost $231,516,576)........................................... 245,317,352
------------
aShort Term Investments 0.5%
Colorado Health Facilities Authority Revenue, Weekly VRDN and Put,
500,000 Boulder Community Hospital Project, MBIA Insured, 3.30%, 10/01/14 ........................... 500,000
400,000 Sisters of Charity Health, 3.30%, 05/15/22 .................................................. 400,000
300,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.95%, 12/01/15 ............................................................................... 300,000
------------
Total Short Term Investments (Cost $1,200,000) ........................................... 1,200,000
------------
Total Investments (Cost $232,716,576) 101.8% ........................................ 246,517,352
Liabilities in Excess of Other Assets (1.8)% ........................................ (4,254,776)
------------
Net Assets 100.0% ................................................................... $242,262,576
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $232,717,464 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost ............................................................ $ 13,912,137
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value ............................................................ (112,249)
------------
Net unrealized appreciation .................................................................. $ 13,799,888
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
HMR - Home Mortgage Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFHR - Multi-Family Housing Revenue
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SF - Single Family
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime rate or U.S. Treasury bills rate).
eSee Note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- -------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin Connecticut Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 96.8%
Bridgeport GO,
$ 300,000 Series A, 7.25%, 06/01/00 .................................................................... $ 318,999
600,000 Series A, Pre-Refunded, 7.625%, 01/15/09 ..................................................... 652,404
1,375,000 Series B, 7.55%, 11/15/00 .................................................................... 1,486,980
3,750,000 Series B, Pre-Refunded, 7.75%, 11/15/10 ...................................................... 4,251,300
425,000 Series B, State Guaranteed, Pre-Refunded, 7.30%, 01/15/09 .................................... 459,893
750,000 Unlimited Tax, Series A, ETM, 7.30%, 03/01/99 ................................................ 795,383
Connecticut HFA, Housing Mortgage Finance,
10,000 Series A, 7.60%, 11/15/05 .................................................................... 10,368
1,010,000 Series A, Sub-Series 2, 7.20%, 11/15/08 ...................................................... 1,071,994
150,000 Series B, 7.20%, 11/15/09 .................................................................... 155,454
16,715,000 Series B, 6.75%, 11/15/23 .................................................................... 17,613,264
100,000 Series B-1, 7.55%, 11/15/08 .................................................................. 104,386
500,000 Series C-1, 6.60%, 11/15/23 .................................................................. 522,280
1,500,000 Series C-2, 6.25%, 11/15/18................................................................... 1,527,630
5,095,000 Series C-2, 6.70%, 11/15/22 .................................................................. 5,245,252
3,900,000 Series E, 6.30%, 05/15/17 .................................................................... 3,999,021
1,250,000 Sub-Series A-1, 6.10%, 05/15/17 .............................................................. 1,274,563
640,000 Sub-Series B-1, 6.50%, 05/15/18 .............................................................. 661,830
700,000 Sub-Series B-1, 6.30%, 05/15/25 .............................................................. 718,984
395,000 Sub-Series B-2, 6.75%, 05/15/22 .............................................................. 412,254
1,380,000 Sub-Series G-1, 6.20%, 11/15/16 .............................................................. 1,404,302
Connecticut Higher Education Supplemental Loan Authority, Series A,
850,000 7.00%, 11/15/05 .............................................................................. 902,845
245,000 7.20%, 11/15/10 .............................................................................. 260,141
405,000 7.50%, 11/15/10 .............................................................................. 423,662
5,800,000 Connecticut State Development Authority, Health Care Revenue, Masonic Charity of Connecticut,
6.50%, 08/01/20 .............................................................................. 6,053,228
750,000 Connecticut State Development Authority, PCR, New England Power Co., 7.25%, 10/15/15 .......... 803,385
2,000,000 Connecticut State Development Authority, Solid Waste Disposal Facilities Revenue, Pfizer, Inc.
Project, 7.00%, 07/01/25 ..................................................................... 2,239,140
Connecticut State Development Authority, Water Facility Revenue, Bridgeport Hydraulic Co. Project,
1,000,000 6.15%, 04/01/35............................................................................... 1,016,060
1,000,000 Refunding, 7.25%, 06/01/20.................................................................... 1,081,260
Connecticut State Health and Educational Facilities Authority Revenue,
2,000,000 Abbot Terrace Health Center Project, Series A, 6.00%, 11/01/14 ............................... 2,100,860
635,000 Capital Assets, Series B, ETM, 7.00%, 01/01/00................................................ 680,053
1,265,000 Capital Assets, Series C, MBIA Insured, 7.00%, 01/01/20 ...................................... 1,378,863
730,000 Capital Assets, Series C, MBIA Insured, Pre-Refunded, 7.00%, 01/01/20 ........................ 809,767
5,600,000 Choate Rosemary Hall, Series A, 7.00%, 07/01/25 .............................................. 6,209,112
1,000,000 Greenwich Hospital, Series A, MBIA Insured, 5.75%, 07/01/16 .................................. 1,005,690
1,500,000 Greenwich Hospital, Series A, MBIA Insured, 5.80%, 07/01/26 .................................. 1,502,325
1,375,000 Hartford University, Series C, Pre-Refunded 8.00%, 07/01/18 .................................. 1,576,286
5,000,000 Hartford University, Series D, 6.80%, 07/01/22 ............................................... 5,045,450
1,245,000 Hebrew Home and Hospital, Series A, 7.00%, 08/01/30 .......................................... 1,280,619
1,000,000 Lawrence Memorial Hospital, Series B, MBIA Insured, Pre-Refunded, 7.00%, 07/01/20 ............ 1,101,680
500,000 Lutheran General Health Care System, ETM, 7.375%, 07/01/19 ................................... 588,715
1,000,000 New Britain Memorial Hospital, Series A, 7.75%, 07/01/22 ..................................... 1,078,010
2,905,000 New Horizons Village Project, 7.30%, 11/01/16 ................................................ 3,315,244
975,000 Quinnipiac College, Series C, Pre-Refunded, 7.75%, 07/01/20 .................................. 1,094,945
1,000,000 Sacred Heart University, Refunding, Series C, 6.50%, 07/01/16 ................................ 1,024,030
615,000 Sacred Heart University, Series A, Pre-Refunded, 6.85%, 07/01/22 ............................. 690,823
Connecticut State Health and Educational Facilities Authority Revenue, (cont.)
$ 7,000,000 Sacred Heart University, Series C, 6.625%, 07/01/26 .......................................... $ 7,164,290
275,000 San Raphael Hospital, Series C, AMBAC Insured, Pre-Refunded, 7.50%, 07/01/14 ................. 293,582
100,000 St. Mary's Hospital, Series B, 7.50%, 07/01/02 ............................................... 104,402
1,000,000 St. Mary's Hospital, Series C, Pre-Refunded, 7.375%, 07/01/20 ................................ 1,111,530
1,000,000 Taft School, Series A, 7.375%, 07/01/20 ...................................................... 1,058,100
2,500,000 Taft School, Series C, 6.00%, 07/01/16 ....................................................... 2,516,700
3,325,000 Taft School, Series C, Asset Guarantee, 5.75%, 07/01/26 ...................................... 3,306,014
2,200,000 Trinity College, Series E, MBIA Insured, 5.875%, 07/01/26 .................................... 2,233,418
7,000,000 Windham Community Memorial Hospital, Series C, 6.00%, 07/01/20................................ 6,802,600
12,350,000 Yale New Haven Hospital, Series F, MBIA Insured, Pre-Refunded, 7.10%, 07/01/25 ............... 13,643,533
1,000,000 Yale New Haven Hospital, Series H, MBIA Insured, Refunding, 5.70%, 07/01/25 .................. 994,340
Connecticut State Resource Recovery Authority Revenue,
200,000 American Refunding, Series A, 7.70%, 11/15/01 ................................................ 214,368
200,000 American Refunding, Series A, 8.10%, 11/15/15 ................................................ 215,652
835,000 Bridgeport Resco, Ltd. Partnership Project, Series A, 7.625%, 01/01/09 ....................... 866,922
205,000 Wallingford Recovery Project, Series A, 7.125%, 11/15/08 ..................................... 211,214
Connecticut State Special Tax Obligation Revenue, Transportation Infrastructure Purpose,
Series A, Pre-Refunded,
900,000 7.30%, 02/15/08 .............................................................................. 948,888
2,000,000 7.20%, 02/01/09 .............................................................................. 2,153,280
200,000 East Haven, Utah Bank Qualified GO, 7.00%, 09/15/07 ........................................... 213,950
200,000 Griswold GO, AMBAC Insured, 7.50%, 04/01/06 ................................................... 238,516
Guam Airport Authority Revenue, Series B
250,000 6.60%, 10/01/10 .............................................................................. 259,923
1,300,000 6.70%, 10/01/23 .............................................................................. 1,346,995
5,500,000 Guam Power Authority Revenue, Series A, 6.75%, 10/01/24 ....................................... 5,784,460
210,000 Montville Town GO, Pre-Refunded, 7.35%, 12/01/10 .............................................. 226,160
New Haven GO,
2,250,000 Series A, 7.10%, 03/01/97 .................................................................... 2,250,180
4,545,000 Series A, Pre-Refunded, 7.40%, 03/01/12 ...................................................... 5,189,890
2,000,000 Series B, Pre-Refunded, 6.75%, 12/01/05 ...................................................... 2,250,760
Plainfield GO,
150,000 Series 1988, 7.30%, 09/01/10 ................................................................. 164,216
335,000 Series 1991, 7.25%, 09/01/05 ................................................................. 369,197
335,000 Series 1991, 7.30%, 09/01/07 ................................................................. 368,728
335,000 Series 1991, 7.30%, 09/01/09 ................................................................. 366,467
100,000 Plainville GO, 7.20%, 06/15/08 ................................................................ 102,670
1,500,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series 1988-A,
Pre-Refunded, 7.00%, 07/01/19 ................................................................ 1,593,780
1,000,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series S,
Pre-Refunded, 6.625%, 07/01/18 ............................................................... 1,118,900
1,800,000 Puerto Rico Commonwealth Highway Authority Revenue, Pre-Refunded, Series R, 6.75%, 07/01/05 ... 1,969,218
Puerto Rico Electric Power Authority Revenue,
700,000 Series P, Pre-Refunded, 7.00%, 07/01/11 ...................................................... 786,891
2,950,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ...................................................... 3,316,184
5,000,000 Series T, 6.375%, 07/01/24 ................................................................... 5,233,550
775,000 Puerto Rico HFC, SFMR, Series C, GNMA Insured, 6.85%, 10/15/23 ................................ 815,192
5,000,000 Puerto Rico Municipal Finance Agency, Series1994-A, 6.50%, 07/01/19 ........................... 5,341,700
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Pre-Refunded, 7.25%, 07/01/17
700,000 Series H ..................................................................................... 742,665
1,000,000 Series J ..................................................................................... 1,060,950
1,130,000 Stratford GO, Unlimited Tax, Pre-Refunded, 7.30%, 03/01/12 .................................... 1,267,679
$ 6,550,000 Virgin Islands Water and Power Authority, Electric System Revenue, Series A, 7.40%, 07/01/11 .. $ 7,015,902
Waterbury GO, Pre-Refunded,
785,000 7.25%, 03/01/03 .............................................................................. 879,224
785,000 7.25%, 03/01/04 .............................................................................. 879,224
780,000 7.50%, 03/01/07 .............................................................................. 880,682
------------
Total Long Term Investments (Cost $170,131,695) .............................................. 181,821,420
------------
aShort Term Investments 1.2%
800,000 Connecticut State Development Authority, PCR, Refunding, Connecticut Light & Power Co. Project,
Series A, Weekly VRDN and Put, 3.40%, 09/01/28 ............................................... 800,000
1,500,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.95%, 12/01/15............................................................................... 1,500,000
------------
Total Short Term Investments (Cost $2,300,000) ................................................ 2,300,000
------------
Total Investments (Cost $172,431,695) 98.0% .................................................. 184,121,420
Other Assets and Liabilities, Net 2.0% ....................................................... 3,676,076
------------
Net Assets 100.0% ............................................................................ $187,797,496
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $ 172,457,405 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .............................................................. $ 11,674,726
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .............................................................. (10,711)
------------
Net unrealized appreciation ................................................................. $ 11,664,015
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
ETM - Escrow to Maturity
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Agency/Authority
HFC - Housing Finance Corp.
MBIA - Municipal Bond Investors Assurance Corp.
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime 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 28, 1997
Face Value
Amount Franklin Indiana Tax-Free Income Fund (Note 1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.4%
$ 75,000 Allen County COP, Fort Wayne Memorial Coliseum, Pre-Refunded, 8.125%, 11/01/17.................... $ 77,017
50,000 Beech Grove EDR, Westvaco Corp., 8.75%, 07/01/10 ................................................. 50,665
1,000,000 Carmel EDR, Refunding, Cool Creek Association, 6.50%, 09/01/15.................................... 1,029,520
75,000 Center Grove Central Elementary School Building Corp., First Mortgage, Pre-Refunded, 7.375%, 07/01/09 78,725
50,000 Chesterton Sewer Revenue, Pre-Refunded, 8.10%, 08/01/07........................................... 52,929
250,000 Clarke County Hospital Association, First Mortgage, Refunding, MBIA Insured, 7.50%, 09/01/07...... 267,403
710,000 Columbus Sewage Works Revenue, MBIA Insured, 6.50%, 02/15/13...................................... 772,295
500,000 Crawfordsville School Building Corp., First Mortgage, Pre-Refunded, 7.70%, 07/15/11............... 560,465
50,000 Crown Point Redevelopment District, Lake County Tax Increment, 8.10%, 02/01/07.................... 50,728
1,000,000 Eastern Hancock Middle School Building Corp., Indianapolis First Mortgage, Refunding, 6.00%, 01/15/21 1,009,120
1,750,000 Elkhart County, Hospital Authority Revenue, Goshen Hospital Association, Inc. Project, 7.35%, 07/01/12 1,866,760
500,000 Elwood Middle School Building Corp., First Mortgage, Refunding, 7.30%, 01/01/08 .................. 542,685
55,000 Flat Rock-Hawcreek Elementary School Building Corp., First Mortgage, Pre-Refunded, 8.30%, 01/01/09 59,167
1,000,000 Fort Wayne Hospital Authority Revenue, Parkview Memorial Hospital Project, Series A, FGIC Insured,
6.50%, 11/15/12 ................................................................................. 1,055,050
150,000 Franklin Community Elementary School Building Corp., First Mortgage, Pre-Refunded, 7.80%, 01/01/09 155,024
200,000 Franklin Township of Marion County, Multi-School Building Corp., First Mortgage, Pre-Refunded,
7.50%, 01/15/12 ................................................................................. 215,946
50,000 Frankton-Lapel School Building Corp., First Mortgage, Pre-Refunded, 7.90%, 01/01/09............... 51,690
125,000 Hamilton Southeastern Building Corp., Consolidated School Building Corp., First Mortgage,
Pre-Refunded, 8.40%, 01/01/15 ................................................................... 134,629
3,000,000 Hammond Industrial Sewer and Solid Waste Disposal Revenue, American Maize-Products Co. Project,
Series A, 8.00%, 12/01/24 ....................................................................... 3,349,170
1,500,000 Hammond Multi-School Building Corp., First Mortgage, Refunding, Series A, 6.20%, 07/10/15......... 1,542,000
300,000 Hammond PCR, Stauffer Chemical Project, Guaranteed Imperial 82, 8.00%, 11/01/12 .................. 333,333
Indiana Bond Bank, Special Program,
25,000 Series 1986-C, 8.00%, 08/01/11................................................................... 25,734
300,000 Series 1988-A, Pre-Refunded, 8.375%, 02/01/18 ................................................... 312,903
250,000 Series 1990-A, 7.50%, 02/01/20 .................................................................. 268,488
Indiana Health Facility Financing Authority, Hospital Revenue,
500,000 Bartholomew Indiana County Hospital, FSA Insured, Pre-Refunded, 7.75%, 08/15/20 ................. 563,295
2,000,000 Hancock Memorial Hospital Health Services, 6.125%, 08/15/17...................................... 1,975,800
1,250,000 Hancock Memorial Hospital Project, Pre-Refunded, 8.30%, 08/15/20 ................................ 1,425,700
1,835,000 Jackson County Schneck Memorial Hospital, 7.50%, 02/15/22 ....................................... 1,961,395
1,280,000 Methodist Hospital, Inc., 6.75%, 09/15/09 ....................................................... 1,358,093
1,000,000 Refunding and Improvement, Community Hospitals Projects, MBIA Insured, 5.70%, 05/15/22 .......... 995,920
50,000 St. Anthony's Medical Center/Home, Inc., Pre-Refunded, 9.25%, 10/01/17........................... 52,548
1,000,000 St. Anthony's Medical Center/Home, Inc., Series A, 7.00%, 10/01/17............................... 1,069,720
50,000 Welborn Memorial Baptist Hospital Project, Pre-Refunded, 8.00%, 07/01/02 ........................ 51,698
65,000 Indiana Municipal Power Agency, Power Supply System Revenue, Refunding, Series A, 5.75%, 01/01/18 63,604
2,000,000 Indiana State Development Financing Authority Environmental Revenue, 6.25%, 07/15/30 ............. 2,008,120
Indiana State Educational Facilities Authority Revenue,
175,000 Anderson University Project, 8.40%, 10/01/08..................................................... 187,614
175,000 Butler University Project No. 2, Series B, FGIC Insured, Pre-Refunded, 8.00%, 11/01/09........... 189,663
100,000 Valparaiso University Project, MBIA Insured, Pre-Refunded, 7.80%, 10/01/08....................... 107,849
500,000 University of Evansville Project, Pre-Refunded, 8.125%, 11/01/10 ................................ 571,655
Indiana State HFA, SFMR,
1,000,000 6.10%, 07/01/22 ................................................................................. 1,000,750
20,000 Series A, 7.875%, 01/01/17....................................................................... 20,690
45,000 Series A, GNMA Secured, 8.125%, 07/01/06 ........................................................ 47,231
460,000 Series F-2, GNMA Secured, 7.75%, 07/01/22 ....................................................... 486,804
1,000,000 Indiana State Office Building Commission, Correctional Facilities Program Revenue, 6.375%, 07/01/16 1,027,100
$ 95,000 Indiana State Vocational Technical College Building Facilities, Student Fee, Series B, MBIA Insured,
Pre-Refunded, 7.90%, 07/01/07.................................................................... $ 100,158
100,000 Indiana Transportation Finance Authority Highway Revenue, Series A, Pre-Refunded, 8.125%, 06/01/11 107,021
200,000 Indiana University Revenue Hospital Facilities, Pre-Refunded, 7.30%, 01/01/03 .................... 214,824
Indianapolis Airport Authority, Indianapolis International Airport Revenue,
1,460,000 6.50%, 11/15/31 ................................................................................. 1,487,974
85,000 MBIA Insured, 8.30%, 07/01/18 ................................................................... 90,388
Indianapolis Local Public Improvement Bond Bank, Series D,
225,000 Pre-Refunded, 8.50%, 02/01/18 ................................................................... 238,660
2,300,000 Refunding, 6.75%, 02/01/20 ...................................................................... 2,464,473
2,540,000 Refunding, 6.50%, 02/01/22 ...................................................................... 2,576,525
500,000 Jasper County PCR, Refunding, Collateralized, Northern Indiana Public Service Co., MBIA Insured,
7.10%, 07/01/17.................................................................................. 540,670
300,000 Jefferson County Hospital Authority Facility Revenue, Refunding, King's Daughters' Hospital,
8.50%, 08/15/13 ................................................................................. 319,203
50,000 Kendallville Sewage Works Revenue, GO, Pre-Refunded, 7.60%, 07/01/07.............................. 52,573
Kokomo Hospital Authority Revenue, Refunding, St. Joseph's Hospital and Health Center of Kokomo,
8.75%, 02/15/13
300,000 Pre-Refunded, Series A .......................................................................... 326,127
225,000 Series B ........................................................................................ 238,392
2,100,000 Lake Central Industrial Multi-School Building, First Mortgage, MBIA Insured, 6.50%, 01/15/14 ..... 2,243,745
95,000 Madison County Authority, Anderson Hospital Revenue, Refunding, Series A, MBIA Insured,
8.00%, 01/01/14 ................................................................................ 99,429
100,000 Manchester Community, Elementary School Building Corp., First Mortgage, Pre-Refunded,
7.80%, 01/01/12 ................................................................................. 107,005
250,000 Marion County Convention and Recreational Facilities Authority, Excise Tax Revenue, Lease Rental,
Series A, AMBAC Insured, 7.00%, 06/01/21......................................................... 272,615
300,000 Monroe County, Hospital Authority Revenue, Bloomington Hospital Project, MBIA Insured,
6.70%, 05/01/12 ................................................................................. 323,667
2,000,000 Muncies Edit Building Corp., Industrial First Mortgage, Series A, AMBAC Insured, 6.60%, 12/01/17.. 2,138,040
2,000,000 Munster School Building Corp., First Mortgage, MBIA Insured, 5.75%, 01/15/21...................... 2,004,300
2,220,000 New Prairie Unified School Building Corp., Revenue, First Mortgage, Refunding, 5.80%, 07/05/11.... 2,287,643
85,000 North Lawrence Community School, COP, Multi-School Building Corp., Pre-Refunded, 8.10%, 01/01/10 . 89,679
60,000 North Montgomery Elementary School Building Corp., COP, Pre-Refunded, 8.375%, 07/01/08 ........... 63,436
125,000 Northridge High School Additions, Building Corp., Middlebury, First Mortgage, Pre-Refunded,
8.00%, 12/30/08 ................................................................................. 133,978
100,000 Perry Township Multi-School Building Corp. Revenue, First Mortgage, Pre-Refunded, 7.80%, 01/01/03 105,307
Peru Community School Building Corp., First Mortgage, Pre-Refunded,
150,000 Series 1988, 7.90%, 07/01/08 .................................................................... 162,683
100,000 Series 1989, 7.80%, 01/01/11..................................................................... 108,281
Princeton PCR, Refunding, Public Service Co. of Indiana Project, Series C, MBIA Insured, 03/15/12,
250,000 7.375% .......................................................................................... 269,325
300,000 7.60% ........................................................................................... 306,231
150,000 South Bend Redevelopment Authority Lease Revenue, Rental Parking Facility Project, Pre-Refunded,
7.90%, 02/01/07 ................................................................................. 155,688
500,000 Steuben County Metropolitan School District, COP, 6.90%, 01/01/08 ................................ 532,105
750,000 Sullivan Industrial PCR, Refunding, Hoosier Energy, Meron Project, 7.10%, 04/01/19 ............... 805,230
250,000 Twin Lakes School Building Improvement Corp., First Mortgage, Pre-Refunded, 7.50%, 01/15/08 ...... 269,698
50,000 Warsaw High School Building Corp., First Mortgage, Pre-Refunded, 8.10%, 01/01/09.................. 53,690
------------
Total Long Term Investments (Cost $47,375,788) ................................................... 50,315,458
------------
aShort Term Investments 0.2%
$ 100,000 Fort Wayne Indiana Hospital Authority Revenue, Parkview Memorial Hospital, Series B, Weekly VRDN
and Put, 3.30%, 01/01/16 ........................................................................ $ 100,000
------------
Total Short Term Investments (Cost $100,000) ................................................ 100,000
------------
Total Investments (Cost $47,475,788) 98.6% ............................................ 50,415,458
Other Assets and Liabilities, Net 1.4% ................................................ 721,859
------------
Net Assets 100.0% ..................................................................... $51,137,317
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $47,475,788 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................... $ 2,939,670
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................... --
------------
Net unrealized appreciation ...................................................................... $ 2,939,670
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assistance
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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin Michigan Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 97.3%
$ 150,000 Avondale School District, AMBAC Insured, 5.75%, 05/01/22 ............................................ $ 150,788
160,000 Big Rapids Public School District, Building and Site, FGIC Insured, 5.625%, 05/01/20 ................ 159,883
100,000 Brandon School District, FGIC Insured, 5.75%, 05/01/20 .............................................. 101,450
100,000 Caledonia Community Schools, MBIA Insured, 5.85%, 05/01/22 .......................................... 101,907
100,000 Dearborn EDC Hospital Revenue, Oakwood Obligation Group, Series A, FGIC Insured, 5.75%, 11/15/15 .... 100,944
100,000 Farmington Hills EDC Revenue, Botsford Continuing Care, Series A, MBIA Insured, 5.75%, 02/15/25 ..... 100,221
500,000 Gogebic-Iron Wastewater Authority, Wastewater Treatment System Revenue, Refunding, MBIA Insured,
6.05%, 01/01/25 .................................................................................... 512,135
150,000 Grosse Ile Township School District, Refunding, FGIC Insured, 6.00%, 05/01/22 ....................... 153,885
125,000 Hale Area Schools, MBIA Insured, 5.60%, 05/01/22 .................................................... 123,001
100,000 Huron Valley School District, FGIC Insured, 5.875%, 05/01/16 ........................................ 102,099
130,000 Jenison Public Schools, Refunding, FGIC Insured, 5.75%, 05/01/16 .................................... 130,983
225,000 Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding and Improvement, Bronson
Methodist, MBIA Insured, 5.875%, 05/15/26 .......................................................... 227,831
100,000 Lakeview Community Schools, FGIC Insured, 5.75%, 05/01/16 ........................................... 100,679
140,000 Lincoln Consolidated School District, Refunding, FGIC Insured, 5.85%, 05/01/21....................... 141,868
115,000 Livonia Public Schools, School District, Refunding, FGIC Insured, 5.50%, 05/01/21.................... 111,846
Michigan State HDA, SFMR,
100,000 Refunding, Series B, 6.20%, 06/01/27................................................................ 101,036
250,000 Series D, 5.95%, 12/01/16 .......................................................................... 252,073
350,000 Series E, 6.20%, 12/01/27........................................................................... 351,988
Michigan State Hospital Finance Authority Revenue,
140,000 Refunding, Henry Ford Health System, 5.75%, 09/01/17................................................ 140,673
100,000 Sparrow Obligated Group, MBIA Insured, 5.90%, 11/15/26 ............................................. 101,509
140,000 Michigan State Trunk Line, Series A, FGIC Insured, 5.625%, 11/01/26 ................................. 138,099
150,000 Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Y,
5.50%, 07/01/26 .................................................................................... 144,291
125,000 Puerto Rico Electric Power Authority Revenue, Series X, 6.00%, 07/01/15 ............................. 127,884
100,000 Zeeland Public Schools, Refunding, Series B, MBIA Insured, 6.05%, 05/01/19 .......................... 103,685
------------
Total Investments (Cost $3,712,326) 97.3% ..................................................... 3,780,758
Other Assets and Liabilities, Net 2.7% ........................................................ 103,372
------------
Net Assets 100.0% ............................................................................. $3,884,130
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $3,712,326 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ...................................................................... $ 71,575
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ...................................................................... (3,143)
------------
Net unrealized appreciation ......................................................................... $ 68,432
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
EDC - Economic Development Corp.
FGIC - Financial Guaranty Insurance Co.
HDA - Housing Development Authority/Agency
MBIA - Municipal Bond Investors Assurance Corp.
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 28, 1997
Face Value
Amount Franklin New Jersey Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.3%
$ 1,000,000 Allamuchy Town Board of Education, COP, MBIA Insured, 6.00%, 11/01/14 ......................... $ 1,036,220
2,000,000 Atlantic City Municipal Utilities Authority Revenue, Water System, Pre-Refunded, 7.75%, 05/01/17 2,236,380
9,500,000 Atlantic County Improvement Authority, Luxury Tax Revenue, Convention Center Project, Insured,
ETM, 7.40%, 07/01/16 ......................................................................... 11,708,370
Atlantic County Utilities Authority, Solid Waste Revenue,
2,000,000 7.00%, 03/01/08 .............................................................................. 2,006,520
6,600,000 7.125%, 03/01/16 ............................................................................. 6,648,510
2,000,000 Bedminister Township Board of Education, COP, 7.125%, 09/01/10 ................................ 2,210,060
Bergen County Utility Authority, Solid Waste System Revenue, Series A, FGIC Insured,
1,325,000 6.25%, 06/15/11 .............................................................................. 1,404,977
100,000 Pre-Refunded, 7.75%, 03/15/13 ................................................................ 104,045
100,000 Bridgeview Manor Housing Corp. Revenue, Series A, Pre-Refunded, 8.20%, 12/01/08 ............... 105,263
5,400,000 Cape May County, IPC, Financing Authority Revenue, Refunding, Atlantic City Electric Co., Series A,
MBIA Insured, 6.80%, 03/01/21 ................................................................ 6,361,200
2,750,000 Carteret Board of Education, COP, MBIA Insured, 6.25%, 04/15/19 ............................... 2,885,410
1,890,000 Church Street Corp., Keansburg Elderly Housing Mortgage Revenue, Refunding, 5.625%, 03/01/11 .. 1,874,634
4,200,000 Delaware River and Bay Authority, Delaware Authority Revenue, FGIC Insured, 5.25%, 01/01/26 ... 4,013,646
200,000 Delaware River Joint Toll Bridge System Commission Revenue, Pre-Refunded,
7.875%, 07/01/18.............................................................................. 214,202
24,000,000 Delaware River Port Authority, Pennsylvania and New Jersey Revenue, FGIC Insured,
5.50%, 01/01/26 .............................................................................. 23,488,560
1,000,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue, Revenue
Refunding, AMBAC Insured, 7.375%, 01/01/07 ................................................... 1,070,660
2,510,000 Essex County Improvement Authority GO, Lease Revenue, MBIA Insured, 6.00%, 12/01/17 ........... 2,583,618
3,000,000 Evesham Municipal Utilities Authority Revenue, Series B, MBIA Insured, 7.00%, 07/01/10 ........ 3,211,560
3,675,000 Evesham Township Board of Education, COP, FGIC Insured, 6.875%, 09/01/11 ...................... 4,032,761
Gloucester County Improvement Authority Revenue,
1,000,000 Justice Complex Lease Project, Pre-Refunded, 7.50%, 12/15/10 ................................. 1,095,860
275,000 Solid Waste Resource Recovery, SES Gloucester Co., Limited Partnership Project, Series B,
8.375%, 07/01/10 ............................................................................. 282,780
2,000,000 Gloucester County, Industrial Refunding, Mobil Oil Refinance Corp. Project, 5.625%, 12/01/28 .. 2,008,696
4,670,000 Hamilton Township Board of Education, COP, Series B, FSA Insured, 7.00%, 12/15/15 ............. 5,074,422
1,750,000 Howell Township, GO, Refunding, FGIC Insured, 6.80%, 01/01/14 ................................. 1,903,055
100,000 Howell Township Municipal Utilities Authority Revenue, Monmouth County, MBIA Insured,
Pre-Refunded, 7.375%, 01/01/14 ............................................................... 106,597
2,550,000 Hudson County COP, Correctional Facility, MBIA Insured, Pre-Refunded, 7.60%, 12/01/21 ......... 2,759,100
2,000,000 Hudson County Improvement Authorities Facilities Lease Revenue, Hudson County Lease Project,
FGIC Insured, 6.00%, 12/01/25 ................................................................ 2,048,200
Lacey Municipal Utilities Authority, Water Revenue, MBIA Insured,
1,225,000 6.125%, 12/01/14 ............................................................................. 1,297,165
2,500,000 6.10%, 12/01/23 .............................................................................. 2,602,700
2,500,000 Mercer County Improvement Authority Revenue, Library Systems, Series A, 6.00%, 12/01/14 ....... 2,582,050
Middlesex County, COP, MBIA Insured,
1,500,000 6.00%, 08/15/14 .............................................................................. 1,566,270
2,300,000 6.125%, 02/15/19 ............................................................................. 2,401,775
2,000,000 Middlesex County Improvement Authority Revenue, Guaranteed Educational Services, Commission
Project, 6.00%, 09/15/14 ..................................................................... 2,092,960
2,100,000 Middlesex County Utilities Authority, Sewer Revenue, Refunding, Series A, FGIC Insured,
5.375%, 09/15/15 ............................................................................. 2,084,145
100,000 Monmouth County Improvement Authority Revenue, Wall and Keyport Projects, MBIA Insured,
Pre-Refunded, 7.90%, 07/15/13 ................................................................ 107,490
3,250,000 Newark Board of Education, MBIA Insured, 5.875%, 12/15/14 ..................................... 3,355,788
New Jersey EDA,
$ 575,000 First Mortgage Gross Revenue, Mega Care, Inc. Project, Pre-Refunded, 8.625%, 08/01/07......... $ 598,173
6,370,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series A, 6.20%, 12/01/10 ............... 6,437,649
3,375,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.10%, 12/01/04 ............... 3,439,125
2,720,000 Heating and Cooling Revenue, Trigen-Trenton Project, Series B, 6.20%, 12/01/07 ............... 2,758,107
550,000 Jersey Central Power and Light, 7.10%, 07/01/15 .............................................. 600,897
3,000,000 Market Transition Facilities Revenue, Senior Lien, Series A, MBIA Insured, 5.875%, 07/01/11 .. 3,114,150
6,000,000 Middlesex Water Co. Project, Water Facilities Revenue, 7.25%, 07/01/21........................ 6,507,780
8,200,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series A, AMBAC Insured,
6.25%, 08/01/24 .............................................................................. 8,563,588
7,810,000 Natural Gas Facilities Revenue, New Jersey Natural Gas Co. Project, Series B, 7.25%, 03/01/21 8,117,714
1,640,000 School Revenue, Blair Academy, 1995 Project, Series A, 5.85%, 09/01/16 ....................... 1,650,873
340,000 Series M, 7.90%, 12/01/08 .................................................................... 356,204
3,865,000 Series N, 6.90%, 12/01/11 .................................................................... 4,145,676
435,000 Series P, 6.90%, 12/01/11 .................................................................... 466,590
4,605,000 State Lease Revenue Refunding, Liberty State Park Lease Rental, AMBAC Insured,
5.75%, 03/15/20............................................................................... 4,627,288
3,315,000 State Lease Revenue Refunding, Liberty State Park Lease Rental, AMBAC Insured,
5.75%, 03/15/22............................................................................... 3,333,730
7,440,000 Terminal GATX Corp. Project, 6.65%, 09/01/22 ................................................. 7,889,153
1,000,000 Water Facilities Revenue Refunding, Hackensack Water Co., Series A, MBIA Insured,
5.80%, 03/01/24............................................................................... 1,012,550
New Jersey Health Care Facilities Financing Authority Revenue,
2,500,000 Atlantic City Medical Center, Series C, 6.80%, 07/01/11 ...................................... 2,665,075
6,000,000 Berkeley Heights Convalescent Hospital, AMBAC Insured, 5.00%, 07/01/26 ....................... 5,508,120
3,380,000 Beth Israel Hospital Association Passaic, 7.80%, 07/01/04 .................................... 3,598,855
1,000,000 Beth Israel Hospital Association Passaic, Refunding, 7.875%, 07/01/07 ........................ 1,066,360
9,460,000 Cathedral Health, Series A, FHA Insured, 7.25%, 02/15/10...................................... 10,209,610
2,020,000 Cathedral Health, Series A, FHA Insured, 7.25%, 02/15/21...................................... 2,176,348
1,000,000 Clara Maas Medical Center, Series B, Pre-Refunded, 7.30%, 07/01/09 ........................... 1,088,310
2,435,000 Clara Maas Medical Center, Series B, Pre-Refunded, 7.25%, 07/01/19 ........................... 2,647,356
100,000 Community Memorial Hospital Association, Series C, 8.00%, 07/01/14 ........................... 105,986
5,445,000 East Orange General Hospital, Series B, 7.75%, 07/01/20 ...................................... 5,796,584
4,890,000 Elizabeth General Medical Center, Series C, 7.375%, 07/01/15 ................................. 5,187,801
5,150,000 Franciscan St. Mary's Hospital, 5.875%, 07/01/12 ............................................. 5,080,475
2,400,000 Hackensack Medical Center, FGIC Insured, 6.25%, 07/01/21 ..................................... 2,459,832
4,000,000 Holy Name Hospital, Series B, AMBAC Insured, 7.00%, 07/01/08 ................................. 4,350,680
2,500,000 Jersey Shore Medical Center, Revenue Refunding, AMBAC Insured, 5.875%, 07/01/24............... 2,536,100
5,000,000 John F. Kennedy Health Systems, Obligation Group Revenue, FGIC Insured, 5.70%, 07/01/25....... 5,034,400
230,000 Kennedy Memorial Hospitals-University Medical Center, Inc., Series D, 7.875%, 07/01/09 ....... 243,496
4,900,000 Monmouth Medical Center, Series C, FSA Insured, 6.25%, 07/01/16 .............................. 5,139,267
8,250,000 Monmouth Medical Center, Series C, FSA Insured, 6.25%, 07/01/24 .............................. 8,622,323
1,800,000 Morristown Memorial Hospital, Series C, 7.125%, 07/01/08 ..................................... 1,909,890
125,000 New Jersey Geriatric Center of Workmen's Circle, Inc., Series A, FHA Mortgage Insured,
8.00%, 02/01/28 .............................................................................. 132,458
3,630,000 Newcomb Medical Center, Series A, 7.875%, 07/01/03 ........................................... 3,902,395
8,500,000 Overlook Hospital Association, Series E, FGIC Insured, 6.70%, 07/01/13 ....................... 8,740,635
3,565,000 Pascack Valley Hospital, 6.90%, 07/01/21 ..................................................... 3,714,231
10,000,000 Riverview Medical Center, 5.875%, 07/01/16 ................................................... 10,182,100
100,000 St. Claire's Riverside Medical Center, Series D, MBIA Insured, Pre-Refunded, 7.75%, 07/01/14.. 103,366
2,050,000 St. Joseph's Hospital and Medical Center, Revenue Refunding, 5.75%, 07/01/16.................. 2,056,560
1,000,000 St. Joseph's Hospital and Medical Center, Revenue Refunding, 6.00%, 07/01/26.................. 1,017,160
1,865,000 Wayne General Hospital, Series B, 5.75%, 08/01/11 ............................................ 1,902,878
New Jersey Health Care Facilities Financing Authority Revenue, (cont.)
$ 1,000,000 Wayne General Hospital, Series B, 5.875%, 08/01/18 ........................................... $ 1,010,360
475,000 Zurbrugg Memorial Hospital Issue, Series C, 8.50%, 07/01/12 .................................. 489,051
1,850,000 New Jersey State Building Authority Revenue, Refunding, 7.20%, 06/15/13 ....................... 1,946,182
New Jersey State Educational Facilities Authority Revenue,
4,000,000 Institute of Technology, Series A, MBIA Insured, 6.00%, 07/01/15 ............................. 4,161,720
2,000,000 Jersey State College, Series D, MBIA Insured, 6.125%, 07/01/22 ............................... 2,063,380
1,455,000 New Jersey Institute of Technology Revenue, Refunding, Series A, MBIA Insured, 6.00%, 07/01/24 1,497,748
2,500,000 New Jersey Institute of Technology, Series 95-E, MBIA Insured, 5.375%, 07/01/25 .............. 2,413,475
2,000,000 Princeton University, Series A, 5.875%, 07/01/18 ............................................. 2,034,880
2,760,000 Princeton University, Series C, 5.25%, 07/01/25............................................... 2,630,887
500,000 Ramapo College, Series C, MBIA Insured, Pre-Refunded, 7.70%, 07/01/13 ........................ 534,725
3,000,000 Rider College, Series D, AMBAC Insured, 6.20%, 07/01/17 ...................................... 3,143,280
9,810,000 Rowan College, Series E, AMBAC Insured, 6.00%, 07/01/26 ...................................... 10,134,809
445,000 Seton Hall University Project, Series C, MBIA Insured, Pre-Refunded, 6.85%, 07/01/19 ......... 475,701
555,000 Seton Hall University Project, Series C, MBIA Insured, Refunding, 6.85%, 07/01/19 ............ 599,178
4,400,000 Seton Hall University Project, Series D, 7.00%, 07/01/21 ..................................... 4,623,432
1,765,000 Seton Hall University Project, Series E, Refunding, MBIA Insured, 5.60%, 07/01/16 ............ 1,772,184
4,780,000 Trenton State College, Series B, AMBAC Insured, 6.125%, 07/01/19 ............................. 4,975,072
7,845,000 Trenton State College, Series B, AMBAC Insured, 6.125%, 07/01/24 ............................. 8,140,207
New Jersey State Highway Authority, Garden State Parkway, Senior Parkway Revenue,
5,000,000 6.20%, 01/01/10 .............................................................................. 5,477,950
2,500,000 6.25%, 01/01/14 .............................................................................. 2,648,925
2,900,000 6.00%, 01/01/16 .............................................................................. 2,978,909
1,000,000 5.75%, 01/01/19 .............................................................................. 1,010,370
New Jersey State Housing and Mortgage Finance Agency,
600,000 Home Buyer Revenue, Series B, MBIA Insured, 7.90%, 10/01/22 .................................. 636,066
3,510,000 Home Buyer Revenue, Series D, MBIA Insured, 7.70%, 10/01/29 .................................. 3,667,564
5,000,000 Home Buyer Revenue, Series J, MBIA Insured, 6.20%, 10/01/25 .................................. 5,093,350
4,000,000 Home Buyer Revenue, Series N, MBIA Insured, 6.35%, 10/01/27 .................................. 4,105,040
40,000 Home Mortgage Purchase Revenue, Series A, MBIA Insured, 7.875%, 10/01/17 ..................... 41,499
2,200,000 MFHR, Montclarion Project, Series J, FHA Insured, 7.70%, 11/01/29 ............................ 2,299,748
5,000,000 MFHR, Refunding, Series A, AMBAC Insured, 6.00%, 11/01/14 .................................... 5,110,100
12,500,000 MFHR, Refunding, Series A, AMBAC Insured, 6.05%, 11/01/20 .................................... 12,726,500
450,000 MFHR, Regency Park Project, Series H, 7.70%, 11/01/30 ........................................ 467,321
6,000,000 Revenue, Home Buyer Revenue, Series S, MBIA Insured, 6.05%, 10/01/28 ......................... 6,020,040
5,000,000 Section 8, Refunding, Series 1, 6.70%, 11/01/28 .............................................. 5,275,750
12,400,000 Section 8, Refunding, Series A, 6.95%, 11/01/13 .............................................. 13,053,728
4,670,000 Wastewater Treatment Trust Revenue, Series B, Pre-Refunded, 7.00%, 07/01/11 .................. 5,210,366
8,000,000 New Jersey State Sports and Expo. Authority, State Contract, Series A, MBIA Insured,
6.60%, 07/01/15 .............................................................................. 8,647,520
6,800,000 Refunding, 6.25%, 07/01/20 ................................................................... 7,082,540
1,000,000 North Bergen Township Municipal Utility Authority Sewer Revenue, FGIC Insured, Pre-Refunded,
7.625%, 12/15/19 ............................................................................. 1,050,760
2,000,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Port Saipan Harbor
Improvement, Series A, 6.85%, 10/01/25 ....................................................... 2,049,720
100,000 Ocean Township Municipal Utilities Authority Revenue, Refunding, MBIA Insured, Pre-Refunded,
7.875%, 08/01/15 ............................................................................. 107,561
Passaic Valley Sewerage Commissioners, Sewer System, Series D, AMBAC Insured,
7,400,000 5.80%, 12/01/18 .............................................................................. 7,472,668
5,000,000 5.875%, 12/01/22 ............................................................................. 5,056,700
1,000,000 Pine Hill Borough School District, COP, Fiscal Funding of New Jersey, Inc., MBIA Insured,
Pre-Refunded, 7.60%, 12/30/09 ................................................................ 1,023,180
$ 1,000,000 Piscataway Township School District, COP, MBIA Insured, Pre-Refunded, 7.50%, 06/15/09 ......... $ 1,074,250
Port Authority of New York and New Jersey,
2,500,000 Consolidated 67th Series, 6.875%, 01/01/25 ................................................... 2,656,350
750,000 Consolidated 67th Series, AMBAC Insured, 6.875%, 01/01/25 .................................... 793,853
2,500,000 Consolidated 71st Series, 6.50%, 01/15/26 .................................................... 2,605,075
12,000,000 Consolidated 72nd Series, Pre-Refunded, 7.35%, 10/01/27 ...................................... 13,730,160
1,000,000 Consolidated 74th Series, 6.75%, 08/01/26 .................................................... 1,065,800
1,125,000 Consolidated 84th Series, 6.00%, 01/15/28 .................................................... 1,138,230
2,000,000 Consolidated 94th Series, 6.00%, 12/01/16 .................................................... 2,057,700
5,000,000 Consolidated 94th Series, 6.00%, 06/01/17 .................................................... 5,125,400
5,000,000 Consolidated 102nd Series, MBIA Insured, 5.75%, 10/15/23 ..................................... 5,039,450
5,000,000 Delta Airlines, Inc., Special Project, Series 1R, 6.95%, 06/01/08 ............................ 5,407,900
2,500,000 Special Obligation Revenue, 4th Installment, Special Project, 6.75%, 10/01/11................. 2,603,800
6,500,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, Pre-Refunded,
7.90%, 07/01/07 .............................................................................. 6,981,195
5,000,000 Puerto Rico Commonwealth GO, 6.45%, 07/01/17 .................................................. 5,380,050
Puerto Rico Commonwealth Highway Authority Revenue, Pre-Refunded,
275,000 Series P, 8.125%, 07/01/13 ................................................................... 295,963
8,000,000 Series Q, 8.00%, 07/01/18 .................................................................... 9,072,080
2,360,000 Series R, 7.25%, 07/01/02 .................................................................... 2,618,042
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
350,000 7.90%, 07/01/07 .............................................................................. 371,581
5,500,000 7.75%, 07/01/08 .............................................................................. 5,828,680
250,000 7.50%, 07/01/09 .............................................................................. 264,148
1,000,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Commonwealth Appropriation,
Refunding, 7.875%, 10/01/04 .................................................................. 1,091,220
Puerto Rico Electric Power Authority Revenue,
2,355,000 Refunding, Series N, 7.125%, 07/01/14 ........................................................ 2,512,361
4,500,000 Refunding, Series U, 6.00%, 07/01/14 ......................................................... 4,648,680
11,535,000 Series T, 6.00%, 07/01/16 .................................................................... 11,764,662
2,000,000 Series X, 6.00%, 07/01/15..................................................................... 2,046,140
5,000,000 Series X, 6.125%, 07/01/21 ................................................................... 5,124,350
Puerto Rico HFC,
5,000,000 MFMR, Portfolio A, Series I, 7.50%, 04/01/22 ................................................. 5,269,000
255,000 SFMR, Portfolio No. 1, Series A, GNMA Secured, 7.80%, 10/15/21 ............................... 264,922
1,215,000 SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ............................... 1,279,735
125,000 Puerto Rico HFC Revenue, FHA Mortgage Insured, Sixth Portfolio, Section 8, Pre-Refunded,
7.75%, 12/01/26 .............................................................................. 150,044
2,000,000 Puerto Rico Industrial, Medical and Environmental Facilities, PCFA, Baxter Travenol Labs, Series A,
8.00%, 09/01/12 .............................................................................. 2,156,760
100,000 Puerto Rico Municipal Finance Agency, Series 1988-A, 8.25%, 07/01/08 .......................... 106,999
4,250,000 Rutgers State University, Series A, 6.50%, 05/01/18 ........................................... 4,505,935
Salem County IPC, Financing Authority Revenue, Refunding, Public Services, Electric and Gas Co.,
9,050,000 Series A, MBIA Insured, 5.70%, 05/01/28....................................................... 8,970,994
5,000,000 Series D, MBIA Insured, 6.55%, 10/01/29 ...................................................... 5,446,150
1,950,000 Sayreville HDC, Mortgage Revenue, Refunding, Lakeview, Section 8, FHA Insured, 7.75%, 08/01/24 1,994,246
1,000,000 Stony Brook Regional Sewerage Authority Revenue, Series 1989-A, Pre-Refunded, 7.40%, 12/01/09 . 1,101,100
100,000 Sussex County Municipal Utilities Authority, Solid Waste Revenue, Series A, MBIA Insured,
Pre-Refunded, 7.875%, 12/01/13 ............................................................... 108,658
University of Medicine and Dentistry Revenue, Series C, Pre-Refunded, 7.20%
750,000 12/01/09 ..................................................................................... 820,958
725,000 12/01/19 ..................................................................................... 793,592
$ 1,200,000 Warren Hills Regional School District COP, MBIA Insured, Pre-Refunded, 7.375%, 12/15/09 ....... $ 1,285,872
100,000 Winslow Township GO, Camden County, Refunding, AMBAC Insured, Pre-Refunded, 7.80%, 07/01/18 ... 106,187
------------
Total Long Term Investments (Cost $548,087,616) ............................................... 577,981,965
------------
aShort Term Investments 0.2%
600,000 New Jersey EDA, EDR, Dow Chemical, El Dorado Terminals, Series A, Refunding, Daily VRDN
and Put, 3.30%, 05/01/01 ..................................................................... 600,000
100,000 New Jersey EDA, EDR, El Dorado Terminals, Series B, Daily VRDN and Put, 3.30%, 05/01/03........ 100,000
200,000 New Jersey EDA, PCR, Refunding, Exxon Project, Daily VRDN and Put, 3.10%, 4/1/22............... 200,000
50,000 New Jersey Sports and Exposition Authority, State Contract, Series C, MBIA Insured, Weekly VRDN
and Put, 3.10%, 09/01/24...................................................................... 50,000
------------
Total Short Term Investments (Cost $950,000) ............................................. 950,000
------------
Total Investments (Cost $549,037,616) 98.5% ......................................... 578,931,965
Other Assets and Liabilities, Net 1.5%............................................... 8,854,500
------------
Net Assets 100.0%.................................................................... $587,786,465
------------
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $ 549,037,616 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................. $ 30,104,744
Aggregate gross unrealized depreciation for all investments in which there was an
excess tax cost over value.................................................................... (210,395)
------------
Net unrealized appreciation.................................................................... $ 29,894,349
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
EDA - Economic Development Authority
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDC - Housing Development Corp.
HFC - Housing Finance Corp.
IPC - Industrial Pollution Control
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFMR - Multi-Family Mortgage Revenue
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- -------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin Oregon Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.4%
$ 750,000 Albany Sewer Revenue, Series A, Pre-Refunded, 7.00%, 02/01/12 .................................. $ 820,635
1,000,000 Albany Water Revenue, Second Lien, Pre-Refunded, 7.25%, 08/01/09 ............................... 1,072,590
2,000,000 Bay Area Health District Hospital Facility Authority, Health Facilities Revenue, Evergreen Court
Project, 7.25%, 10/01/14 ...................................................................... 2,137,540
Bear Creek Valley Sanitary Authority GO,
100,000 7.30%, 06/01/05 ............................................................................... 104,298
105,000 7.35%, 06/01/06 ............................................................................... 109,576
50,000 7.70%, 05/01/07 ............................................................................... 50,755
115,000 7.40%, 06/01/07 ............................................................................... 120,137
125,000 7.40%, 06/01/08 ............................................................................... 130,584
1,125,000 Benton County, Oregon Hospital Facilities Authority, Good Samaritan Hospital, Corvallis,
6.25%, 10/01/09 ............................................................................... 1,161,169
1,000,000 Central Lincoln Utility District Electric Revenue, Pre-Refunded, 6.75%, 01/01/11 ............... 1,083,590
1,000,000 Chemeketa Community College District, FGIC Insured, 5.80%, 06/01/12 ............................ 1,032,370
City of Bend, Urban Renewal Agency Tax Revenue, Series A,
600,000 6.85%, 09/01/06 .............................................................................. 612,792
750,000 7.00%, 09/01/11 ............................................................................... 766,403
4,000,000 City of Oregon, Sewer Revenue, 6.875%, 10/01/19 ................................................ 4,131,640
4,945,000 Clackamas County, Health Facilities Authority Hospital Revenue, Refunding, Adventist Health,
Series A, MBIA Insured, 6.35%, 03/01/09 ....................................................... 5,309,249
Clackamas County, Hospital Facilities Authority Revenue,
1,250,000 Elderly Housing, 7.00%, 11/15/11 .............................................................. 1,343,738
2,990,000 GNMA Secured, Jennings Lodge Project, 7.50%, 10/20/31 ......................................... 3,234,851
1,635,000 Kaiser Permanente, Series A, 6.50%, 04/01/11 .................................................. 1,726,805
4,950,000 Kaiser Permanente, Series A, 6.25%, 04/01/21 .................................................. 5,226,111
2,250,000 Refunding, Gross Willamette Falls, 5.75%, 04/01/15 ............................................ 2,200,455
110,000 Sisters of Providence Project, 8.125%, 10/01/07 ............................................... 113,919
4,000,000 Clackamas County USD No. 115, AMBAC Insured, 6.15%, 06/01/14 ................................... 4,254,440
1,000,000 Clackamas Oregon Community College District, MBIA Insured, 5.80%, 06/01/26 ..................... 1,012,730
1,125,000 Clairmont Water District Revenue, 6.50%, 02/01/12 ............................................. 1,161,585
50,000 Coos Bay Waste Water GO, MBIA Insured, Pre-Refunded, 7.50%, 09/01/06 ........................... 51,010
3,000,000 Deschutes County Hospital Facilities Authority, Hospital Revenue, St. Charles Medical Center,
6.00%, 01/01/13 ............................................................................... 3,117,000
1,950,000 Douglas County, Hospital Facilities Authority Revenue, Catholic Health Facilities, Series B,
MBIA Insured, 6.00%, 11/15/15 ................................................................. 2,044,712
500,000 Emerald People's Utility District, Electric System Revenue, Refunding, AMBAC Insured, Series B,
Pre-Refunded, 7.30%, 11/01/11 ................................................................. 540,485
Eugene Electric Utility System Revenue,
1,145,000 6.65%, 08/01/08 ............................................................................... 1,219,734
615,000 6.65%, 08/01/09 ............................................................................... 652,644
655,000 6.65%, 08/01/10 ............................................................................... 692,453
700,000 6.70%, 08/01/11 ............................................................................... 737,170
3,000,000 5.75%, 08/01/16 ............................................................................... 3,041,130
1,000,000 Eugene Public Safety Facilities, FGIC Insured, 5.70%, 06/01/16 ................................. 1,019,310
840,000 Eugene Trojan Nuclear Project Revenue, Refunding, 5.90%, 09/01/09 .............................. 841,016
70,000 Florence Improvement GO, Lane County, Pre-Refunded, 8.50%, 10/01/07 ............................ 71,942
Guam Airport Authority Revenue, Series B,
750,000 6.60%, 10/01/10 ............................................................................... 779,768
1,900,000 6.70%, 10/01/23 ............................................................................... 1,968,685
825,000 Guam Power Authority Revenue, Series A, 6.30%, 10/01/12 ........................................ 844,363
1,000,000 Hermiston GO, AMBAC Insured, 6.00%, 08/01/15 ................................................... 1,047,960
205,000 Hillsboro Hospital Facility Authority Revenue, Refunding, 5.75%, 10/01/12 ...................... 200,863
Klamath Falls Intercommunity Hospital Revenue, Merle West Medical Center Project,
$ 1,500,000 7.00%, 06/01/02 ............................................................................... $ 1,605,960
2,310,000 7.25%, 06/01/06 ............................................................................... 2,477,360
1,000,000 Lane County COP, Fairground Project, 7.00%, 08/01/04 ........................................... 1,049,360
11,575,000 Lane County PCR, Refunding, Weyerhaeuser Co. Project, 6.50%, 07/01/09 .......................... 12,479,123
2,425,000 Lebanon Wastewater Revenue, Refunding, 5.875%, 06/01/20 ........................................ 2,360,350
1,250,000 Marion County Housing Authority Revenue, Elliott Residence Project, GNMA Secured, 7.50%, 10/20/25 1,384,238
1,000,000 Marion County Union High School District No. 7J, 6.00%, 06/01/13 ............................... 1,060,130
4,475,000 Medford Hospital Facilities Authority Revenue, Gross Rogue Valley Health Services, Insured,
6.75%, 12/01/20 ............................................................................... 4,803,465
Metropolitan Service District, Convention Center GO,
4,865,000 Series A, 6.25%, 01/01/13 ..................................................................... 5,100,855
115,000 Unlimited Tax, Pre-Refunded, 7.60%, 12/01/10 .................................................. 118,443
80,000 Unlimited Tax, Pre-Refunded, 7.65%, 12/01/11 .................................................. 82,424
85,000 Unlimited Tax, Pre-Refunded, 7.65%, 12/01/12 .................................................. 87,576
2,000,000 Waste Disposal System, Revenue Bonds, Pre-Refunded, 7.30%, 01/01/11 ........................... 2,198,780
175,000 Multnomah County School District COP, Series A, Pre-Refunded, 6.90%, 08/01/09 .................. 182,714
3,500,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Port Saipan Harbor
Improvement, Series A, 6.85%, 10/01/25 ........................................................ 3,587,010
Oak Lodge Water District GO, AMBAC Insured,
215,000 7.40%, 12/01/08 ............................................................................... 249,701
215,000 7.50%, 12/01/09 ............................................................................... 249,568
1,500,000 Ontario Hospital Facility Authority-Catholic Health Corp., Facilities Revenue, Dominican Sisters
of Ontario, Inc., Holy Rosary Hospital Project, 6.10%, 11/15/17................................ 1,534,920
1,610,000 Oregon State Bond Bank Revenue, EDR, Series B, Pre-Refunded, 6.80%, 01/01/11 ..........1,719,770
Oregon State Department of Administrative Services, COP, MBIA Insured,
700,000 Series A, 5.50%, 11/01/20 ..................................................................... 693,539
560,000 Series B, 5.625%, 11/01/20 .................................................................... 562,402
2,000,000 Series C, 5.75%, 05/01/17...................................................................... 2,027,460
Oregon State Department of General Services, COP,
750,000 Real Property Financing Program, Series A, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/15........ 842,513
4,110,000 Real Property Financing Program, Series A, MBIA Insured, Pre-Refunded, 7.20%, 01/15/15 ........ 4,511,835
1,000,000 Refunding, Series D, MBIA Insured, 5.80%, 03/01/15 ............................................ 1,011,560
150,000 Series B, MBIA Insured, Pre-Refunded, 7.20%, 01/15/15 ......................................... 164,666
3,150,000 Series F, AMBAC Insured, Pre-Refunded, 7.50%, 09/01/15 ........................................ 3,538,553
750,000 Series G, AMBAC Insured, 6.25%, 09/01/15 ...................................................... 789,173
18,500,000 Oregon State EDR, Georgia-Pacific Corp., Series CLVII, 6.35%, 08/01/25 ......................... 18,825,415
Oregon State Elderly and Disabled Housing Authority,
1,000,000 Series A, 6.00%, 08/01/15 ..................................................................... 1,027,190
500,000 Series A, 6.00%, 08/01/21 ..................................................................... 509,650
1,470,000 Series B, 6.10%, 08/01/17 ..................................................................... 1,512,248
2,100,000 Series B, 6.25%, 08/01/23 ..................................................................... 2,222,220
2,155,000 Series B, 6.375%, 08/01/24 .................................................................... 2,248,333
6,000,000 Series C, 6.50%, 08/01/22 ..................................................................... 6,516,180
635,000 Oregon State Elderly Housing GO, Series A, 7.125%, 08/01/30 .................................... 681,558
Oregon State GO, Board of Higher Education,
750,000 6.50%, 10/01/17 ............................................................................... 802,065
60,000 Series A, Pre-Refunded, 8.125%, 10/01/17 ...................................................... 61,556
300,000 Series A, Pre-Refunded, 7.50%, 05/01/18 ....................................................... 312,930
400,000 Oregon State GO, Department of Energy, Series B, 6.80%, 01/01/17 ............................... 415,888
Oregon State GO, Department of Transportation Revenue, Regional Light Rail, Federal Westside
Project, MBIA Insured,
2,000,000 6.10%, 06/01/07 ............................................................................... 2,180,460
2,500,000 6.20%, 06/01/08 ............................................................................... 2,719,850
1,750,000 6.25%, 06/01/09 ............................................................................... 1,909,163
$ 1,000,000 Oregon State GO, Series B, 6.875%, 12/01/13 .................................................... $ 1,065,710
4,830,000 Oregon State HFA, SFMR Program, Series A, 7.20%, 07/01/15 ...................................... 5,091,738
1,445,000 Oregon State Higher Education GO, Series C, Pre-Refunded, 7.25%, 10/15/18 ...................... 1,523,261
Oregon State Housing and Community Service Department, Finance Housing Revenue,
6,710,000 Multi-Unit, Series A, 6.80%, 07/01/13 ......................................................... 7,031,275
910,000 Multi-Unit, Series A, 6.15%, 07/01/21 ......................................................... 923,241
180,000 Multi-Unit, Series C, 6.85%, 07/01/22 ......................................................... 188,123
850,000 SFM, Series A, 5.75%, 07/01/12 ................................................................ 864,527
3,190,000 SFM, Series A, 6.35%, 07/01/14 ................................................................ 3,303,022
1,470,000 SFM, Series A, 6.40%, 07/01/18 ................................................................ 1,506,089
3,100,000 SFM, Series A, 6.45%, 07/01/26 ................................................................ 3,201,029
12,000,000 SFM, Series B, 6.875%, 07/01/28 ............................................................... 12,635,160
2,500,000 SFM, Series C, 6.20%, 07/01/15 ................................................................ 2,543,575
1,200,000 SFM, Series C, 6.40%, 07/01/26 ................................................................ 1,234,548
1,750,000 SFM, Series D, 6.80%, 07/01/27 ................................................................ 1,825,355
260,000 SFM, Series E, 7.00%, 07/01/09 ................................................................ 274,716
800,000 SFM, Series E, 5.80%, 07/01/16 ................................................................ 784,448
2,830,000 SFM, Series E, 6.75%, 07/01/16 ................................................................ 2,947,530
1,025,000 SFM, Series E, 7.15%, 07/01/25 ................................................................ 1,089,309
2,680,000 SFM, Series F, 7.00%, 07/01/22 ................................................................ 2,797,518
645,000 SFM, Series G, 6.80%, 07/01/22 ................................................................ 678,656
Oregon State Housing, Educational and Cultural Facility Authority,
10,500,000 Lewis and Clark College Project, Series A, 6.125%,10/01/24 .................................... 10,974,810
2,100,000 Lewis and Clark College Project, Series A, MBIA Insured, Pre-Refunded, 7.125%, 07/01/20........ 2,325,015
700,000 Reed College Project, Pre-Refunded, 6.75%, 07/01/11 ........................................... 775,649
1,250,000 Reed College Project, Series A, Pre-Refunded, 6.75%, 07/01/21 ................................. 1,387,700
Oregon State Veteran's Welfare GO,
2,500,000 Series 73-A, 7.00%, 12/01/11 .................................................................. 2,662,925
875,000 Series 75, 5.85%, 10/01/15 .................................................................... 902,799
500,000 Series 75, 5.875%, 10/01/18 ................................................................... 512,840
3,050,000 Series 75, 6.00%, 04/01/27 .................................................................... 3,143,727
750,000 Port of Astoria, GO, MBIA Insured, Pre-Refunded, 6.60%, 09/01/11 ............................... 821,333
2,200,000 Port of Morrow PCR, Idaho Power Co., Boardman Project, 7.25%, 08/01/08 ......................... 2,225,432
500,000 Port of Morrow Revenue, Refunding, Pre-Refunded, 8.00%, 12/01/11 ............................... 534,530
4,000,000 Port of Portland Special Obligation Revenue, Delta Airlines, Inc. Project, 6.20%, 09/01/22 ..... 4,047,640
1,500,000 Port of St. Helens PCR, Refunding, Boise Cascade Corp. Project, 7.375%, 11/01/04 ............... 1,549,680
320,000 Port of Umpqua PCR, International Paper Co. Project, Series A, 6.60%, 03/15/05.................. 326,531
2,000,000 Portland COP, Refunding, PBA, Series A, Pre-Refunded, 7.25%, 04/01/08 .......................... 2,125,900
85,000 Portland EDR, Public Broadcasting, Series A, 7.20%, 06/01/09 ................................... 85,410
Portland Hospital Facilities Authority Hospital Revenue, Refunding, Legacy Health System,
AMBAC Insured, 6.70%, 05/01/21,
10,500,000 Series A ...................................................................................... 11,394,285
10,475,000 Series B ...................................................................................... 11,367,156
1,000,000 Portland Housing Authority Revenue, 7.10%, 07/01/15 ............................................ 1,056,910
635,000 Portland Hydroelectric Power Revenue, Bull Run Project, Series C, 7.00%, 10/01/16 .............. 635,565
Portland International Airport,
1,500,000 Series 7-A, MBIA Insured, 6.75%, 07/01/09 ..................................................... 1,625,640
200,000 Series 7-B, MBIA Insured, 7.10%, 07/01/21...................................................... 219,702
2,800,000 Series 7-B, MBIA Insured, Pre-Refunded, 7.10%, 07/01/21 ....................................... 3,360,924
300,000 Series 10, FGIC Insured, 5.75%, 07/01/25 ...................................................... 299,139
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 ................................................... 3,099,308
170,000 Portland Parking Revenue, Pre-Refunded, 8.625%, 10/01/12 ....................................... 178,169
Portland Sewer System Revenue,
$ 5,000,000 Pre-Refunded, 7.125%, 03/01/10 ................................................................ $ 5,167,200
14,100,000 Series A, 6.25%, 06/01/15 ..................................................................... 14,852,658
950,000 Series A, FGIC Insured, 6.00%, 10/01/12 ....................................................... 998,232
Portland Urban Renewal and Redevelopment, Downtown Waterfront,
5,555,000 Refunding, Series A, 6.40%, 06/01/08 .......................................................... 5,948,572
125,000 Series H, Pre-Refunded, 8.25%, 12/01/07 ....................................................... 129,283
75,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Series A, FSA Insured,
Pre-Refunded, 9.00%, 07/01/09 ................................................................. 95,211
1,000,000 Puerto Rico Commonwealth GO, 6.45%, 07/01/17 ................................................... 1,076,010
4,000,000 Puerto Rico Commonwealth Highway Authority Revenue, Series Q, Pre-Refunded, 8.00%, 07/01/18..... 4,536,040
20,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ......................... 20,099
2,400,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
7.75%, 07/01/08 ............................................................................... 2,543,424
Puerto Rico Commonwealth Public Improvement GO, Series A, Pre-Refunded, 7.75%,
250,000 07/01/06 ...................................................................................... 268,030
280,000 07/01/13 ...................................................................................... 300,194
Puerto Rico Electric Power Authority Revenue,
190,000 Refunding, Series L, Pre-Refunded, 8.40%, 07/01/15 ............................................ 196,787
600,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ............................................ 644,778
1,500,000 Refunding, Series X, 5.50%, 07/01/25 .......................................................... 1,429,635
1,065,000 Series O, 7.125%, 07/01/14 .................................................................... 1,138,592
935,000 Series O, Pre-Refunded, 7.125%, 07/01/14 ...................................................... 1,012,988
2,070,000 Series R, Pre-Refunded, 6.25%, 07/01/17 ....................................................... 2,158,534
2,500,000 Series X, 6.00%, 07/01/15 ..................................................................... 2,557,675
Puerto Rico HFC,
70,000 SFMR, Portfolio No. 1, Series A, GNMA Secured, 7.80%, 10/15/21 ............................... 72,724
545,000 SFMR, Portfolio No. 1, Series B, GNMA Secured, 7.65%, 10/15/22 ............................... 574,038
395,000 Puerto Rico HFC, FHA Mortgage Insured, Sixth Portfolio, Section 8, Pre-Refunded, 7.75%, 12/01/26 474,138
500,000 Puerto Rico Housing Bank and Finance Agency, SFMR, Homeownership, Fifth Portfolio,
Pre-Refunded, 7.50%, 12/01/15 ................................................................. 547,845
205,000 Puerto Rico Municipal Finance Agency, Series A, 8.25%, 07/01/08 ................................ 219,348
Puerto Rico PBA, Guaranteed Public Education and Health Facilities, Refunding,
90,000 Series G, Pre-Refunded, 7.875%, 07/01/07 ...................................................... 93,095
2,500,000 Series M, 5.75%, 07/01/15...................................................................... 2,480,200
1,100,000 Puerto Rico Telephone Authority Revenue, Refunding, Series L, 6.125%, 01/01/22 ................. 1,122,275
50,000 Redmond Improvement GO, Pre-Refunded, 7.80%, 05/01/17 .......................................... 50,337
Roseburg Urban Sanitary Authority, Improvement GO, Unlimited Tax, Douglas County,
60,000 7.40%, 01/01/06 .............................................................................. 62,377
230,000 7.50%, 01/01/08 ............................................................................... 239,913
1,000,000 Salem Educational Facilities Revenue, Refunding, Williamette University, 6.10%, 04/01/14 ....... 1,027,260
1,250,000 Salem GO, Series A, 5.875%, 01/01/07 ........................................................... 1,296,538
Salem-Keizer School District No. 24J, FGIC Insured, 6.00%,
4,345,000 06/01/13 ...................................................................................... 4,565,422
4,395,000 06/01/14 ...................................................................................... 4,601,741
1,110,000 Taft-Nelscott-Delake Rural Fire Protection District, 6.00%, 06/01/16 ........................... 1,121,633
2,765,000 Tillamook People Utilities District, 5.75%, 01/01/28 ........................................... 2,645,746
1,235,000 Tri-County, Metro Transportation District, COP, 7.50%, 12/15/02 ................................ 1,245,288
2,500,000 Tri-County, Metro Transportation District, Light Rail Extended, Series A, 6.00%, 07/01/12 ..... 2,605,000
1,375,000 Umatilla County Hospital Facility Authority, Hospital Revenue, Refunding, Good Shepherd
Community Hospital, 7.50%, 01/01/10 ........................................................... 1,396,766
5,300,000 Umatilla County USD No. 16R, Pendletron Project, AMBAC Insured, 6.00%, 07/01/14 ................ 5,558,375
2,000,000 Wasco County Hospital Facility Authority Hospital Revenue, 7.375%, 07/01/00 .................... 2,082,680
$ 100,000 Washington County Building GO, Pre-Refunded, 7.75%, 12/01/06 ................................... $ 103,065
Washington County Unified Sewer Agency Revenue,
50,000 Pre-Refunded, 7.90%, 07/01/07 ................................................................. 50,726
2,700,000 Pre-Refunded, 7.00%, 11/01/09 ................................................................. 2,898,423
4,000,000 Refunding, Series A, 6.20%, 10/01/10 .......................................................... 4,278,520
1,000,000 Refunding, Series A, AMBAC Insured, 6.125%, 10/01/12 .......................................... 1,059,810
7,500,000 Subordinated Senior Lien, Series 1, AMBAC Insured, 6.125%, 10/01/12 ........................... 7,948,575
1,000,000 Washington County USD No. 88J, 6.10%, 06/01/12 ................................................. 1,063,030
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 .............................................................................. 4,568,696
2,700,000 Pre-Refunded, 7.125%, 08/01/17................................................................. 2,940,624
5,000,000 Yamhill County USD No. 29J, 6.10%, 06/01/11..................................................... 5,330,583
------------
Total Long Term Investments (Cost 362,911,890).................................................. 384,752,643
------------
aShort Term Investments 0.2%
300,000 Medford Oregon Hospital Facilities Authority Revenue, Rogue Valley Health Services, Daily VRDN
and Put, 3.60%, 10/01/16 ...................................................................... 300,000
400,000 Oregon State Health, Housing, Educational, and Cultural Facilities Authority, Weekly VRDN and Put,
3.35%, 07/01/25 ............................................................................... 400,000
------------
Total Short Term Investments (Cost $700,000) ............................................. 700,000
------------
Total Investments (Cost $363,611,890) 98.6% ......................................... 385,452,643
Other Assets and Liabilities, Net 1.4% ............................................. 5,650,094
------------
Net Assets 100.0% ................................................................... $391,102,737
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $363,611,890 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 22,059,985
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (219,232)
------------
Net unrealized appreciation .................................................................... $ 21,840,753
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
COP - Certificate of Participation
EDR - Economic Development Revenue
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corp.
IDC - Industrial Development Corp.
MBIA - Municipal Bond Investors Assurance Corp.
PBA - Public Building Authority
PCR - Pollution Control Revenue
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
USD - Unified School District
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- -------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin Pennsylvania Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.2%
$ 2,000,000 Abington Pennsylvania School District, FGIC Insured, 6.00%, 05/15/26 .......................... $ 2,071,220
Allegheny County Hospital Development Authority Revenue, Refunding,
10,000,000 Allegheny General Hospital, Series A, MBIA Insured, 6.25%, 09/01/20 .......................... 10,437,700
1,700,000 Allegheny Hospital, South Hills Health System, Series A, MBIA Insured, 5.875%, 05/01/26 ...... 1,717,153
500,000 Divine Providence Hospital, Series 1988-B, Pre-Refunded, 8.75%, 01/01/14...................... 540,410
2,000,000 Allegheny County IDA, Environmental Improvement Revenue, Refunding, 6.10%,01/15/18............. 2,016,600
1,000,000 Allegheny County IDA, Presbyterian University Hospital, Kaufmann Medical Project, Refunding,
Series A, MBIA Insured, 6.80%, 03/01/15 ...................................................... 1,076,290
3,175,000 Allegheny County RDAR, Refunding, Home Improvement, Series A, 5.90%, 02/01/11 ................. 3,196,622
Allegheny County Residential Finance Authority,
2,000,000 Ladies Grand Army Republic Health Facilities, Series G, FHA Secured, 6.35%, 10/01/36 ......... 2,044,920
3,820,000 Lemington Home, Series E, 7.125%, 02/01/27.................................................... 3,970,432
1,400,000 Series D, MFMR, FHA Secured, 7.50%, 06/01/33 ................................................. 1,455,776
1,350,000 Series H, SFMR, GNMA Secured, 8.00%, 06/01/17................................................. 1,394,091
2,385,000 Series J, GNMA Secured, 7.50%, 06/01/17....................................................... 2,456,669
2,250,000 Series K, GNMA Secured, 7.75%, 12/01/22 ...................................................... 2,338,088
1,390,000 Series M, SFMR, GNMA Secured, 7.90%, 06/01/11 ................................................ 1,458,068
810,000 Series T, SFMR, GNMA Secured, 6.95%, 05/01/17 ................................................ 855,068
5,000,000 Beaver County Hospital Authority Revenue, Refunding, Medical Center Beaver County, Inc.,
AMBAC Insured, 6.625%, 07/01/10 .............................................................. 5,425,050
Beaver County IDA, PCR, Refunding, Ohio Edison/Pennsylvania Power Project, Series A,
4,400,000 Beaver Co., 7.15%, 09/01/21 .................................................................. 4,665,760
6,475,000 7.75%, 09/01/24 .............................................................................. 6,791,433
8,000,000 Beaver County, Series A, MBIA Insured, 5.90%, 10/01/26 ........................................ 8,175,520
3,000,000 Bensalem TWP Refunding, FGIC Insured, 5.75%,12/01/16 .......................................... 3,051,270
4,000,000 Berks County, IDA, PCR, Refunding, FGIC Insured, Pre-Refunded, 7.00%, 05/15/18 ................ 4,568,840
4,000,000 Bethlehem Area School District, MBIA Insured, 6.00%, 03/01/16 ................................. 4,134,560
2,500,000 Bradford County IDA, Solid Waste Disposal Revenue, International Paper Co., 6.60%, 03/01/19 ... 2,644,175
2,890,000 Burrell School District, FGIC Insured, 5.60%, 11/15/15......................................... 2,929,102
2,000,000 Butler County IDA, PCR, Refunding, Witco Corp. Project, 5.85%, 12/01/23 ....................... 2,014,740
Cambria County Hospital Development Authority Revenue, Refunding and Improvement,
Conemaugh Valley Hospital, Series B, 07/01/18
3,500,000 Connie Lee Insured, 6.375%.................................................................... 3,652,215
1,000,000 Pre-Refunded, 8.875% ......................................................................... 1,083,090
5,000,000 Cambria County IDA, PCR, Refunding, Pennsylvania Electric Company Project, MBIA Insured,
Series A, 5.80%, 11/01/20 .................................................................... 5,039,050
Cambria County IDA, Resource Recovery Revenue, Cambria Cogen Project,
4,000,000 Series F-1, 7.75%, 09/01/19 .................................................................. 4,090,520
2,715,000 Series F-2, 7.75%, 09/01/19 .................................................................. 2,776,440
Chartiers Valley Industrial and Commercial Development Authority Revenue, Refunding,
4,295,000 First Mortgage, Asbury Place Project, 6.50%, 02/01/36 ........................................ 4,402,547
1,000,000 First Mortgage, United Methodist Health Center, Series A, Pre-Refunded, 9.25%, 12/01/08 ...... 1,106,800
Dauphin County General Authority Hospital Revenue, Refunding,
4,500,000 Hapsco-Western Hospital Project, Series A, MBIA Insured, 6.50%, 07/01/12 ..................... 4,810,950
5,000,000 Hapsco-Western Hospital Project, Series B, MBIA Insured, 6.25%, 07/01/16 ..................... 5,226,100
1,000,000 Northeast Bradford School, 7.50%, 06/01/26 ................................................... 1,023,220
10,800,000 Delaware County Authority Health Facility Revenue, Mercy Health Corporation Project,
6.00%, 12/15/26 .............................................................................. 10,535,508
9,000,000 Delaware County Authority Healthcare Revenue, Mercy Health Corporation Southeastern,
Series B, 6.00%, 11/15/07 .................................................................... 9,256,680
2,000,000 Delaware County Authority Revenue Bond 1990, Elwyn, Inc. Project, Pre-Refunded, 8.35%, 06/01/15 2,267,320
5,000,000 Delaware County IDAR, PCR, Philadelphia Electric Co. Project, 7.375%, 04/01/21 ................ 5,429,200
Delaware County IDAR, Resources Recovery Project, Refunding, Series A,
$ 1,000,000 7.90%, 12/01/05 .............................................................................. $ 1,043,800
6,000,000 8.10%, 12/01/13 .............................................................................. 6,265,620
450,000 Delaware River Joint Toll Bridge System Commission Revenue, Pre-Refunded, 7.875%, 07/01/18..... 481,955
7,350,000 Delaware River Port Authority, Pennsylvania and New Jersey Revenue, Series 1995, FGIC Insured,
5.50%, 01/01/26 .............................................................................. 7,193,372
1,000,000 Delaware River Port Authority, Pennsylvania and New Jersey River Bridges Revenue, Refunding,
AMBAC Insured, 7.375%, 01/01/07 .............................................................. 1,070,660
400,000 Dubois Hospital Authority Revenue, Refunding, Dubois Regional Medical Center Project,
Series 1987-A, Pre-Refunded, 8.75%, 07/01/11 ................................................. 412,312
250,000 Edinboro Municipal Authority Sewer Revenue, Guaranteed, Series 1987, Pre-Refunded,
8.25%, 08/01/07............................................................................... 254,720
7,000,000 Erie County Hospital Authority Revenue, St. Vincent Health Center Project, Series A, AMBAC
Insured, 6.375%, 07/01/22 .................................................................... 7,377,300
2,110,000 Erie County IDAR, Nursing Home-Sarah Reed Center Project, 8.625%, 07/01/14 .................... 2,226,282
3,000,000 Erie Higher Educational Building Authority, Gannon University, Series A, Pre-Refunded,
8.50%, 06/01/15............................................................................... 3,330,660
1,850,000 Erie Western Pennsylvania Port Authority GO, 8.625%, 06/15/10 ................................. 2,052,538
920,000 Erie Western Pennsylvania Port Authority General Revenue, 6.875%, 06/15/16 .................... 942,715
6,000,000 Harrisburg Authority Revenue, MBIA Insured, Series I, 5.625%, 04/01/19 ........................ 5,891,880
4,000,000 Harrisburg Authority Water Revenue, FGIC Insured, Pre-Refunded, 7.00%, 07/15/15 ............... 4,408,320
Jeannette County Health Service Authority Hospital Revenue, Jeannette District Memorial Hospital,
4,000,000 Pre-Refunded, 8.625%, 01/01/18 ............................................................... 4,632,880
785,000 Series A, 6.00%, 11/01/18 .................................................................... 774,622
1,250,000 Jeannette County Municipal Authority Sewer Revenue, 7.00%, 07/01/17............................ 1,331,625
1,600,000 Lancaster County Hospital Authority Revenue, Refunding, Health Center, Masonic Homes Project,
AMBAC Insured, 5.00%, 11/15/20 ............................................................... 1,461,056
1,000,000 Lancaster County Hospital Authority Revenue, Willow Valley Lakes Manor, Series B, Pre-Refunded,
9.00%, 06/01/12............................................................................... 1,060,990
1,000,000 Lancaster County Solid Waste Management Authority, Resource Recovery System Revenue,
Series A, 8.50%, 12/15/10 .................................................................... 1,055,690
5,595,000 Lawrence County IDA, PCR, Refunding, Ohio Edison/Pennsylvania Power Co., 7.15%, 03/01/17 ...... 5,928,406
2,500,000 Lebanon County, Good Samaritan Hospital Authority Revenue, Good Samaritan Hospital Project,
Refunding, 6.00%, 11/15/18.................................................................... 2,481,750
Lehigh County General Purpose Authority Revenue,
1,000,000 Exempt Facility, FGIC Insured, Pre-Refunded, 7.25%, 01/01/10 ................................. 1,049,070
3,000,000 Good Shepherd Rehabilitation Hospital, 7.50%, 11/15/21 ....................................... 3,239,610
1,000,000 Lehigh Valley Hospital, Inc., Series A, MBIA Insured, Refunding, 5.875%, 07/01/15............. 1,015,750
5,800,000 Muhlenburg Hospital, Series A, 6.60%, 07/15/22 ............................................... 6,035,538
1,400,000 Muhlenburg Hospital, Series A, Pre-Refunded, 8.00%, 07/15/01 ................................. 1,541,988
1,500,000 Muhlenburg Hospital, Series B, 8.00%, 07/15/01................................................ 1,625,595
Lehigh County IDA, PCR, Refunding, Pennsylvania Power & Light Co. Project,
5,000,000 Series A, MBIA Insured, 6.40%, 11/01/21 ...................................................... 5,290,400
5,550,000 Series A, MBIA Insured, 6.15%, 08/01/29 ...................................................... 5,778,993
10,000,000 Series B, MBIA Insured, 6.40%, 09/01/29 ...................................................... 10,635,500
2,000,000 Lower Providence TWP, Pennsylvania Sewer Authority, Sewer Revenue, Guaranteed Refunding,
MBIA Insured, 5.25%, 05/01/14 ................................................................ 1,957,800
Luzerne County IDA, Exempt Facility Revenue Refunding, Pennsylvania Gas and Water Co. Project,
Series A,
4,750,000 6.05%, 01/01/19............................................................................... 4,765,580
5,000,000 AMBAC Insured, 7.00%, 12/01/17................................................................ 5,620,400
2,285,000 Meadville GO, Series A, AMBAC Insured, 5.25%, 10/01/25......................................... 2,168,442
Montgomery County Higher Education and Health Authority Revenue,
$ 500,000 Bryn Mawr Hospital Project, Pre-Refunded, 9.375%, 12/01/19 ................................... $ 530,555
2,375,000 Holy Redeemer Hospital, Series A, AMBAC Insured, 7.625%, 02/01/20 ............................ 2,519,756
610,000 Jeanes Health System Project, Series 1987, 7.625%, 07/01/17 .................................. 614,764
10,000,000 Jeanes Health System Project, Series 1990, Pre-Refunded, 8.75%, 07/01/20 ..................... 11,502,900
1,315,000 Pottstown Memorial Medical Center Project, 7.35%, 11/15/05 ................................... 1,427,275
5,500,000 St. Joseph's University, Pre-Refunded, 8.30%, 06/01/10 ....................................... 6,235,845
1,750,000 St. Joseph's University, Series 1990, Connie Lee Insured, 6.50%, 12/15/22..................... 1,855,928
Montgomery County IDA, Retirement Community Revenue, Adult Community Total Services,
2,600,000 Refunding, Series A, 5.875%, 11/15/22......................................................... 2,550,730
3,000,000 Series B, 5.75%, 11/15/17..................................................................... 2,935,800
Montgomery County IDAR,
5,000,000 PCR, Philadelphia Electric Co., Series B, MBIA Insured, 6.70%, 12/01/21....................... 5,384,900
2,530,000 Refunding, PCR, Philadelphia Electric Co., Series A, 7.60%, 04/01/21 ......................... 2,717,726
10,000,000 Resources Recovery, 7.50%, 01/01/12 .......................................................... 10,736,800
600,000 Moon Transportation Authority, Highway Improvement Revenue, Pre-Refunded, 9.50%, 02/01/16 ..... 630,672
1,000,000 Neshaminy School District GO, FGIC Insured, 7.00%, 02/15/14.................................... 1,100,830
7,000,000 New Castle Sanitation Authority Sewer Revenue, MBIA Insured, 5.70%, 06/01/27................... 6,939,450
6,600,000 North Allegheny School District GO, AMBAC Insured, Pre-Refunded, 7.60%, 05/01/13 .............. 7,235,712
600,000 Northeastern Pennsylvania Hospital Authority Revenue, Wilkes Barre General Hospital, Series B,
Pre-Refunded, 8.375%, 07/01/06 ............................................................... 621,084
Northeastern Pennsylvania Hospital and Educational Authority Revenue, Refunding,
1,000,000 Kings College Project, Series B, 6.00%, 07/15/11 ............................................. 992,310
1,000,000 Kings College Project, Series B, 6.00%, 07/15/18 ............................................. 971,790
5,000,000 Wilkes University, 6.125%, 10/01/11 .......................................................... 4,999,600
400,000 Northeastern York County Sewer Authority Revenue, Series 1987, Pre-Refunded, 8.75%, 09/01/18 .. 410,084
1,175,000 North Hampton Borough Municipal Authority, Water Revenue, Lehigh and North Hampton
Counties Project, AMBAC Insured, Pre-Refunded, 7.00%, 09/01/14................................ 1,229,790
6,100,000 North Hampton County IDA, PCR, Refunding, 6.10%, 07/15/21 ..................................... 6,322,223
5,000,000 Pennsylvania Convention Center Authority Revenue, Series A, Refunding, 6.60%, 09/01/09 ........ 5,422,950
Pennsylvania EDA,
3,000,000 MacMillian L.P. Project, 7.60%, 12/01/20...................................................... 3,371,250
5,000,000 Resources Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15 ....................... 5,266,400
Pennsylvania HFA,
10,000,000 Refunding, Rental Housing, FNMA Insured, 5.75%, 07/01/14 ..................................... 10,111,000
1,500,000 Refunding, SFMR, FHA/VA Mortgage Insured, 6.15%, 10/01/22 .................................... 1,512,390
5,545,000 SFMR, Series 1987-K, 6.125%, 10/01/24 ........................................................ 5,635,217
50,000 SFMR, Series 1987-L, 7.125%, 04/01/14 ........................................................ 51,547
750,000 SFMR, Series 1987-P, 8.00%, 04/01/16 ......................................................... 769,553
4,885,000 SFMR, Series 1988-U, 7.80%, 10/01/20 ......................................................... 5,160,319
1,965,000 SFMR, Series 1989-W, 7.80%, 10/01/20 ......................................................... 2,057,316
2,870,000 SFMR, Series 1989-Y, 7.45%, 04/01/16 ......................................................... 3,002,250
3,900,000 SFMR, Series 1990-29, 7.375%, 10/01/16 ....................................................... 4,135,599
3,065,000 SFMR, Series 1991-30, 7.30%, 10/01/17 ........................................................ 3,257,329
4,510,000 SFMR, Series 1991-32, 7.15%, 04/01/15 ........................................................ 4,751,691
3,000,000 SFMR, Series 1992-34-A, 6.85%, 04/01/16 ...................................................... 3,136,230
6,000,000 SFMR, Series 1992-34-B, 7.00%, 04/01/24 ...................................................... 6,253,680
Pennsylvania Infrastructure Investment Authority Revenue, Pennvest Lane Pool Program,
MBIA Insured, 5.625%,
6,010,000 09/01/13 ..................................................................................... 6,078,394
2,870,000 09/01/14 ..................................................................................... 2,902,661
6,000,000 Pennsylvania Intergovernmental Cooperative Authority, Special Tax Revenue, Philadelphia
Funding Project, FGIC Insured, Pre-Refunded, 7.00%, 06/15/14.................................. 6,914,520
$ 12,565,000 Pennsylvania State Financial Authority Revenue, Refunding, 6.60%, 11/01/09 .................... $ 13,499,082
Pennsylvania State Higher Educational Facilities Authority Revenue,
1,000,000 Allegheny College Project, Series B, 6.125%, 11/01/13 ........................................ 1,012,950
3,140,000 Allegheny College Project, Series B, 6.00%, 11/01/22 ......................................... 3,111,269
4,000,000 La Salle University, MBIA Insured, 5.625%, 05/01/17........................................... 4,004,560
1,000,000 Lycoming College, Pre-Refunded, 8.375%, 10/01/18 ............................................. 1,085,570
1,000,000 Medical College of Pennsylvania, Series A, Pre-Refunded, 8.375%, 03/01/11 .................... 1,099,290
3,135,000 Medical College of Pennsylvania, Series A, Pre-Refunded, 7.50%, 03/01/14 ..................... 3,339,653
3,040,000 Philadelphia College of Textiles and Science, 6.75%, 04/01/20 ................................ 3,124,786
1,955,000 Temple University, 7.375%, 10/01/06 .......................................................... 1,998,812
4,505,000 Temple University, 7.40%, 10/01/10 ........................................................... 4,603,614
1,000,000 Widner University, AMBAC Insured, Pre-Refunded, 7.625%, 10/01/13 ............................. 1,057,010
Pennsylvania State Higher Educational Facilities Authority Health Services Revenue,
15,000,000 Refunding, Allegheny Delaware Valley, MBIA Insured, 5.875%, 11/15/21.......................... 15,194,700
10,000,000 University of Pennsylvania, Series A, Refunding, 5.75%, 01/01/22 ............................. 10,055,000
5,220,000 Pennsylvania State Higher Educational Facilities Authority Revenue, Drexel University, Refunding,
6.375%, 05/01/17.............................................................................. 5,300,545
Pennsylvania State Higher Educational Facilities Authority Revenue, State System of Higher Education,
2,220,000 Series L, AMBAC Insured, 6.20%, 06/15/19 ..................................................... 2,311,930
3,000,000 Series N, MBIA Insured, 5.80%, 6/15/24 ....................................................... 3,027,510
4,250,000 Pennsylvania State IDAR, Economic Revenue, AMBAC Insured, 6.00%, 01/01/12 ..................... 4,420,638
890,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ................................................................ 933,396
Pennsylvania State Turnpike Commission Revenue,
1,000,000 Series C, FGIC Insured, Pre-Refunded, 7.625%, 12/01/17 ....................................... 1,081,530
1,900,000 Series K, Pre-Refunded, 7.50%, 12/01/19 ...................................................... 2,096,954
5,000,000 Philadelphia Airport Revenue, Philadelphia Airport System, Series A, AMBAC Insured, 6.10%, 6/15/25 5,133,850
Philadelphia Gas Works Revenue,
795,000 11th Series C, AMBAC Insured, Pre-Refunded, 7.25%, 01/01/10 .................................. 842,096
1,000,000 12th Series, MBIA Insured, ETM, 7.00%, 05/15/20 .............................................. 1,144,850
1,255,000 13th Series, Pre-Refunded, 7.70%, 06/15/11 ................................................... 1,432,946
2,745,000 13th Series, Pre-Refunded, 7.70%, 06/15/11 ................................................... 3,140,006
10,100,000 14th Series A, 6.375%, 07/01/26 .............................................................. 10,397,445
205,000 AMBAC Insured, Pre-Refunded, 7.25%, 01/01/10.................................................. 220,205
Philadelphia Hospitals and Higher Educational Facilities Authority, Hospital Revenue,
5,225,000 Albert Einstein Medical Center, 7.30%, 10/01/08 .............................................. 5,670,849
7,755,000 Albert Einstein Medical Center, 7.625%, 04/01/11 ............................................. 8,208,590
2,465,000 Children's Hospital, Refunding, Series A, 5.00%, 02/15/21 .................................... 2,259,025
1,000,000 Children's Seashore House, Series A, 7.00%, 08/15/17 ......................................... 1,061,130
2,600,000 Children's Seashore House, Series B, 7.00%, 08/15/22 ......................................... 2,750,930
2,500,000 Frankford Hospital, Series A, 6.00%, 06/01/14 ................................................ 2,475,900
100,000 Presbyterian Medical Center, AMBAC Insured, Pre-Refunded, 8.00%, 07/01/13 .................... 103,412
2,750,000 Philadelphia Municipal Authority, Gas Works Lease Revenue, 7.625%, 05/01/14.................... 2,908,400
Philadelphia Municipal Authority Revenue, Refunding,
1,360,000 FGIC Insured, Pre-Refunded, 7.80%, 04/01/18 .................................................. 1,495,551
2,000,000 Lease, Series D, 6.30%, 07/15/17.............................................................. 2,046,720
300,000 Series 1987, Pre-Refunded, 7.875%, 07/15/17 .................................................. 310,674
1,000,000 Philadelphia Parking Authority, Airport Revenue, Refunding, AMBAC Insured, 5.50%, 09/01/18 .... 983,900
Philadelphia RDA, Home Improvement Loan Revenue, FHA Mortgage Insured,
185,000 Series A, 7.375%, 06/01/03 ................................................................... 187,927
1,000,000 Series B, 6.10%, 06/01/17..................................................................... 1,004,570
Philadelphia RDA, Housing Revenue,
290,000 Sub-Series 2-B, 8.625%, 08/01/26 ............................................................. 293,657
500,000 Sub-Series 3-B, 8.00%, 08/01/13 .............................................................. 531,875
$ 5,000,000 Philadelphia School District, Series B, AMBAC Insured, 5.50%, 09/01/15 ....................... $ 4,937,150
Philadelphia Water and Sewer Revenue,
6,920,000 10th Series, ETM, 7.35%, 09/01/04 ............................................................ 7,879,112
11,000,000 16th Series, Pre-Refunded, 7.50%, 08/01/10 ................................................... 12,533,070
10,000,000 Philadelphia Water and Wastewater Revenue, Refunding, 5.75%, 06/15/13 ......................... 9,884,500
1,700,000 Pittsburgh Urban RDA, Mortgage Revenue, Series D, 6.25%, 10/01/17 ............................. 1,736,669
Pittsburgh Urban RDA, SFMR,
840,000 Series A, 7.15%, 10/10/27 .................................................................... 886,822
2,410,000 Series B, GNMA Secured, 7.375%, 12/01/16 ..................................................... 2,511,268
1,250,000 Pittsburgh Water and Sewer Authority Revenue, Refunding, FGIC Insured, ETM, 7.25%, 09/01/14 ... 1,474,375
Pottstown Borough Authority, Pre-Refunded,
4,000,000 Sewer Revenue, 7.70%, 11/01/21 ............................................................... 4,293,840
1,000,000 Water Revenue, 7.80%, 08/01/10................................................................ 1,026,560
5,000,000 Rose Tree Media, Pennsylvania School District, FGIC Insured, 5.85%, 2/15/17.................... 5,100,900
18,205,000 Schuylkill County IDA, Resource Recovery Revenue, Refunding, Schuylkill Energy Resource, Inc.,
6.50%, 01/01/10 .............................................................................. 17,694,896
1,500,000 Schuylkill County RDA, Lease Revenue, Series A, FGIC Insured, 7.125%, 06/01/13 ............... 1,663,425
500,000 Scranton-Lackawanna Health and Welfare Authority, Health Facilities Revenue, Allied Services,
FHA Insured, Series C, Pre-Refunded, 8.125%, 01/15/28 ........................................ 537,535
750,000 Silver Spring Towership Authority, Sewer Revenue, FGIC Insured, 6.70%, 07/15/21 ............... 783,068
10,000,000 South Fork Municipal Authority, Hospital Revenue, Conemaugh Valley Memorial
Hospital Project, Series A, MBIA Insured, 5.75%, 07/01/26 .................................... 10,007,300
7,585,000 Southeastern Transportation Authority, Pennsylvania Supply Revenue, Series A, FGIC Insured,
5.75%, 03/01/20 .............................................................................. 7,648,411
State Public School Building Authority, Pennsylvania School Revenue, Refunding,
2,165,000 Cornell School District, Series B, MBIA Insured, 5.375%, 09/01/12 ........................... 2,154,846
1,000,000 Shenandoah Valley School District, AMBAC, 7.375%, 09/15/10 ................................... 1,083,810
1,975,000 Temple University, System of Higher Education, Pennsylvania Hospital Revenue, Series A,
FHA Insured, Pre-Refunded, 7.25%, 08/01/16 ................................................... 2,068,674
100,000 Union County Higher Educational Facilities Financing Authority, University Revenue, Bucknell
University, MBIA Insured, Pre-Refunded, 7.75%, 04/01/07....................................... 100,305
3,000,000 Union School District GO, AMBAC Insured, Pre-Refunded, 7.25%, 04/01/15......................... 3,110,820
100,000 University of Pittsburgh Higher Education, University Capital Project, Series 1987-A, Pre-Refunded,
8.375%, 06/01/05 ............................................................................. 103,132
1,000,000 Warren County GO, MBIA Insured, Pre-Refunded, 7.20%, 07/01/16 Hospital, Series A, AMBAC
Insured, Pre-Refunded, 7.375%, 12/15/09 ...................................................... 1,109,030
100,000 Washington County Hospital Authority Revenue, Washington Hospital Project, Pre-Refunded,
9.50%, 07/01/17 .............................................................................. 102,881
1,500,000 Westmoreland County IDAR, Refunding, Citizen's General Hospital Project, Series A, 8.25%, 07/01/13 1,540,170
3,000,000 Wilkes Barre Area School District, GO, FGIC Insured, 6.375%, 04/01/15.......................... 3,216,240
York County Solid Waste and Refuse Authority, IDR, Resource Recovery Project, 8.20%, 12/01/14
105,000 Series B ..................................................................................... 110,852
900,000 Series C ..................................................................................... 950,151
------------
Total Long Term Investments (Cost $623,879,339).......................................... 658,002,955
------------
aShort Term Investments
200,000 Chester County, Pennsylvania Industrial Development Authority, Industrial Development Revenue,
Daily VRDN and Put, 3.450%, 08/01/01 ......................................................... 200,000
------------
Total Short-Term Investments (Cost $200,000) ............................................. 200,000
------------
Total Investments (Cost $624,079,339) 98.2% ......................................... 658,202,955
Other Assets and Liabilities, Net 1.8% .............................................. 12,070,697
------------
Net Assets 100.0% ................................................................... $670,273,652
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $624,079,339 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 34,525,270
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (401,654)
------------
Net unrealized appreciation ................................................................... $ 34,123,616
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
EDA - Economic Development Authority
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
IDA - Industrial Development Authority/Agency
IDR - Industrial Development Revenue
IDAR - Industrial Development Authority Revenue
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MFMR - Multi-Family Mortgage Revenue
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
RDAR - Redevelopment Agency Revenue
SFMR - Single Family Mortgage Revenue
TWP - Township
VA - Veterans Administration
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin Puerto Rico Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 96.3%
Guam Airport Authority Revenue, Series B,
$ 1,675,000 6.60%, 10/01/10 .............................................................................. $ 1,741,481
5,800,000 6.70%, 10/01/23 .............................................................................. 6,009,670
Guam Government GO, Series A,
4,575,000 5.90%, 09/01/05 .............................................................................. 4,614,116
1,085,000 6.00%, 09/01/06 .............................................................................. 1,094,266
5,590,000 Guam Government Limited Obligation Highway, Refunding, Series A, 6.30%, 05/01/12 .............. 5,947,648
Guam Power Authority Revenue, Series A,
7,190,000 6.30%, 10/01/22 .............................................................................. 7,306,190
2,680,000 6.75%, 10/01/24 .............................................................................. 2,818,610
5,000,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue, Port Saipan Harbor
Improvement, Series A, 6.85%, 10/01/25 ....................................................... 5,124,300
1,000,000 Puerto Rico Commonwealth Aqueduct and Sewer Authority Revenue, Refunding,
5.00%, 07/01/19 .............................................................................. 913,310
Puerto Rico Commonwealth GO,
250,000 6.25%, 07/01/10 .............................................................................. 262,990
3,905,000 6.40%, 07/01/11 .............................................................................. 4,190,143
2,000,000 Refunding, MBIA Insured, 5.75%, 07/01/24 .................................................... 2,030,920
Puerto Rico Commonwealth Highway and Transportation Authority Revenue, Series Y,
8,000,000 6.00%, 07/01/22 .............................................................................. 8,137,280
1,000,000 5.50%, 07/01/26 .............................................................................. 961,940
Puerto Rico Commonwealth Highway Authority Revenue, Pre-Refunded,
70,000 Refunding, Series N, 8.00%, 07/01/03 ......................................................... 75,224
3,925,000 Series P, 8.125%, 07/01/13 ................................................................... 4,224,203
350,000 Series Q, 7.75%, 07/01/10 .................................................................... 394,804
2,135,000 Puerto Rico Commonwealth IDC, General Purpose Revenue, 8.00%, 01/01/03 ........................ 2,145,568
Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue, Series A,
3,000,000 7.90%, 07/01/07 .............................................................................. 3,184,980
2,300,000 7.75%, 07/01/08 .............................................................................. 2,437,448
2,600,000 7.50%, 07/01/09 .............................................................................. 2,747,134
3,350,000 Puerto Rico Commonwealth Urban Renewal and Housing Corp., Commonwealth Appropriation,
Refunding, 7.875%, 10/01/04 .................................................................. 3,655,587
Puerto Rico Electric Power Authority Revenue,
1,000,000 Refunding, Series M, Pre-Refunded, 8.00%, 07/01/08 ........................................... 1,074,630
700,000 Refunding, Series U, 6.00%, 07/01/14.......................................................... 723,128
1,525,000 Series O, 7.125%, 07/01/14 ................................................................... 1,630,378
615,000 Series P, Pre-Refunded, 7.00%, 07/01/11 ...................................................... 691,340
1,000,000 Series P, Pre-Refunded, 7.00%, 07/01/21 ...................................................... 1,124,130
10,000,000 Series T, 6.375%, 07/01/24 ................................................................... 10,467,100
7,225,000 Series X, 6.125%, 07/01/21 ................................................................... 7,404,686
Puerto Rico HFC,
1,750,000 MFHR, Portfolio A, Series I, 7.50%, 04/01/22 ................................................. 1,844,150
2,320,000 SFMR, Portfolio No. 1, Series C, GNMA Insured, 6.85%, 10/15/23 ............................... 2,440,315
Puerto Rico HFC Revenue,
2,060,000 FHA Mortgage Insured, Sixth Portfolio, Section 8, Pre-Refunded, 7.75%, 12/01/26 .............. 2,472,721
420,000 MF, Portfolio A, Series I, 7.50%, 10/01/15 ................................................... 441,391
375,000 MF, Series A, 8.25%, 06/01/11 ................................................................ 379,425
Puerto Rico Housing Bank and Finance Agency, SFMR, Homeownership,
3,025,000 Affordable Housing Mortgage, First Portfolio, 6.25%, 04/01/29 ................................ 3,090,522
955,000 Fifth Portfolio, Pre-Refunded, 7.50%, 12/01/15 ............................................... 1,046,384
Puerto Rico Industrial, Medical and Environmental Facilities, PCFA Revenue,
$ 4,010,000 Baxter Travenol Labs, Inc., Series A, 8.00%, 09/01/12 ........................................ $ 4,324,304
900,000 PepsiCo, Inc. Project, 6.25%, 11/15/13 ....................................................... 963,819
2,000,000 Special Facilities, American Airlines, Series A, 6.45%, 12/01/25 ............................. 2,100,960
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities,
Financing Authority,
5,810,000 Hospital Revenue, Hospital Auxilio Mutuo Obligation Group, Series A, MBIA Insured,
6.25%, 07/01/24 ............................................................................. 6,109,680
5,000,000 Hospital Revenue, Mennonite General Hospital PJ, Series A, 6.50%, 07/01/26 ................... 5,055,300
2,500,000 Hospital Revenue, Refunding, Dr. Pila Hospital Project, Series A, 6.125%, 08/01/25 ........... 2,588,325
500,000 Hospital Revenue, Refunding, Dr. Pila Hospital Project, Series A, 6.25%, 08/01/32 ............ 518,545
6,550,000 Industrial Revenue, Guaynabo Municipal Government Center, Series A, 5.625%, 07/01/15 ......... 6,243,591
3,175,000 Industrial Revenue, Teachers Retirement System Revenue, Series B, 5.50%, 07/01/16 ............ 3,206,718
5,335,000 Industrial Revenue, Teachers Retirement System Revenue, Series B, 5.50%, 07/01/21 ............ 5,365,783
Puerto Rico Municipal Finance Agency, Series A,
4,550,000 8.25%, 07/01/08 .............................................................................. 4,868,455
2,000,000 6.50%, 07/01/19 .............................................................................. 2,136,680
Puerto Rico PBA, Guaranteed Government Facilities, Series A, AMBAC Insured,
1,000,000 5.50%, 07/01/21............................................................................... 999,910
1,000,000 5.75%, 07/01/22 .............................................................................. 1,019,400
Puerto Rico Port Authority Revenue,
1,250,000 Series D, FGIC Insured, 6.00%, 07/01/21....................................................... 1,271,713
5,655,000 Special Facilities, American Airlines, Series A, 6.30%, 06/01/23 ............................. 5,785,461
1,900,000 Special Facilities, American Airlines, Series A, 6.25%, 06/01/26 ............................. 1,947,576
Puerto Rico Telephone Authority Revenue, Refunding,
6,450,000 Series L, 6.125%, 01/01/22 ................................................................... 6,580,613
500,000 Series N, 5.50%, 01/01/13 ................................................................... 496,825
1,885,000 Series N, 5.50%, 01/01/22 ................................................................... 1,832,635
University of Puerto Rico Revenue, Series M, MBIA Insured,
4,000,000 5.50%, 06/01/15 .............................................................................. 4,024,520
5,750,000 5.25%, 06/01/25 .............................................................................. 5,568,588
Virgin Islands HFA, SFR, Refunding, Series A, GNMA Insured,
950,000 6.45%, 03/01/16 .............................................................................. 971,736
2,250,000 6.50%, 03/01/25 .............................................................................. 2,309,783
5,600,000 Virgin Islands Water and Power Authority, Electric System Revenue, Series A, 7.40%, 07/01/11 .. 5,998,323
------------
Total Long Term Investments (Cost $178,301,629) .......................................... 187,137,355
------------
aShort Term Investments 0.8%
1,500,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN and Put,
2.95%, 12/01/15 (Cost $1,500,000) ............................................................ 1,500,000
------------
Total Investments (Cost $179,801,629) 97.1% ........................................... 188,637,355
Other Assets and Liabilities, Net 2.9% ................................................ 5,567,083
------------
Net Assets 100.0% ..................................................................... $194,204,438
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $179,801,629 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................ $ 8,871,120
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................ (35,394)
------------
Net unrealized appreciation ................................................................... $ 8,835,726
============
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Federal Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
GNMA - Government National Mortgage Association
GO - General Obligation
HFA - Housing Finance Authority/Agency
HFC - Housing Finance Corp.
IDC - Industrial Development Corp.
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi Family
MFHR - Multi Family Housing Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
SFMR - Single Family Mortgage Revenue
SFR - Single Family Revenue
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin Federal Intermediate-Term Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 96.7%
Alabama 1.0%
$ 1,000,000 Morgan County, Decatur Health Care Authority, Hospital Revenue, Refunding, Connie Lee Insured,
5.80%, 03/01/04 ............................................................................... $ 1,044,890
------------
Alaska 0.7%
480,000 Alaska State HFC, Collateral, First Series, Veteran's Mortgage Program, 5.80%, 06/01/04 ........ 498,610
200,000 Anchorage Parking Authority Lease Revenue, Refunding, 5th Avenue Garage Project, 6.50%, 12/01/02 212,838
------------
711,448
------------
Arizona 3.2%
2,000,000 Maricopa County COP, 5.625%, 06/01/00 .......................................................... 2,044,560
1,000,000 Maricopa County School District No. 40, Glendale Improvement, 6.10%, 07/01/08 .................. 1,049,320
200,000 Mohave County IDA, Hospital Systems Revenue, Refunding, Medical Environments, Inc.,
Phoenix Hospital and Medical Center, ETM, 6.00%, 07/01/00 ..................................... 211,040
60,000 Phoenix HFC, Mortgage Revenue, Refunding, MBIA Insured, Project A, 6.00%, 07/01/02 ............. 62,230
------------
3,367,150
------------
California 14.5%
100,000 ABAG Finance Corp., COP, Association XXVI, Series B, 6.30%, 10/01/02 ........................... 104,765
3,000,000 Bakersfield Public Financing Authority Revenue, Refunding, Series A, 5.80%, 09/15/05 ........... 3,098,490
1,500,000 California Educational Facilities Authority Revenue, Pooled College and University Financing,
Refunding, Series B, 5.90%, 06/01/03 .......................................................... 1,561,665
California Statewide CDA Revenue, COP, Refunding, Health Facilities, Barton Memorial Hospital,
Series B,
200,000 5.70%, 12/01/00 ............................................................................... 206,400
300,000 6.40%, 12/01/05 ............................................................................... 318,117
1,000,000 California Statewide Community Development Corp., COP, Pacific Homes, Series A, 5.90%, 04/01/09 1,025,080
300,000 Coalinga Public Financing Authority Revenue, Series B, 6.10%, 09/15/04 ......................... 305,694
2,600,000 Fresno Joint Powers Financing Authority, Local Agency Revenue, Refunding, Series A, 6.00%, 09/02/01 2,629,484
100,000 Los Angeles County Transportation Commission, COP, Series B, 5.90%, 07/01/00 ................... 103,955
450,000 Merced Irrigation District, COP, Water Facilities Project, 6.00%, 11/01/02 ..................... 473,931
200,000 Paso Robles USD, COP, Measure D, Capital Projects, Phase III, 5.75%, 08/01/02 .................. 207,016
100,000 San Diego County COP, Children's Center Project, 6.00%, 10/01/02 ............................... 100,922
100,000 San Diego Port Facilities Revenue, Refunding, National Steel and Shipbuilding Co., 6.60%, 12/01/02 104,341
120,000 San Francisco City and County RDA, Mortgage Revenue, Refunding, Series A, MBIA Insured,
6.125%, 07/01/02 .............................................................................. 120,000
200,000 San Francisco Downtown Parking Corp. Revenue, 6.25%, 04/01/04 .................................. 214,360
200,000 San Joaquin County COP, General Hospital Project, 5.90%, 09/01/03 .............................. 208,518
2,000,000 San Ramon Valley USD, COP, Measure A, Capital Projects', Series A, 5.95%, 10/01/01 ............. 2,106,740
Snowline Joint USD, COP,
245,000 5.50%, 07/01/00 ............................................................................... 248,462
260,000 5.60%, 07/01/01 ............................................................................... 264,157
275,000 5.70%, 07/01/02 ............................................................................... 280,275
290,000 5.80%, 07/01/03 ............................................................................... 296,429
400,000 Solano County COP, Refunding, Justice Facility and Public Building Project, 5.875%, 10/01/05 ... 414,336
100,000 Southern California Rapid Transit District Revenue, Special Benefit AD A2, 6.00%, 09/01/02 ..... 105,286
Susanville Public Financing Authority Revenue, Series A, AMBAC Insured,
25,000 5.90%, 09/01/02 ............................................................................... 26,546
100,000 6.00%, 09/01/03 ............................................................................... 106,505
500,000 Tahoe City Public Utilities District, COP, Capital Facilities Project, Series B, 6.05%, 06/01/01 516,125
100,000 Tuolumne County COP, Multiple Facilities Project, 6.00%, 06/01/99 .............................. 101,407
------------
15,249,006
------------
Colorado 5.1%
Denver City and County Airport Revenue,
$ 3,000,000 Series A, 7.00%, 11/15/99 ..................................................................... $ 3,176,310
335,000 Series C, 6.25%, 11/15/00 ..................................................................... 346,765
1,500,000 Montrose County COP, 6.20%, 06/15/03 ........................................................... 1,566,255
255,000 Summit County Recreational Facilities Revenue, Refunding, Copper Mountain, Mandatory Put,
10/01/99, 5.90%, 04/01/17 ..................................................................... 263,507
------------
5,352,837
------------
Connecticut 2.5%
560,000 Connecticut State Health and Educational Facilities Authority Revenue, Sacred Heart University,
Refunding, Series C, 6.00%, 07/01/05........................................................... 576,559
2,000,000 Connecticut HFA, Housing Mortgage Finance, Series C-2, 6.00%, 11/15/10 ......................... 2,037,340
------------
2,613,899
------------
District of Columbia 0.7%
700,000 District of Columbia GO, Refunding, Series A, 5.875%, 06/01/05 ................................. 713,419
------------
Florida 12.8%
125,000 Alachua County Health Facilities Authority Revenue, Refunding, Santa Fe Health Systems Project,
Pre-Refunded, 6.875%, 11/15/02 ................................................................ 135,994
1,000,000 Dade County Solid Waste System, Split Obligation Revenue, Refunding, AMBAC Insured,
5.15%, 10/01/08 ............................................................................... 1,003,420
2,615,000 Gateway Services District, Transportation/Roadway Service Charges, 8.50%, 05/01/04 ............. 2,796,089
2,590,000 Meadow Pointe II Community Development District, Capital Improvement Revenue, 6.00%, 07/01/01 .. 2,590,699
1,000,000 Nassau County PCR, Refunding, ITT Rayonier, Inc. Project, 6.25%, 06/01/10 ...................... 1,023,220
Northern Palm Beach County Water Control District, Refunding, Unit Development No. 31,
6.60%, 11/01/03
405,000 Program 1 ..................................................................................... 424,914
320,000 Program 2 ..................................................................................... 335,734
795,000 Palm Bay Lease Revenue, Refunding, Florida Education and Research Foundation Project, Series A,
6.10%, 09/01/03 .............................................................................. 813,810
Palm Beach County IDR, Lourdes-Noreen Mckeen Residence, Geriatric Care, Inc. Project,
275,000 6.20%, 12/01/08 ............................................................................... 286,143
580,000 6.30%, 12/01/09 ............................................................................... 603,374
2,700,000 Palm Beach County Solid Waste IDR, Okeelanta Power Project, Series A, 6.375%, 02/15/07 ......... 2,347,596
1,000,000 Pembroke Pines Special Assessment, No. 94-I, 5.75%, 11/01/05 ................................... 1,017,630
------------
13,378,623
------------
Georgia 3.2%
100,000 Fulton County Development Authority, Special Facilities Revenue, Refunding, Delta Air Lines, Inc.
Project, 6.85%, 11/01/07 ...................................................................... 106,089
3,105,000 Wayne County Development Authority, PCR, Refunding, ITT Rayonier, Inc. Project, 6.10%, 11/01/07 3,217,587
------------
3,323,676
------------
Guam 1.0%
1,000,000 Guam Government GO, Series A, 5.90%, 09/01/05 .................................................. 1,008,550
------------
Hawaii0.5%
500,000 Hawaii State Department of Budget and Finance, Special Purpose Revenue, Kapi'Olani Health
Obligation, 5.60%, 07/01/06 ................................................................... 513,470
------------
Illinois 3.7%
850,000 Illinois Educational Facilities Authority Revenue, Columbia College, 5.875%, 12/01/03 .......... 884,145
360,000 Illinois HDA Revenue, Homeowner Mortgage, Sub-Series A-1, 6.10%, 02/01/05 ...................... 378,619
Illinois (cont.)
Illinois Health Facilities Authority Revenue,
$ 1,115,000 Franciscan Sisters Health Care, Series C, Refunding, MBIA Insured, 6.00%, 09/01/09 ............ $ 1,166,223
425,000 St. Elizabeth's Hospital, 6.00%, 07/01/05 ..................................................... 427,720
1,000,000 Metropolitan Pier and Exposition Authority, Hospitality Facilities Revenue, McCormick Place Convention,
5.75%, 07/01/06 ............................................................................... 1,006,350
------------
3,863,057
------------
Indiana 5.5%
2,000,000 Franklin EDR, Refunding, Hoover Universal, Inc. Project, Johnson Controls, 6.10%, 12/01/04 ..... 2,121,120
100,000 Indianapolis Local Public Improvement Bond Bank, Series D, Refunding, 6.10%, 02/01/02 .......... 106,967
3,500,000 Sullivan PCR, Refunding, Michigan Power Company Project, Series C, 5.95%, 05/01/09.............. 3,542,455
------------
5,770,542
------------
Iowa 0.2%
200,000 Iowa State Financial Authority, Hospital Facilities Revenue, Refunding, Trinity Regional Hospital Project,
6.50%, 07/01/00 ............................................................................... 208,190
------------
Kentucky 0.6%
100,000 Kenton County Airport Board Revenue, Special Facilities, Delta Airlines Project, Series A,
6.75%, 02/01/02 ............................................................................... 105,435
500,000 Mt. Sterling Lease Revenue, Kentucky League Cities Funding, Series A, 5.625%, 03/01/03 ......... 514,435
------------
619,870
------------
Louisiana 0.2%
40,000 Calcasieu Parish Public Trust Authority, Mortgage Revenue, Refunding, Series B, 6.375%, 11/01/02 41,895
100,000 Louisiana State Offshore Terminal Authority, Deepwater Port Revenue, Refunding, First Stage,
Loop, Inc., Series B, 6.20%, 09/01/03 ......................................................... 107,208
100,000 Louisiana State Public Facilities Authority Revenue, Refunding, Student Loan, Series A-1,
6.20%, 03/01/01 ............................................................................... 104,768
------------
253,871
------------
Maryland 0.2%
220,000 Baltimore Economic Development Lease Revenue, Refunding, Armistead Partnership, Series A,
6.75%, 08/01/02 ............................................................................... 236,410
------------
Massachusetts 0.6%
200,000 Massachusetts State Industrial Finance Agency, Resource Recovery Revenue, Refunding,
Refusetech, Inc. Project, Series A, FSA Insured, 5.45%, 07/01/01 .............................. 207,850
415,000 New England Educational Loan Marketing Corp., Student Loan Revenue, Refunding, Series B,
5.60%, 06/01/02 ............................................................................... 427,276
------------
635,126
------------
Michigan 1.0%
1,000,000 Detroit GO, Refunding, Series B, 6.375%, 04/01/06 ............................................. 1,074,320
------------
Minnesota 0.2%
200,000 Minneapolis CDA, Supported Development Revenue, Common Bond Fund, Series 91-5A,
7.20%, 12/01/04 ............................................................................... 216,472
------------
Mississippi 0.7%
725,000 Mississippi Development Bank, Special Obligation, Refunding, Oktibbeha County Hospital Revenue
Project, 5.65%, 07/01/06 ...................................................................... 724,928
------------
Nebraska 0.3%
300,000 Nebraska Higher Education Loan Program, Inc. Revenue, Subject Lien, Series A-6, 6.70%, 12/01/02 316,875
------------
New Jersey 1.1%
$ 95,000 New Jersey EDA Revenue, Economic Growth, 2nd Series F-1, 6.00%, 12/01/02 ....................... $ 98,149
1,000,000 New Jersey Health Care Facilities Financing Authority Revenue, Monmouth Medical Center,
Series C, FSA Insured, Refunding, 5.80%, 07/01/04 ............................................. 1,069,320
------------
1,167,469
------------
New York 14.3%
New York City GO,
515,000 Refunding, Series C, 6.50%, 08/01/04 .......................................................... 549,005
1,850,000 Refunding, Series C, 6.50%, 08/01/07........................................................... 1,945,423
500,000 Refunding, Series D, 5.70%, 11/01/06 .......................................................... 508,495
500,000 Refunding, Series H, 5.90%, 08/01/09........................................................... 503,465
100,000 Series B, 6.25%, 10/01/01 ..................................................................... 105,801
245,000 Series H, 7.00%, 02/01/05 ..................................................................... 265,168
5,000 Series H, Pre-Refunded, 7.00%, 02/01/05 ....................................................... 5,617
1,000,000 Series J, 6.00%, 02/15/04 ..................................................................... 1,039,010
2,500,000 New York City Health and Hospital Corp. Revenue, Refunding, Series A, 6.00%, 02/15/06 .......... 2,536,125
90,000 New York City IDA, Civic Facility Revenue, New York Blood Center, Inc. Project, ETM, 6.80%, 05/01/02 94,892
New York State Dormitory Authority Revenue, Refunding,
1,000,000 City University, Series V, 5.60% 07/01/10 ..................................................... 992,500
440,000 Mental Health Services Facilities Improvement, Series D, 5.60%, 02/15/07 ...................... 446,010
1,000,000 New York State HFA, Refunding, Series A, 5.90%, 05/01/05........................................ 1,020,650
New York State Tollway Authority, Service Contract Revenue, Local Highway and Bridge,
1,000,000 5.90%, 04/01/08 ............................................................................... 1,018,950
500,000 5.75%, 04/01/08 ............................................................................... 504,045
1,150,000 5.75%, 04/01/09 ............................................................................... 1,149,931
100,000 Oneida-Herkimer Solid Waste Management Authority, Solid Waste Systems Revenue, Refunding,
6.20%, 04/01/00 ............................................................................... 102,829
1,000,000 Port Authority of New York and New Jersey, Special Obligation Revenue, 3rd Installment, 7.00%,10/01/07 1,086,370
1,100,000 Ulster County Resident Recovery Agency, Solid Waste System Revenue, 5.90%, 03/01/07 ............ 1,124,563
------------
14,998,849
------------
Oklahoma 3.0%
2,020,000 Jackson County Memorial Hospital Authority Revenue, Refunding, Jackson County Memorial Hospital
Project, 6.75%, 08/01/04 ...................................................................... 2,063,390
100,000 Tulsa Public Facilities Authority, Lease Payment Revenue, Refunding, Assembly Center, 5.80%, 07/01/01 103,302
1,000,000 Valley View Hospital Authority Revenue, Refunding, Valley View Regional Medical Center,
5.75%, 08/15/06 ............................................................................... 982,130
------------
3,148,822
------------
Pennsylvania 4.1%
100,000 Cambria County Hospital Development Authority Revenue, Refunding and Improvement, Conemaugh
Valley Hospital, Series B, Connie Lee Insured, 5.90%, 07/01/03 ................................ 105,817
325,000 Chartiers Valley Industrial and Commercial Development Authority, First Mortgage Revenue, Asbury
Place Project, 6.25%, 02/01/06 ................................................................ 336,430
575,000 Lebanon County Good Samaritan Hospital Authority Revenue, Good Samaritan Hospital Project,
Refunding, 5.50%, 11/15/03 .................................................................... 579,428
Northeastern Hospital and Educational Authority, College Revenue, Refunding, Kings College Project,
Series B,
390,000 5.50%, 07/15/02 ............................................................................... 395,019
410,000 5.60%, 07/15/03 .............................................................................. 416,097
Pennsylvania (cont.)
Philadelphia Gas Works Revenue, Refunding, Series A,
$ 300,000 5.70%, 07/01/00 ............................................................................... $ 306,606
300,000 5.80%, 07/01/01 ............................................................................... 308,379
1,890,000 Schuylkill County IDA, Resource Recovery Revenue, Refunding, Schuylkill Energy Resource, Inc.,
6.50%, 01/01/10 ............................................................................... 1,837,042
------------
4,284,818
------------
Puerto Rico 1.5%
Puerto Rico Electric Power Authority Revenue,
100,000 Refunding, Series Q, 5.90%, 07/01/01 .......................................................... 105,035
1,345,000 Series T, 6.00%, 07/01/04 ..................................................................... 1,434,994
------------
1,540,029
------------
South Dakota 3.0%
1,000,000 South Dakota HDA, Homeownership Mortgage, Series D, 6.05%, 05/01/04 ............................ 1,059,350
2,000,000 South Dakota Student Loan Finance Corp., Student Loan Revenue, Series A, Refunding,
6.35%, 08/01/05 ............................................................................... 2,034,500
------------
3,093,850
------------
Tennessee 0.7%
750,000 Metropolitan Government, Nashville and Davidson County IDBR, Refunding and Improvement,
Osco Treatment, Inc., 6.00%, 05/01/03 ......................................................... 766,545
------------
Texas 1.5%
785,000 Abilene Higher Education Facilities Corp., Higher Education Revenue, Refunding and Improvement,
Abilene Christian Facility, 5.90%, 10/01/05 ................................................... 819,273
355,000 Houston HFC, SFMR, Refunding, Series A, FSA Insured, 5.45%, 06/01/03 ........................... 364,205
400,000 North Central Health Facility Development Corp. Revenue, Refunding, C Young Memorial Home Project,
Series C, 6.10%, 02/15/06 ..................................................................... 404,924
------------
1,588,402
------------
Utah 1.4%
500,000 Davis County Solid Waste Management and Energy Recovery Revenue, Refunding, Special Service
District, 5.50%, 06/15/00 ..................................................................... 502,330
910,000 Utah State HFA, Refunding, SFM, 5.85%, 07/01/08 ................................................ 921,939
------------
1,424,269
------------
Virginia 6.1%
2,800,000 Covington-Alleghany County IDA, PCR, Refunding, Westvaco Corp. Project, 5.85%, 09/01/04 ........ 3,028,788
Virginia State HDA, Commonwealth Mortgage, Sub-Series C-7,
1,695,000 5.60%, 01/01/03 ............................................................................... 1,770,038
1,475,000 5.70%, 01/01/04 ............................................................................... 1,549,591
------------
6,348,417
------------
Washington 1.6%
600,000 Marysville Water and Sewer Revenue, Refunding, MBIA Insured, 5.75%, 12/01/05 ................... 631,728
1,000,000 Washington State Public Power Supply System, Nuclear Project No. One Revenue, Refunding,
Series A, AMBAC Insured, 5.70%, 07/01/09 ...................................................... 1,027,630
------------
1,659,358
------------
Total Long Term Investments (Cost $98,299,239) ............................................ 101,217,457
------------
aShort Term Investments 1.4%
$ 100,000 New York City GO, Sub-Series B-3, MBIA Insured, Daily VRDN and Put, 3.45%, 08/15/04 ............ $ 100,000
1,400,000 New York City Municipal Water Finance Authority, Water and Sewer System Revenue, Series C,
FGIC Insured, Daily VRDN and Put, 3.45%, 06/15/23 ............................................. 1,400,000
------------
Total Short Term Investments (Cost $1,500,000) ............................................ 1,500,000
------------
Total Investments (Cost $99,799,239) 98.1% .......................................... 102,717,457
Other Assets and Liabilities, Net 1.9% .............................................. 1,997,713
------------
Net Assets 100.0% ................................................................... $104,715,170
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $99,799,239 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 3,297,133
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (378,915)
------------
Net unrealized appreciation .................................................................... $ 2,918,218
============
PORTFOLIO ABBREVIATIONS:
ABAG - Association of Bay Area Governments
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Agency
COP - Certificate of Participation
EDA - Economic Development Authority
EDR - Economic Development Revenue
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
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.
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
SFM - Single Family Mortgage
SFMR - Single Family Mortgage Revenue
USD - Unified School District
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
- --------------------------------------------------------------------------------
Statement of Investments in Securities and Net Assets, February 28, 1997
Face Value
Amount Franklin High Yield Tax-Free Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Term Investments 98.3%
Bonds 95.8%
Alabama 0.4%
$ 5,890,000 Homewood Special Care Facilities Financing Authority, Hospital Revenue, Lakeshore Hospital
Project, Refunding, Series B, Pre-Refunded, 8.25%, 02/01/04 ............................... $ 6,351,894
Marshall County Health Care Authority, Hospital Revenue,
4,895,000 Guntersville, Arab Medical Center, 10.25%, 10/01/13 ....................................... 5,390,766
3,300,000 Refunding, Boaz-Albertville Medical Center, 6.20%, 01/01/08 ............................... 3,342,405
2,500,000 Prichard Water Works and Sewer Board Revenue, Pre-Refunded, 9.50%, 11/15/14 ................ 2,795,175
------------
17,880,240
------------
Alaska 1.1%
Alaska Industrial Development and Export Revenue,
4,000,000 American President Lines Project, 8.00%, 11/01/09 ......................................... 4,292,200
905,000 Revolving Fund, Series A, 6.20%, 04/01/10 ................................................. 945,200
Alaska State HFC,
4,760,000 Mortgage Program, First Series, 5.90%, 12/01/33 ........................................... 4,668,418
10,000,000 Refunding, Series A, 5.40%, 12/01/13....................................................... 9,594,800
4,670,000 Refunding, MBIA Insured, Series A, 5.85%, 12/01/15......................................... 4,687,980
4,500,000 Refunding, MBIA Insured, Series A, 6.00%, 12/01/15......................................... 4,521,375
5,000,000 Refunding, MBIA Insured, Series A, 5.875%, 12/01/24........................................ 5,009,300
12,475,000 Refunding, MBIA Insured, Series A, 5.875%,12/01/30......................................... 12,428,219
4,000,000 Anchorage Electric Utility Revenue, Senior Lien, 5.50%, 02/01/26 ........................... 3,903,640
1,635,000 Palmer Golf Course Lease, COP, 10.25%, 07/01/08 ............................................ 1,723,928
------------
51,775,060
------------
Arizona 0.9%
950,000 Gila County IDAR, PCR, ASARCO, Inc. Project, Refunding, 8.90%, 07/01/06 .................... 991,306
8,500,000 Maricopa County PCR, Public Services, Palo Verde, Refunding, Series A, 6.375%, 08/15/23 ... 8,629,625
4,000,000 Maricopa County Rural Road ID, 8.625%, 07/01/07 ............................................ 4,361,840
16,785,000 Red Hawk Canyon Community Facility, 7.625%, 06/01/05 ....................................... 16,766,704
7,900,000 Salt River Project, Agricultural Improvement and Power District, Electric System Revenue,
Series A, 6.00%, 01/01/31 ................................................................. 7,971,495
2,245,000 Tempe IDA, Residential Care Facilities Revenue, Volunteers of America Care Facilities,
9.00%, 06/01/18 ........................................................................... 2,343,645
------------
41,064,615
------------
Arkansas 0.3%
2,400,000 Baxter County IDR, Aeroquip/Trinova Corp. Project, Refunding, 5.80%, 10/01/13 .............. 2,410,032
1,000,000 Conway Hospital Revenue, Refunding, Series 1990, 8.375%, 07/01/11 .......................... 1,090,030
Independence County PCR,
4,275,000 Mississippi Power and Light Co. Project, Series A, 9.00%, 07/01/13 ........................ 4,642,052
1,185,000 Mississippi Power and Light Co. Project, Series B, 9.00%, 07/01/13 ........................ 1,286,744
200,000 Mississippi Power and Light Co. Project, Series C, 9.50%, 07/01/14 ........................ 219,292
5,000,000 Refunding, Arkansas Power and Light Co. Project, 6.25%, 01/01/21 .......................... 5,083,700
750,000 Little Rock Sewer Revenue, Refunding, 5.40%, 08/01/10 ...................................... 746,423
700,000 North Little Rock Health Facilities, Baptist Hospital Revenue, Series A, MBIA Insured,
5.50%, 12/01/21............................................................................ 693,392
------------
16,171,665
------------
California 10.7%
21,330,000 Adelanto California Water Authority Revenue, Water Systems Acquisition Project, Series A,
7.50%, 09/01/28 ........................................................................... 21,673,413
7,500,000 Alameda County COP, Santa Rita Jail Project, Refunding, MBIA Insured, 5.70%, 12/01/14 ...... 7,597,050
13,250,000 Alameda County MFHR, Claremont House Project, Refunding, Series A, 8.00%, 12/01/23 ......... 13,719,713
California (cont.)
Antioch 1915 Act, AD No. 27, Lone Tree,
$ 11,080,000 Series C, 7.70%, 09/02/17 ................................................................. $ 11,433,009
4,385,000 Series D, 7.30%, 09/02/13 ................................................................. 4,495,151
2,500,000 Arroyo Grande California COP, Vista Hospital Systems, Series A, 8.375%, 07/01/06 ........... 2,663,375
22,515,000 Arroyo Grande Hospital System COP, Vista Hospital Systems, Refunding, Series A,
9.50%, 07/01/20 ........................................................................... 23,681,277
2,850,000 Azusa RDA, Tax Allocation, Refunding, Merged Area Project, Series A, 6.75%, 08/01/23 ....... 2,968,646
4,575,000 Beaumont Public Financing Authority Revenue, Sewer Enterprise Project, Series A, Pre-Refunded,
6.90%, 09/01/23 ........................................................................... 5,334,953
Benicia 1915 Act, Refunding, Fleetside Industrial Park Assessment,
210,000 4.80%, 09/02/97 ........................................................................... 210,099
220,000 5.00%, 09/02/98 ........................................................................... 219,219
230,000 5.25%, 09/02/99 ........................................................................... 229,204
245,000 5.50%, 09/02/00 ........................................................................... 244,998
260,000 5.65%, 09/02/01 ........................................................................... 260,507
270,000 5.80%, 09/02/02 ........................................................................... 271,256
285,000 5.90%, 09/02/03 ........................................................................... 286,519
305,000 6.00%, 09/02/04 ........................................................................... 306,821
320,000 6.10%, 09/02/05 ........................................................................... 322,102
340,000 6.20%, 09/02/06 ........................................................................... 342,417
365,000 6.30%, 09/02/07 ........................................................................... 367,781
385,000 6.40%, 09/02/08 ........................................................................... 388,111
410,000 6.50%, 09/02/09 ........................................................................... 413,485
435,000 6.60%, 09/02/10 ........................................................................... 438,863
460,000 6.70%, 09/02/11 ........................................................................... 464,246
300,000 6.80%, 09/02/12 ........................................................................... 304,308
3,000,000 California Educational Facilities Authority Revenue, Pooled College and University Financing,
Series B, 6.125%, 06/01/09 ................................................................ 3,070,680
2,000,000 California HFA, MFHR, Series A, AMBAC Insured, 6.05%, 08/01/27 ............................. 2,024,500
1,030,000 California Special Districts, Association Financial Corp. COP, Santa Cruz Port Authority, Series B,
7.50%, 05/01/13 ........................................................................... 1,073,466
California State Health Facilities Hospital Revenue, Summit Medical Center, Pre-Refunded,
4,855,000 Series A, 7.50%, 05/01/09 ................................................................. 5,291,367
2,155,000 Series A, 7.60%, 05/01/15 ................................................................. 2,353,088
5,835,000 Series B, 7.50%, 05/01/09 ................................................................. 6,359,450
3,500,000 California State Higher Education Loan Authority, Inc., Student Loan Revenue, Refunding,
Junior Lien, Series B, 9.00%, 07/03/97 .................................................... 3,545,640
7,320,000 California State Variable Purpose, 5.75%, 03/01/19 ......................................... 7,369,630
2,500,000 California Statewide CDA, California State University Northridge, Refunding, AMBAC Insured,
6.00%, 04/01/26 ........................................................................... 2,579,475
Capistrano USD, CFD, Special Tax No. 92-1,
285,000 6.60%, 09/01/05 ........................................................................... 290,740
280,000 6.70%, 09/01/06 ........................................................................... 285,614
325,000 6.80%, 09/01/07 ........................................................................... 331,490
260,000 6.90%, 09/01/08 ........................................................................... 265,171
1,000,000 7.00%, 09/01/18 ........................................................................... 1,005,690
2,335,000 City of Oakland Revenue, YMCA East Bay Project, Refunding, 7.10%, 06/01/10 ................. 2,452,777
3,695,000 Colton Community Facilities District, Special Tax No. 90-1, 9.00%, 09/01/20 ................ 3,390,569
Contra Costa County Public Financing Authority Revenue, Refunding,
2,405,000 6.625%, 09/02/10 .......................................................................... 2,427,391
2,795,000 6.875%, 09/02/16 .......................................................................... 2,856,965
California (cont.)
Corona COP,
$ 9,155,000 Corona Community Hospital Project, ETM, 9.425%, 09/01/06 .................................. $ 11,107,029
8,820,000 Corona Community Hospital Project, Pre-Refunded, 9.425%, 09/01/20 ......................... 11,933,548
11,100,000 Vista Hospital Systems, Series B, Refunding, 8.375%, 07/01/06 ............................. 11,825,385
10,885,000 Vista Hospital Systems, Series B, Refunding, 9.50%, 07/01/20 .............................. 11,533,311
4,845,000 Eden Township Hospital District Health Facilities Revenue, COP, Refunding, Insured Eden
Hospital Health Services Corp., 5.85%, 07/01/18 ........................................... 4,826,977
Emeryville RDA, MFHR, Emery Bay Apartments, Series 1991, 8.75%,
220,000 12/01/02 .................................................................................. 226,514
3,770,000 12/01/21 .................................................................................. 3,847,624
37,675,000 Foothill Eastern Transportation Corridor Agency, California Toll Road Revenue, Series A,
6.50%, 01/01/32 ........................................................................... 39,509,773
4,500,000 Gateway Improvement Authority, Marin City Community Facilities District, Series A, 7.75%, 09/01/25 4,700,160
4,175,000 Hawthorne CRDA, Refunding, Hawthorne Plaza Project, 8.50%, 07/01/20 ........................ 4,370,766
8,900,000 Hesperia Public Financing Authority Revenue, Series B, 7.375%, 10/01/23 .................... 9,040,709
6,000,000 Lake Elsinore, 1915 Act, AD No. 93-1, Series A, 7.90%, 09/02/24 ............................ 6,187,260
3,065,000 Long Beach Special Tax, CFD No. 2, West Long Beach, 7.50%, 09/01/11 ........................ 3,098,715
30,100,000 Los Angeles County, CFD No. 4, Special Tax Improvement, Calabassas Area B, Series A,
9.25%, 09/01/22 ........................................................................... 27,168,862
Los Angeles MFR, Refunding, 01/01/24,
230,000 Series J-1A, 7.125% ....................................................................... 231,518
675,000 Series J-1B, 7.125% ....................................................................... 679,455
1,435,000 Series J-1C, 7.125% ....................................................................... 1,444,471
1,240,000 Series J-2A, 8.50% ....................................................................... 1,247,080
3,345,000 Series J-2B, 8.50% ........................................................................ 3,364,100
7,120,000 Series J-2C, 8.50% ........................................................................ 7,160,655
Los Angeles Regional Airports Improvement Corp., Lease Revenue,
25,000,000 Refunding, Delta Airlines, Inc., 6.35%, 11/01/25 .......................................... 25,477,500
9,500,000 Refunding, United Airlines, Inc., 6.875%, 11/15/12 ........................................ 10,095,270
2,000,000 Sub-Lease Revenue, Continental Airlines, Inc., Terminal Facilities, 9.00%, 08/01/08 ....... 2,141,600
7,730,000 Sub-Lease Revenue, Continental Airlines, Inc., Terminal Facilities, 9.00%, 08/01/17 ....... 8,277,284
4,220,000 Needles Public Financing Authority, Local Agency Revenue, Series A, 10.00%, 10/01/24 ....... 4,191,937
2,938,000 Orinda, 1915 Act, AD No. 94-1, Oak Springs, 8.25%, 09/02/19 ................................ 3,022,409
23,500,000 Palmdale California Special Tax Community Facility, Ritter Ranch, Series A, 8.50%, 09/01/24 22,796,880
Perris Public Financing Authority, Local Agency Revenue, Series B,
2,035,000 7.125%, 08/15/15 .......................................................................... 2,033,840
4,095,000 7.25%, 08/15/23 ........................................................................... 4,114,124
3,755,000 Richmond Joint Power Finance Authority Improvement Bond, 1915 Act, Improvement Districts
Nos. 851 and 853, Series B, 8.50%, 09/02/19................................................ 3,876,887
Riverside County COP, Airforce Village Project, Series 1992, 8.125%,
7,160,000 06/15/07 .................................................................................. 7,647,954
5,290,000 06/15/12 .................................................................................. 5,638,399
12,000,000 Roseville Special Tax, North Center Community Facility District, 8.60%, 11/01/17 ........... 12,647,640
Sacramento County 1915 Act, Refunding, Sunrise/US Corridor Assessment,
1,020,000 6.10%, 09/02/01............................................................................ 1,029,537
1,125,000 6.30%, 09/02/02 ........................................................................... 1,140,053
1,515,000 6.50%, 09/02/03 ........................................................................... 1,549,512
1,620,000 6.60%, 09/02/04 ........................................................................... 1,661,261
1,725,000 6.70%, 09/02/05 ........................................................................... 1,773,248
1,835,000 6.80%, 09/02/06 ........................................................................... 1,890,527
1,965,000 6.90%, 09/02/07 ........................................................................... 2,026,112
California (cont.)
Sacramento County 1915 Act, Refunding, Sunrise/US Corridor Assessment, (cont.)
$ 2,095,000 7.00%, 09/02/08 ........................................................................... $ 2,160,134
2,160,000 7.00%, 09/02/09 ........................................................................... 2,219,746
San Bernardino County Finance Authority Revenue, Refunding, Public Improvement, AD, Series A,
1,450,000 6.00%, 09/02/01 ........................................................................... 1,449,986
1,285,000 6.50%, 09/02/04 ........................................................................... 1,298,505
2,720,000 7.00%, 09/02/17 ........................................................................... 2,719,973
15,000,000 San Francisco City and County RDA, 7.75%, 09/01/06 ......................................... 15,530,100
San Francisco Downtown Parking Corp. Revenue, Series 1993,
1,800,000 6.55%, 04/01/12 ........................................................................... 1,894,212
2,150,000 6.65%, 04/01/18 ........................................................................... 2,273,432
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue, Senior Lien,
12,350,000 6.75%, 01/01/32 ........................................................................... 13,125,827
5,930,000 5.00%, 01/01/33 ........................................................................... 5,201,025
1,500,000 San Jose MFHR, Timberwood Apartments, Series B, 9.25%, 02/01/10 ............................ 1,555,650
San Ramon, 1915 Act, Fostoria Parkway Reassessment District No. 93-1,
540,000 6.30%, 09/02/03 ........................................................................... 545,713
1,325,000 6.80%, 09/02/15 ........................................................................... 1,324,987
3,000,000 Santa Margarita, Dana Point Authority, California Revenue, Refunding, Improvement Districts,
Series B, MBIA Insured, 5.75%, 08/01/20 ................................................... 3,008,430
Santa Rosa, 1915 Act, Fountaingrove Parkway Extension,
3,340,000 7.40%, 09/02/13 ........................................................................... 3,442,304
3,450,000 7.625%, 09/02/19 .......................................................................... 3,556,847
2,000,000 South San Francisco RDA, Tax Allocation, Gateway Redevelopment Project, 7.60%, 09/01/18 .... 2,109,420
7,500,000 Vallejo Special Tax, CFD No. 1988-1, 8.90%, 08/01/21 ....................................... 7,809,300
------------
503,371,703
------------
Colorado 4.0%
2,485,000 Arvada Limited Sales and Use Tax Revenue, Pre-Refunded, 7.50%, 06/01/11 .................... 2,774,602
3,000,000 Arvada MFHR, Springwood Community, Project A, 6.45%, 02/20/26 .............................. 3,098,460
Auraria Higher Education Center, Parking Facilities Revenue, Refunding, Pre-Refunded,
3,450,000 7.75%, 04/01/09 ........................................................................... 3,783,753
1,600,000 7.875%, 04/01/12 .......................................................................... 1,760,480
12,600,000 Colorado Health Facilities Authority Revenue, Beneficial Living System, Inc., Series A,
10.125%, 10/01/20 ......................................................................... 13,563,270
Colorado HFA,
480,000 SF Program, Issue A-2, 9.375%, 08/01/02 ................................................... 503,525
345,000 SF Program, Series A-2, 9.25%, 08/01/01 ................................................... 360,315
465,000 SF Program, Series B-1, 8.70%, 08/01/01 ................................................... 483,089
490,000 SFMR, Series B-3, 9.75%, 08/01/02 ......................................................... 500,594
840,000 SFMR, Series C, 9.20%, 08/01/02 ........................................................... 876,347
1,025,000 SFMR, Series 1991-C, 9.075%, 08/01/03 ..................................................... 1,072,488
3,735,000 Colorado Springs, Utilities Revenue, Series A, 6.10%, 11/15/24 ............................. 3,869,572
Denver City and County Airport Revenue,
5,840,000 Series A, 8.25%, 11/15/12 ................................................................. 6,639,788
11,065,000 Series A, 8.00%, 11/15/17 ................................................................. 11,542,565
31,800,000 Series A, 8.50%, 11/15/23 ................................................................. 36,421,812
145,000 Series A, 8.00%, 11/15/25 ................................................................. 163,641
5,830,000 Series A, Pre-Refunded, 7.50%, 11/15/12 ................................................... 6,789,910
22,050,000 Series A, Pre-Refunded, 7.25%, 11/15/25 ................................................... 25,406,451
8,900,000 Series A, Pre-Refunded, 7.25%, 11/15/25 ................................................... 10,254,758
500,000 Series D, 7.75%, 11/15/13 ................................................................. 613,080
4,190,000 Series D, 7.75%, 11/15/21 ................................................................. 4,637,995
Colorado (cont.)
$ 2,305,000 Eagle County Airport Terminal Project Revenue, 7.50%, 05/01/21.............................. $ 2,414,741
Eagle County Sports Facilities Revenue, Refunding, 8.00%, 08/01/09,
19,600,000 Beaver Creek Association Project ......................................................... 21,194,656
21,600,000 Vail Association Project ................................................................. 23,357,376
300,000 Fort Collins IDR, Vipont Pharmaceutical, Inc. Project, Pre-Refunded, 9.25%, 08/01/13 ....... 326,973
4,640,000 Stonegate Village Metropolitan District, Refunding and Improvement, Series A, FSA Insured,
5.60%, 12/01/25 ........................................................................... 4,613,274
3,000,000 bVillage Castle Rock Metropolitan District No. 4, 8.50%, 06/01/31 .......................... 1,231,710
------------
188,255,225
------------
Connecticut 0.7%
2,755,000 Connecticut State Development Authority, First Mortgage Revenue, East Hill Gladeview Health
Project 86, 9.75%, 12/15/16 ............................................................... 3,021,161
Connecticut HFA, Housing Mortgage Finance,
19,995,000 Series C-1, 6.30%, 11/15/17................................................................ 20,493,075
3,500,000 Sub-Series F-1, 6.00%, 05/15/17............................................................ 3,529,855
3,000,000 Connecticut State Development Authority, Water Facility Revenue, Bridgeport Hydraulic Co. Project,
6.15%, 04/01/35 ........................................................................... 3,048,180
Connecticut State Health and Educational Facilities Authority Revenue, Series C,
2,000,000 Sacred Heart University, Refunding, 6.50%, 07/01/16........................................ 2,048,060
2,500,000 Windham Community Memorial Hospital, 6.00%, 07/01/11 ...................................... 2,487,875
------------
34,628,206
------------
District of Columbia 2.7%
5,410,000 District of Columbia, Carnegie Endowment Revenue, 5.75%, 11/15/26 .......................... 5,371,373
District of Columbia GO,
7,800,000 Refunding, Series A, 5.875%, 06/01/05 ..................................................... 7,949,526
11,775,000 Refunding, Series A, 6.00%, 06/01/07 ...................................................... 12,063,252
22,770,000 Series A, 6.375%, 06/01/11 ................................................................ 23,382,968
27,230,000 Series A, 6.375%, 06/01/16 ................................................................ 27,851,661
5,000,000 Series E, 6.00%, 06/01/11 ................................................................. 5,186,800
District of Columbia Hospital Revenue, Series A,
6,500,000 Medlantic Healthcare Group, Refunding, MBIA Insured, 5.70%, 08/15/08 ...................... 6,760,325
8,850,000 Medlantic Healthcare Group, Refunding, MBIA Insured, 5.875%, 08/15/19 ..................... 8,926,641
2,000,000 Washington Hospital Center, 7.00%, 08/15/05 ............................................... 2,155,440
4,500,000 Washington Hospital Center, 7.125%, 08/15/19 .............................................. 4,709,520
14,045,000 Washington Hospital Center, Pre-Refunded, 9.00%, 01/01/08 ................................. 16,395,993
3,750,000 Washington Hospital Center, Pre-Refunded, 8.75%, 01/01/15 ................................. 4,338,075
1,500,000 District of Columbia Redevelopment Agency, Washington D. C. Sports Arena Special Tax Revenue,
5.625%, 11/01/10 .......................................................................... 1,468,425
------------
126,559,999
------------
Florida 8.7%
2,990,000 Alachua County Health Facilities Authority Revenue, Shands Teaching Hospital, Series A,
MBIA Insured, 5.80%, 12/01/26 ............................................................. 3,022,681
19,170,000 Broward County Resource Recovery Revenue, Broward Waste Energy, L.P. North Project,
7.95%, 12/01/08 ........................................................................... 21,012,429
12,200,000 Cape Coral Health Facilities Authority Revenue, Refunding, First Mortgage, Gulf Care, Inc.
Project, Pre-Refunded, 11.00%, 10/01/17 ................................................... 14,716,250
Capron Trails CDD, Series 1990,
1,685,000 9.375%, 12/01/01........................................................................... 1,762,409
5,795,000 9.50%, 12/01/10............................................................................ 6,121,664
Florida (cont.)
East County Water Control District, Lee County Drain, Series 1991, Pre-Refunded,
$ 2,770,000 8.75%, 09/01/01 ........................................................................... $ 3,055,227
10,565,000 8.625%, 09/01/11 .......................................................................... 12,194,229
1,640,000 Escambia County Health Facilities Authority Revenue, Refunding, Baptist Hospital, Inc.,
Series A, 8.70%, 10/01/14 ................................................................. 1,759,080
2,915,000 Flagler County IDA, First Mortgage Revenue, RHA South Florida Properties, Inc. Projects,
10.50%, 12/01/18 .......................................................................... 2,912,785
Florida State Board of Education, Capital Outlay, Public Education, Series B, 5.875%,
7,000,000 06/01/24 .................................................................................. 7,101,360
2,000,000 06/01/25 .................................................................................. 2,028,960
Florida State, Mid Bay Bridge Authority, Series 1991-B, 8.50%,
3,200,000 10/01/08 .................................................................................. 3,575,104
15,400,000 10/01/22 .................................................................................. 17,205,188
4,025,000 Gateway Services District, Florida Water Management Benefit Tax Revenue, Second Assessment
Area Phase One, 8.00%, 05/01/20 ........................................................... 4,054,866
11,000,000 Indian Trace CDD, Florida Water and Sewer Revenue, Expansion, 6.875%, 04/01/10 ............. 10,985,040
Indian Trace CDD, Refunding, Water Management Special Benefit, Sub-Series B, 8.25%,
11,935,000 05/01/05 .................................................................................. 12,259,751
12,760,000 05/01/11 .................................................................................. 13,123,277
1,765,000 Lake Clarke Shores Utility System Revenue, Pre-Refunded, 8.75%, 10/01/18 ................... 1,927,451
6,280,000 Lakeland Electric and Water Revenue, Refunding and Improvement, Series B, 5.625%, 10/01/19 . 6,251,866
12,000,000 Lakeland Retirement Community First Mortgage Revenue, Carpenters Home Estates Project,
9.75%, 09/01/18 ........................................................................... 12,559,440
Lakewood Ranch Community Development, District 2, Benefit Special Assessment,
8.125%, 05/01/17,
10,495,000 Series A .................................................................................. 10,616,007
9,510,000 Series B .................................................................................. 9,619,650
9,995,000 Lakewood Ranch Community Development, District 3, Special Assessment Revenue,
7.625%, 05/01/18 .......................................................................... 10,090,552
6,500,000 Manatee County IDR, Manatee Hospitals and Health Systems, Inc., Pre-Refunded,
9.25%, 03/01/21............................................................................ 7,724,665
Meadow Pointe CDD, Capital Improvement Revenue,
1,280,000 6.25%, 07/01/98 ........................................................................... 1,284,032
7,870,000 6.875%, 07/01/99 .......................................................................... 7,952,714
Mount Dora Country Club CDD, Special Assessment Revenue,
1,675,000 6.75%, 05/01/03 ........................................................................... 1,653,309
4,110,000 7.125%, 05/01/05 .......................................................................... 4,113,206
2,790,000 7.75%, 05/01/13 ........................................................................... 2,779,398
16,430,000 Naples Heritage CDD, Capital Improvements Revenue, 6.15%, 11/01/01.......................... 16,388,925
20,000,000 North Broward Hospital District Revenue, Refunding and Improvement, MBIA Insured,
5.75%, 01/15/27............................................................................ 20,032,400
North Springs ID, Water Management, 05/01/24,
1,980,000 Series A, 8.20% ........................................................................... 2,108,324
1,740,000 Series B, 8.30% .......................................................................... 1,852,282
Northwood CDD, Special Assessment Revenue,
1,705,000 Series A, 7.125%, 05/01/00 ................................................................ 1,711,667
1,620,000 Series B, 7.60%, 05/01/17 ................................................................. 1,641,303
6,000,000 Palm Beach County Health Facilities Authority Revenue, Refunding, Abbey del Ray Project,
Series 1992, 8.25%, 10/01/15 .............................................................. 6,547,260
26,000,000 Palm Beach County Solid Waste IDR, Okeelanta Power, L. P. Project, Series A, 6.85%, 02/15/21 22,033,180
Florida (cont.)
Pelican Marsh CDD, Special Assessment Revenue, 8.25%, 05/01/16,
$ 8,540,000 Series A .................................................................................. $ 9,033,014
5,080,000 Series B .................................................................................. 5,373,268
1,225,000 Pembroke Pines Florida, Capital Improvement Revenue, AMBAC Insured, 5.95%, 10/01/20 ........ 1,258,198
2,365,000 Port Orange Lease Finance Corp., Recreation Facilities Lease Revenue, Pre-Refunded,
8.75%, 10/01/12 ........................................................................... 2,667,152
Riverwood Community Development, Special AD, Series A,
4,265,000 6.75%, 05/01/04 ........................................................................... 4,351,580
2,720,000 7.75%, 05/01/14 ........................................................................... 2,793,114
4,975,000 St. Lucie County Florida, Reserve CDD, Storm Water Management, 8.25%, 05/01/14 ............. 5,161,413
5,000,000 St. Lucie West Services District, Florida Water Management Benefit Tax, 7.70%, 05/01/25 .... 5,043,850
St. Lucie West Services District Revenue, Refunding, Port St. Lucie,
20,430,000 7.875%, 05/01/20 .......................................................................... 21,092,545
23,245,000 8.25%, 12/01/23 ........................................................................... 24,443,047
Santa Rosa County Health Facilities Authority Revenue, Refunding, Gulf Breeze Hospital, Inc.,
265,000 8.60%, 10/01/02 ........................................................................... 280,245
835,000 Pre-Refunded, 8.70%, 10/01/14 ............................................................. 909,874
4,500,000 Sunrise Utility System Revenue, Series A, AMBAC Insured, 5.90%, 10/01/18 ................... 4,577,625
Tampa Capital Improvement Program Revenue, 10/01/18,
3,085,000 Series A, 8.25% ........................................................................... 3,239,836
8,900,000 Series B, 8.375% .......................................................................... 9,364,758
10,000,000 Tampa Revenue, Aquarium, Inc. Project, Pre-Refunded, 7.55%, 05/01/12 ....................... 11,522,600
Village Community Development, District No. 1, Capital Improvement Revenue,
3,585,000 6.75%, 05/01/02 ........................................................................... 3,676,812
2,130,000 8.40%, 05/01/12 ........................................................................... 2,262,039
4,125,000 8.00%, 05/01/15 ........................................................................... 4,292,393
------------
407,121,294
------------
Georgia 0.6%
735,000 Burke County Development Authority, PCR, Georgia Power Co., Plant Vogtle Project,
8.375%, 07/01/17 .......................................................................... 758,300
10,000,000 Chatham County Hospital Authority Revenue, Refunding and Improvement, Memorial Medical
Center, Series A, AMBAC Insured, 5.70%, 01/01/19 .......................................... 10,024,600
15,000,000 Metropolitan Atlanta Rapid Transit Authority, Sales Tax Revenue, Series A, Refunding, Second
Indenture, MBIA Insured, 5.625%, 07/01/20 ................................................. 14,969,550
1,365,000 Tift County IDAR, Beverly Enterprises, 10.125%, 09/01/10 .................................. 1,525,865
------------
27,278,315
------------
Hawaii 0.3%
6,500,000 Hawaii Department of Transportation Special Revenue, Continental Airlines, Inc., 9.70%, 06/01/20 7,225,335
4,980,000 Hawaii State Special AD No. 17, AMBAC Insured, 9.50%, 08/01/11 ............................. 5,277,007
1,315,000 Hawaiian Home Lands Department Revenue, 7.60%, 07/01/08 .................................... 1,432,114
------------
13,934,456
------------
Idaho 0.5%
22,360,000 Nez Perce County PCR, Refunding, Potlatch Corp. Project, 6.00%, 10/01/24 ................... 22,506,905
------------
Illinois 4.4%
9,150,000 Alton Hospital Facilities Revenue, Refunding, St. Anthony's Health Center Project, Pre-Refunded,
8.375%, 09/01/14 .......................................................................... 10,197,218
5,635,000 Aurora MFR, Refunding, Fox Valley Two-Oxford Limited Development, GNMA Secured, Series A,
6.125%, 02/20/32 .......................................................................... 5,684,701
11,000,000 Bryant PCR, Refunding, Central Illinois Light Company Project, MBIA Insured, 5.90%, 08/01/23 11,057,090
Illinois (cont.)
Chicago O'Hare Airport Special Facility,
$ 7,830,000 Refunding, American Airlines, Inc. Project, 8.20%, 12/01/24 ............................... $ 9,206,279
3,705,000 United Airlines, Inc., Revenue, 8.85%, 05/01/18 ........................................... 4,177,906
15,450,000 United Airlines, Inc., Series 1984-A, 8.85%, 05/01/18 ..................................... 17,422,038
Chicago Wastewater Transmission Revenue,
2,810,000 FGIC Insured, Pre-Refunded, 6.35%, 01/01/22 ............................................... 3,109,181
4,780,000 MBIA Insured, 6.375%, 01/01/24 ............................................................ 5,041,705
7,000,000 Illinois Development Financial Authority PCR, Refunding, Commonwealth Edison Co. Project,
7.25%, 06/01/11 ........................................................................... 7,499,240
Illinois Educational Facilities Authority Revenue, Osteopathic Health Systems,
2,330,000 ETM, 7.125%, 05/15/11 ..................................................................... 2,545,012
7,000,000 Pre-Refunded, 7.25%, 05/15/22 ............................................................. 7,685,160
Illinois Health Facilities Authority Revenue,
3,000,000 Bensenville Home Society, Series B, 8.20%, 02/15/19 ....................................... 3,173,310
6,500,000 Northwestern Medical Center, 6.625%, 11/15/25 ............................................. 6,942,325
9,000,000 Refunding, Rush Presbyterian Hospital, MBIA Insured, Series A, 6.25%, 11/15/20 ............ 9,362,790
3,370,000 Refunding, Sarah Bush Lincoln Health Center, Series B, 6.00%, 02/15/11..................... 3,381,256
3,000,000 Refunding, Westlake Community Hospital, 7.875%, 01/01/13 .................................. 3,167,880
18,765,000 Revolving Fund, Pooled Financing, Thorek Hospital and Medical Center, Series H,
9.50%, 08/01/15 ........................................................................... 19,937,813
2,000,000 Sarah Bush Lincoln Health Center, Pre-Refunded, 7.25%, 05/15/12 ........................... 2,283,800
3,000,000 Servantcor, Series 1989-B, Pre-Refunded, 7.875%, 08/15/19 ................................. 3,311,370
1,215,000 St. Elizabeth's Hospital, 6.250%, 07/01/16 ................................................ 1,209,472
6,695,000 St. Elizabeth's Hospital, 6.375%, 07/01/26 ................................................ 6,680,941
6,500,000 Lombard, Village of, Revenue, Refunding, Beacon Hill Project, 9.30%, 02/15/18 .............. 6,705,465
Metropolitan Pier and Exposition Authority, Hospitality Facilities Revenue, McCormick
Place Convention,
1,650,000 5.75%, 07/01/06 ........................................................................... 1,660,478
11,000,000 6.25%, 07/01/17............................................................................ 11,114,290
7,500,000 7.00%, 07/01/26 ........................................................................... 8,426,775
Robbins Resource Recovery Revenue Partners, 8.375%, 10/15/16,
15,150,000 Series 1994-A ............................................................................. 15,802,056
17,500,000 Series 1994-B ............................................................................. 18,253,200
1,330,000 Sterling Illinois First Mortgage Revenue, Hoosier Care Project, Series A, 9.75%, 08/01/19 .. 1,415,878
------------
206,454,629
------------
Indiana 0.7%
5,000,000 Crawfordsville Industrial EDR, Refunding, Kroger Co., 7.70%, 11/01/12 ...................... 5,408,450
3,000,000 Indiana Health Facilities Financing Authority, Hospital Revenue, Hancock Memorial Hospital
Project, Pre-Refunded, 8.30%, 08/15/20 .................................................... 3,421,680
1,000,000 Indiana State Educational Facilities Authority Revenue, Anderson University Project,
8.40%, 10/01/08 ........................................................................... 1,072,080
12,500,000 Indianapolis Local Public Improvement Bond, Series C, 6.00%, 01/10/18 ...................... 12,781,000
2,500,000 Jefferson County Hospital Authority Facility Revenue, Refunding, King's Daughters' Hospital,
8.50%, 08/15/13 ........................................................................... 2,660,025
Kokomo Hospital Authority Revenue, Refunding, St. Joseph's Hospital and Health Center
of Kokomo, 8.75%, 02/15/13,
3,700,000 Pre-Refunded, Series A .................................................................... 4,022,233
2,410,000 Series B .................................................................................. 2,553,443
------------
31,918,911
------------
Iowa
$ 500,000 Clinton Hospital Facilities Revenue, Jane Lamb Health Center Project, Pre-Refunded,
8.75%, 08/01/03 ........................................................................... $ 543,380
------------
Kansas 0.1%
5,730,000 Prairie Village Revenue, Claridge Court Project, Series A, 8.75%, 08/15/23 ................ 6,250,685
------------
Kentucky 1.0%
900,000 Danville Multi-City Lease Revenue, Sewer and Drain System, Series G, MBIA Insured,
Pre-Refunded, 6.75%, 03/01/11 ............................................................. 1,003,995
940,000 Florence Housing Facilities Revenue, Bluegrass Retirement Housing Foundation Project,
9.50%, 07/01/17 ........................................................................... 940,160
3,200,000 Jefferson County, Health Facilities Revenue, Beverly Project, 10.125%, 08/01/07 ............ 3,420,608
Kenton County Airport Board Revenue, Special Facilities, Delta Airlines Project,
11,000,000 8.10%, 12/01/15 ........................................................................... 11,938,410
11,230,000 Series A, 7.50%, 02/01/20 ................................................................ 12,128,737
3,595,000 Series B, 7.25%, 02/01/22 ................................................................. 3,865,632
975,000 Powderly IDR, First Mortgage Revenue, Kroger Co., Refunding, 7.375%, 09/01/06 .............. 1,038,736
Russell Health System Revenue, Franciscan Health Center, Series B, 8.10%,
1,700,000 07/01/01 .................................................................................. 1,858,899
7,500,000 07/01/15 .................................................................................. 8,587,125
900,000 Stanford Health Facilities Revenue, Refunding, Beverly Project, 10.375%, 11/01/09 .......... 1,016,379
3,350,000 Winchester Hospital Revenue, Refunding, Clark County Hospital Project, 7.75%, 04/01/13 ..... 3,424,102
------------
49,222,783
------------
Louisiana 2.5%
2,465,000 Calcasieu Parish Public Trust Authority, Mortgage Revenue, Refunding, Series A,
7.75%, 06/01/12 ........................................................................... 2,618,397
705,000 Iberville Parish Consolidated School District No. 5, GO, Unlimited Tax, Pre-Refunded,
8.00%, 10/01/06 ........................................................................... 761,337
35,000,000 Lake Charles Harbor and Terminal District Port Facilities Revenue, Refunding, Trunkline Co.
Project, 7.75%, 08/15/22 .................................................................. 39,851,350
4,850,000 Pointe Coupee Parish PCR, Refunding, Gulf States Utilities Co. Project, 6.70%, 03/01/13 .... 5,016,161
St. Charles Parish PCR, Louisiana Power and Light Co. Project,
25,500,000 8.25%, 06/01/14 ........................................................................... 27,683,055
13,525,000 8.00%, 12/01/14 ........................................................................... 14,718,176
West Feliciana Parish PCR,
17,200,000 Refunding, Gulf States Utilities Co. Project, 8.00%, 12/01/24 ............................. 18,469,016
8,740,000 Series A, 7.50%, 05/01/15 ................................................................. 9,405,027
------------
118,522,519
------------
Maine 0.8%
5,000,000 Maine State Finance Authority Solid Waste Disposal Revenue, Boise Cascade Corp. Project,
7.90%, 06/01/15 ........................................................................... 5,319,700
4,800,000 Rumford PCR, Boise Cascade Corp. Project, Refunding, 6.625%, 07/01/20....................... 5,039,136
4,940,000 Skowhegan Pollution Control Revenue, S.D. Warren Co., Series B, 6.65%, 10/15/15 ............ 4,940,000
24,570,000 Skowhegan Solid Waste Disposal Revenue, S.D. Warren Co., Series A, 6.65%, 10/15/15 ......... 24,570,000
------------
39,868,836
------------
Maryland 0.8%
Gaithersburg Hospital Facilities Revenue, Refunding and Improvement, Shady Grove,
5,000,000 FSA Insured, 6.00%, 09/01/21............................................................... 5,137,000
3,635,000 Nursing Home, Series 1992-B, Pre-Refunded, 8.50%, 09/01/22 ................................ 4,372,396
6,075,000 Series 1992-B, 8.50%, 09/01/03 ............................................................ 6,134,596
5,340,000 Series 1992-B, 8.50%, 09/01/07 ............................................................ 5,747,976
Maryland (cont.)
$ 3,975,000 Maryland State CDA, Department of Housing and Community Development, Series A,
5.875%, 07/01/16 .......................................................................... $ 4,015,108
Takoma Park, Hospital Facilities Revenue, Washington Adventist Hospital Project, Series B, 8.50%,
6,320,000 09/01/03 .................................................................................. 6,521,039
6,975,000 09/01/07 .................................................................................. 7,718,605
------------
39,646,720
------------
Massachusetts 1.4%
2,000,000 Bay Transit Authority, General Transportation System, Series A, 7.00%, 03/01/21 ............ 2,384,960
4,500,000 Cape Cod Health Systems, Massachusetts Industry Finance Authority, Pre-Refunded,
8.50%, 11/15/20 ........................................................................... 5,215,680
Massachusetts Municipal Wholesale, Electric Co. Power Supply System Revenue, 6.75%,
4,435,000 Series A, 07/01/11 ........................................................................ 4,734,673
3,170,000 Series B, 07/01/17 ........................................................................ 3,364,701
Massachusetts Health and Educational Facilities Authority Revenue,
5,000,000 Bay State Medical Center, Series E, FSA Insured, 6.00%, 07/01/26 .......................... 5,081,650
2,000,000 Framingham, Union Hospital, Pre-Refunded, 8.50%, 07/01/10 ................................. 2,288,640
2,000,000 Massachusetts State Industrial Finance Agency, First Mortgage Revenue, Brookhaven at
Lexington Retirement Project, Pre-Refunded, 10.25%, 01/01/18 .............................. 2,164,000
Massachusetts State Industrial Finance Agency, Semass Project, 07/01/15,
15,490,000 Series 1991-A, 9.00% ...................................................................... 17,593,852
20,590,000 Series 1991-B, 9.25% ...................................................................... 23,452,628
1,000,000 Massachusetts State Water Resources Authority, Series A, 6.00%, 04/01/20 ................... 1,005,780
------------
67,286,564
------------
Michigan 2.2%
5,990,000 City of Cadillac, Local Development Financial Authority, Tax Increment Revenue, Refunding,
8.50%, 03/01/10 ........................................................................... 6,379,410
Detroit GO,
5,175,000 City School District, Series A, AMBAC Insured, 5.85%, 05/01/16 ........................... 5,267,891
5,160,000 Series A, Pre-Refunded, 6.80%, 04/01/15.................................................... 5,897,467
7,535,000 Series B, Refunding, 6.375%, 04/01/07...................................................... 8,043,839
3,000,000 Series B, Refunding, 6.25%, 04/01/08....................................................... 3,158,250
4,250,000 Dickinson County, Memorial Hospital System Revenue, 8.125%, 11/01/24 ....................... 4,699,268
11,770,000 Kent Hospital Finance Authority, Michigan Health Care Revenue, Series A, MBIA Insured,
6.125%, 01/15/21........................................................................... 12,198,781
Michigan State Hospital Finance Authority Revenue,
9,310,000 Mercy Hospital Services, Series Q, AMBAC Insured, 5.75%, 08/15/16 ......................... 9,348,357
6,605,000 Refunding, Detroit Osteopathic Hospital, Pre-Refunded, Series A, 7.50%, 11/01/10 .......... 6,903,414
7,825,000 Michigan State Strategic Fund Limited Obligation Revenue, Refunding, Detroit Edison Co.,
Series BB, MBIA Insured, 6.20%, 08/15/25................................................... 8,179,551
12,000,000 Midland County EDC, PCR, Refunding, 9.50%, 07/23/09 ........................................ 13,115,040
3,500,000 Muskegon, Hospital Finance Authority, Muskegon General Hospital, 8.25%, 02/15/11 ........... 3,778,110
2,020,000 Tawas City HFA, Hospital Revenue, Tawas St. Joseph's Hospital Project, Series A, 8.50%, 03/15/12 2,080,964
1,900,000 Wayne County, Downriver Systems Sewer Disposal, Series A, 7.00%, 11/01/13 .................. 1,981,130
4,500,000 Wayne County, Michigan Building Authority IDA, Pre-Refunded, 8.00%, 03/01/17................ 5,257,845
4,665,000 Wayne County, South Huron Valley Wastewater Control, Refunding, 7.875%, 05/01/02 ........... 5,182,488
Wyandotte Tax Increment Finance Authority, Central Development Area Project,
Pre-Refunded, 7.875%,
500,000 06/01/08 .................................................................................. 512,655
500,000 06/01/09 .................................................................................. 544,500
500,000 06/01/10 .................................................................................. 544,500
------------
103,073,460
------------
Minnesota 2.4%
Burnsville Solid Waste Revenue, Freeway Transfer, Inc. Project, 9.00%,
$ 465,000 10/01/00 .................................................................................. $ 509,375
1,500,000 04/01/10 .................................................................................. 1,647,120
5,000,000 Duluth Minnesota, Commercial Development Revenue, Refunding, Duluth Radisson Hotel Project,
8.00%, 12/01/15 ........................................................................... 5,006,100
2,200,000 Maplewood Health Care Facility Revenue, Health East Project, 5.95%, 11/15/06 ............... 2,210,604
Minneapolis CDA, Limited Tax, Supported Development Revenue,
2,985,000 Series 2, 8.40%, 12/01/12 ................................................................. 3,201,233
600,000 Series 3-A, 8.375%, 12/01/19 .............................................................. 654,024
3,830,000 Minnesota State HFA, Rental Housing, Refunding, Series D, MBIA Insured, 5.95%, 02/01/18 .... 3,863,934
1,140,000 Northfield First Mortgage Nursing Home Revenue, Minnesota Odd Fellows Home Project,
8.75%, 10/01/03 ........................................................................... 1,193,740
5,165,000 Northwest Multi-County RDA, Governmental Housing Revenue Pooled Housing Project,
7.40%, 07/01/26 ........................................................................... 5,061,287
4,110,000 Robbinsdale, MFHR, Refunding, Copperfield Phase II Apartments, 9.00%, 03/01/25 ............. 4,181,720
10,000,000 South Central Multi-County Housing and RDA, Pooled Housing, 8.00%, 02/01/25 ................ 6,200,000
5,930,000 St. Cloud IDR, Nahan Printing, 9.75%, 06/01/20 ............................................. 6,551,761
St. Paul Housing and RDA, Hospital Facility Revenue, Health East Project, 9.75%, 11/01/17,
4,415,000 Series A .................................................................................. 4,648,333
410,000 Series B .................................................................................. 431,197
650,000 Series C .................................................................................. 684,353
3,270,000 Series D .................................................................................. 3,442,820
1,530,000 St. Paul Housing and RDA, Housing Tax, 8.625%, 09/01/07 .................................... 1,716,522
585,000 St. Paul Port Authority Commercial Development, Theole Printing Project, 9.00%, 10/01/21 ... 605,656
4,465,000 St. Paul Port Authority Energy Park, Tax Increment Revenue, Refunding, Pre-Refunded,
8.00%, 12/01/07............................................................................ 4,856,938
St. Paul Port Authority, IDR,
1,095,000 SDA Enterprises, Series K, 10.25%, 10/01/10 ............................................... 1,075,246
40,000 Series 1979-2, 7.50%, 10/01/09 ............................................................ 39,046
55,000 Series 1980-F, 10.25%, 10/01/97 ........................................................... 55,115
60,000 Series 1980-F, 10.25%, 10/01/98............................................................ 60,336
65,000 Series 1980-F, 10.25%, 10/01/99............................................................ 65,568
70,000 Series 1980-F, 10.25%, 10/01/00 ........................................................... 70,207
80,000 Series 1980-F, 10.25%, 10/01/01............................................................ 80,294
90,000 Series 1980-F, 10.25%, 10/01/02............................................................ 89,813
1,300,000 Series 1982-N, 10.75%, 10/01/02 ........................................................... 1,309,113
860,000 Series 1983-C, 10.00%, 12/01/01............................................................ 864,463
715,000 Series 1983-C, 10.00%, 12/01/02............................................................ 713,520
2,930,000 Series 1983-C, 10.00%, 12/01/06 ........................................................... 2,882,856
3,100,000 Series 1983-C, 9.875%, 12/01/08 ........................................................... 3,020,702
15,000 Series 1984-I, 10.75%, 12/01/00 ........................................................... 15,173
15,000 Series 1984-I, 10.75%, 12/01/01............................................................ 15,210
15,000 Series 1984-I, 10.75%, 12/01/02 ........................................................... 15,104
25,000 Series 1984-L, 9.75%, 12/01/01 ............................................................ 25,133
30,000 Series 1984-L, 9.75%, 12/01/02 ............................................................ 29,942
1,530,000 Series 1984-L, 9.75%, 12/01/14 ............................................................ 1,467,561
65,000 Series 1984-N, 10.00%, 12/01/01............................................................ 65,337
65,000 Series 1984-N, 10.00%, 12/01/02 ........................................................... 64,865
1,405,000 Series 1984-N, 10.00%, 12/01/14 ........................................................... 1,348,533
80,000 Series 1985-J, 9.50%, 12/01/01............................................................. 80,435
95,000 Series 1985-J, 9.50%, 12/01/02 ............................................................ 94,833
Minnesota (cont.)
St. Paul Port Authority, IDR, (cont.)
$ 1,325,000 Series 1985-J, 9.50%, 12/01/11 ............................................................ $ 1,249,873
40,000 Series 1985-L, 9.50%, 12/01/01............................................................. 40,218
45,000 Series 1985-L, 9.50%, 12/01/02 ............................................................ 44,921
1,025,000 Series 1985-L, 9.50%, 12/01/14 ............................................................ 962,424
55,000 Series 1985-S, 9.625%, 12/01/01 ........................................................... 55,042
60,000 Series 1985-S, 9.625%, 12/01/02 ........................................................... 59,889
1,280,000 Series 1985-S, 9.625%, 12/01/14 ........................................................... 1,214,810
30,000 Series 1985-T, 9.625%, 12/01/01............................................................ 30,161
35,000 Series 1985-T, 9.625%, 12/01/02 ........................................................... 34,935
910,000 Series 1985-T, 9.625%, 12/01/14 ........................................................... 863,654
25,000 Series 1989-F, 8.00%, 09/01/00............................................................. 24,440
25,000 Series 1989-F, 8.00%, 09/01/01............................................................. 24,472
25,000 Series 1989-F, 8.00%, 09/01/02 ............................................................ 24,511
1,025,000 Series 1989-F, 8.00%, 09/01/19 ............................................................ 823,731
1,025,000 Series 1991 A-I, 8.50%, 12/01/01 .......................................................... 993,779
260,000 Series 1991 A-I, 9.00%, 12/01/02........................................................... 257,189
4,300,000 Series 1991 A-I, 9.00%, 12/01/12 .......................................................... 3,883,115
1,005,000 Series 1991 A-II, 8.50%, 12/01/01 ......................................................... 974,388
255,000 Series 1991 A-II, 9.00%, 12/01/02 ......................................................... 252,243
4,235,000 Series 1991 A-II, 9.00%, 12/01/12 ......................................................... 3,824,417
1,055,000 Series 1991 A-III, 8.50%, 12/01/01 ........................................................ 1,022,865
265,000 Series 1991 A-III, 9.00%, 12/01/02 ........................................................ 262,135
4,430,000 Series 1991 A-III, 9.00%, 12/01/12 ........................................................ 4,000,512
805,000 Series 1991 A-IV, 8.50% 12/01/01 .......................................................... 780,480
205,000 Series 1991 A-IV, 9.00%, 12/01/02 ......................................................... 202,784
3,375,000 Series 1991 A-IV, 9.00%, 12/01/12 ......................................................... 3,047,794
St. Paul Port Authority Lease Revenue, Mears Park Center Project, 6.50%,
5,155,000 06/01/16 .................................................................................. 5,197,890
10,660,000 06/01/26 .................................................................................. 10,748,691
------------
111,116,485
------------
Mississippi 1.4%
Claiborne County PCR, Middle South Energy, Inc. Project,
10,680,000 Series A, 9.50%, 12/01/13 ................................................................. 11,701,008
9,750,000 Series B, 8.25%, 06/01/14 ................................................................. 10,522,200
10,000,000 Series C, 9.875%, 12/01/14 ................................................................ 11,017,500
22,795,000 System Energy Residential Income Project, 6.20%, 02/01/26 ................................. 22,611,500
2,500,000 Claiborne County PCR, System Energy Resources Inc., 7.30%, 05/01/25 ........................ 2,625,275
4,250,000 Lowndes County, Golden Triangle Medical Center, 8.50%, 02/01/10 ............................ 4,603,005
720,000 Mississippi Hospital Equipment and Facilities Authority Revenue, Refunding, Mississippi Methodist
Hospital and Rehabilitation Center, Pre-Refunded, 9.375%, 05/01/12 ........................ 785,570
------------
63,866,058
------------
Missouri 1.5%
3,000,000 Lake of the Ozarks Community Bridge Corp., Bridge System Revenue, 6.40%, 12/01/25 .......... 2,980,110
8,800,000 Missouri Health and Educational Facilities Authority, Health Facility Marshall, IDA, John Fitzgibbons
Hospital, Series 1990, Pre-Refunded, 10.00%, 05/01/20 ...................................... 10,403,976
7,300,000 Missouri State Health and Educational Facilities Authority, Revenue, Heartland Health,
Refunding and Improvement, 8.125%, 10/01/10 ............................................... 7,937,801
175,000 Moberly IDA, Hospital Revenue, Refunding, Moberly Regional Medical Center, Inc.,
Pre-Refunded, 8.75%, 03/01/16 .............................................................. 187,632
Missouri (cont.)
$ 1,455,000 Newton County IDA, Health Facilities Revenue, Beverly Enterprises, 10.375%, 11/01/08 ....... $ 1,607,106
1,800,000 Perry Co., Perry Memorial Hospital, Series 1990, 9.125%, 06/01/11 .......................... 1,944,666
1,000,000 St. Louis County IDA, Health Facilities Revenue, Refunding and Improvement, First Mortgage,
Normandy Osteopathic Hospitals, 9.125%, 08/01/13 .......................................... 1,043,670
St. Louis County IDA, Refunding, Kiel Center,
8,000,000 7.625%, 12/01/09 .......................................................................... 8,602,800
5,175,000 7.75%, 12/01/13 ........................................................................... 5,572,285
6,000,000 7.875%, 12/01/24 .......................................................................... 6,466,140
St. Louis Municipal Finance Corp., Leasehold Revenue, Refunding, Series A,
14,250,000 6.00%, 07/15/13 ........................................................................... 14,388,510
8,640,000 City Justice Center, AMBAC Insured, 5.95%, 02/15/16 ....................................... 8,827,834
------------
69,962,530
------------
Montana 0.8%
370,000 Montana State Board of Housing, SFM, Senior Bonds, Series B-2, 8.90%, 10/01/00 ............. 381,836
2,500,000 Montana State Board of Investments EDR, Refunding, Bozeman Holiday Inn Project,
11.00%, 12/01/07 .......................................................................... 2,592,350
35,000,000 Montana State Board of Investments, Resource Recovery Revenue, Yellowstone Energy Project,
7.00%, 12/31/19 ........................................................................... 34,331,150
665,000 Montana State SFMR, Series 1991-A, 8.275%, 10/01/03 ........................................ 698,277
------------
38,003,613
------------
Nebraska 0.1%
3,500,000 Douglas County, Nebraska Hospital Authority Revenue, Health Facilities, Catholic Health,
MBIA Insured, Series C, 5.375%, 11/15/15 .................................................. 3,417,050
2,100,000 Scotts Bluff County, Hospital No. 1, Hospital Revenue, 6.375%, 12/15/08 .................... 2,206,659
------------
5,623,709
------------
Nevada 2.4%
Henderson Local Improvement,
6,150,000 District No. 2, 9.50%, 08/01/11 ........................................................... 6,388,866
44,555,000 District No. T-1, Series A, 8.50%, 08/01/13 ............................................... 46,150,960
10,695,000 District No. T-4, Series A, 8.50%, 11/01/12 ............................................... 11,129,003
4,930,000 District No. T-4, Series B, 7.30%, 11/01/12 ............................................... 5,044,770
7,350,000 District No. T-10, 7.50%, 08/01/15 ........................................................ 7,547,568
2,000,000 Las Vegas Downtown RDA, Tax Increment Revenue, Fremont Street Project, Series A,
6.10%, 06/15/14 ........................................................................... 1,978,740
Las Vegas Special ID,
3,555,000 No. 404, 5.85%, 11/01/09 .................................................................. 3,611,489
8,180,000 No. 505, Elkhorn Springs, 8.00%, 09/15/13 ................................................. 8,251,657
1,000,000 No. 707, 6.60%, 06/01/05 .................................................................. 1,030,570
1,235,000 No. 707, 6.70%, 06/01/06 .................................................................. 1,272,729
1,805,000 No. 707, 6.80%, 06/01/07 .................................................................. 1,860,125
8,000,000 No. 707, 7.10%, 06/01/16 .................................................................. 8,243,920
Nevada Housing Division, SF Program, Subordinated, FI/GML,
230,000 Series A, 9.30%, 10/01/00 ................................................................ 237,457
285,000 Series A-1, 8.75%, 10/01/04 .............................................................. 298,577
260,000 Series A-2, 9.375%, 10/01/00 ............................................................. 269,022
520,000 Series A-2, 8.65%, 10/01/01 .............................................................. 537,300
265,000 Series A-3, 9.20%, 10/01/00 .............................................................. 272,786
390,000 Series B, 9.50%, 10/01/01 ................................................................ 405,354
685,000 Series B-1, 7.90%, 10/01/05 .............................................................. 705,516
875,000 Series C-1, 7.55%, 10/01/05 .............................................................. 912,424
Nevada (cont.)
Nevada Housing Finance Division Subordinate,
$ 280,000 Series 1989 B-2, 9.65%, 10/01/02 .......................................................... $ 288,663
345,000 Series 1990 C-1, 9.60%, 10/01/02 .......................................................... 352,197
6,310,000 White Pine County, School District Building, 6.75%, 06/01/18 ............................... 6,549,465
------------
113,339,158
------------
New Hampshire 1.5%
New Hampshire Higher Education and Health Facility Authority Revenue,
18,950,000 Hillcrest Terrace, 7.50%, 07/01/24 ........................................................ 17,625,206
9,590,000 Kendal at Hanover Project, Pre-Refunded, 8.00%, 10/01/19 .................................. 10,629,172
New Hampshire IDA, PCR,
8,835,000 Public Service Co., Project A, 7.65%, 05/01/21............................................. 9,154,297
28,430,000 Public Service Co., Project C, 7.65%, 05/01/21 ............................................ 29,457,460
500,000 United Illuminating Co., 10.75%, 10/01/12 ................................................. 530,710
3,000,000 New Hampshire State Business Financial Authority, PCR, Refunding, United Illuminating Co.,
Series A, 5.875%, 10/01/33 ................................................................ 2,842,890
------------
70,239,735
------------
New Jersey 0.3%
4,000,000 New Jersey EDA, EDR, Refunding, Stolt Terminals, Series 1988-A, 10.50%, 01/15/18 ........... 4,281,000
2,100,000 New Jersey Health Care Facilities Financing Authority Revenue, Lutheran Home, Series A,
8.40%, 07/01/19 ........................................................................... 2,201,136
New Jersey State Housing and Mortgage Finance Agency, MFHR, Refunding, Series A,
AMBAC Insured,
3,000,000 6.00%, 11/01/14............................................................................ 3,066,060
5,500,000 6.05%, 11/01/20............................................................................ 5,599,660
------------
15,147,856
------------
New Mexico 1.4%
Farmington PCR, Refunding, Public Service of New Mexico Co., San Juan Project,
37,350,000 Series A, 6.40%, 08/15/23 ................................................................. 38,252,003
8,500,000 Series C, AMBAC Insured, 5.70%, 12/01/16 .................................................. 8,489,120
12,175,000 Series D, 6.375%, 04/01/22 ................................................................ 12,426,049
New Mexico Mortgage Finance Authority, SFM Program,
1,540,000 Refunding Series A-1, 7.90%, 07/01/04 ..................................................... 1,609,423
415,000 Series 1988-A, 9.50%, 09/01/00 ............................................................ 422,935
255,000 Series 1988-B, 9.30%, 09/01/00 ............................................................ 259,820
990,000 Series 1991-A, 9.10%, 09/01/03 ............................................................ 1,039,589
395,000 Series A, FHA Insured, 8.80%, 09/01/01 .................................................... 411,069
870,000 Sub-Series 1990-A, 9.55%, 09/01/02 ........................................................ 888,470
3,620,000 Rio Rancho Water and Wastewater Revenue, Series A, 5.90%, 05/15/15 ......................... 3,691,640
------------
67,490,118
------------
New York 15.0%
Babylon IDAR, Resource Recovery, Ogden Martin System, Babylon Inc., Pre-Refunded,
8.50%, 01/01/19,
1,000,000 Series B .................................................................................. 1,087,820
3,920,000 Series C .................................................................................. 4,264,254
3,350,000 Battery Park City Authority, Series A, AMBAC Insured, 5.50%, 11/01/26....................... 3,282,531
Metropolitan Transportation Authority, Service Contract, Refunding,
10,000,000 Commuter Facilities, Series 1, 5.70%, 07/01/24 ............................................ 10,056,500
3,860,000 Commuter Facilities, Series 5, 6.50%, 07/01/16 ............................................ 3,982,362
New York (cont.)
Metropolitan Transportation Authority, Service Contract, Refunding, (cont.)
$ 7,500,000 Commuter Facilities, Series A, FGIC Insured, 6.10%, 07/01/26 ............................. $ 7,797,825
3,330,000 Commuter Facilities, Series N, 6.80%, 07/01/04 ............................................ 3,612,317
3,050,000 Commuter Facilities, Series N, 6.90%, 07/01/05 ............................................ 3,300,375
2,330,000 Transportation Facilities, Series N, 6.80%, 07/01/04 ...................................... 2,521,876
2,470,000 Transportation Facilities, Series N, 6.90%, 07/01/05 ...................................... 2,672,762
7,830,000 Transportation Facilities, Series N, 7.125%, 07/01/09 ..................................... 8,572,284
13,565,000 Transportation Facilities, Series P, 5.75%, 07/01/15 ...................................... 13,278,236
3,500,000 New York City Educational Construction Fund, Revenue, AMBAC Insured, 5.50%, 04/01/26 ....... 3,435,075
New York City GO,
10,190,000 Refunding, Series A, 6.125%, 08/01/06 ..................................................... 10,636,933
10,000,000 Refunding, Series A, 6.25%, 08/01/08....................................................... 10,380,700
10,000,000 Refunding, Series F, 6.00%, 08/01/11....................................................... 10,015,600
1,795,000 Refunding, Series G, 5.75%, 08/01/10 ...................................................... 1,765,275
25,000,000 Refunding, Series H, 6.25%, 08/01/15 ...................................................... 25,256,000
3,435,000 Series A, 7.25%, 03/15/20 ................................................................. 3,690,942
1,200,000 Series A, 6.25%, 08/01/21 ................................................................. 1,206,960
6,565,000 Series A, Pre-Refunded, 7.25%, 03/15/20 ................................................... 7,205,613
17,070,000 Series B, 7.00%, 08/15/16 ................................................................. 18,426,382
4,090,000 Series B, 7.00%, 02/01/18 ................................................................. 4,366,443
4,365,000 Series B, 7.50%, 02/01/18 ................................................................. 4,841,352
5,000,000 Series B, 7.00%, 02/01/19 ................................................................. 5,333,500
5,745,000 Series B, 7.00%, 02/01/20 ................................................................. 6,128,192
635,000 Series B, Pre-Refunded, 7.50%, 02/01/18 ................................................... 727,145
5,000,000 Series B, Sub Series B-1, 7.25%, 08/15/19 ................................................. 5,539,150
4,250,000 Series C, 6.75%, 10/01/15 ................................................................. 4,407,463
4,615,000 Series C, 7.00%, 08/01/17 ................................................................. 4,937,035
10,800,000 Series C, 7.25%, 08/15/24 ................................................................. 11,483,316
185,000 Series C, Pre-Refunded, 7.00%, 08/01/17 ................................................... 209,622
250,000 Series C, Pre-Refunded, 7.25%, 08/15/24 ................................................... 279,003
645,000 Series C, Sub Series C-1, 7.00%, 08/01/16 ................................................. 699,399
3,250,000 Series C, Sub-Series C-1, 7.50%, 08/01/21 ................................................. 3,633,403
355,000 Series C, Sub Series C-1, Pre-Refunded, 7.00%, 08/01/16 ................................... 402,247
1,625,000 Series C, Sub-Series C-1, Pre-Refunded, 7.50%, 08/01/21 ................................... 1,879,914
11,600,000 Series D, 6.00%, 02/15/10 ................................................................. 11,659,740
150,000 Series D, 7.70%, 02/01/11 ................................................................. 167,930
400,000 Series D, 7.625%, 02/01/13 ................................................................ 444,324
4,500,000 Series D, 7.625%, 02/01/14 ................................................................ 5,002,785
7,425,000 Series D, 7.625%, 02/01/14 ................................................................ 8,264,768
3,235,000 Series D, 7.50%, 02/01/19 ................................................................. 3,565,876
3,350,000 Series D, Pre-Refunded, 7.70%, 02/01/11.................................................... 3,865,364
4,600,000 Series D, Pre-Refunded, 7.625%, 02/01/13 .................................................. 5,292,622
1,575,000 Series D, Pre-Refunded, 7.625%, 02/01/14................................................... 1,812,148
1,765,000 Series D, Pre-Refunded, 7.50%, 02/01/19 ................................................... 2,025,338
10,000,000 Series E, 6.25%, 02/15/07 ................................................................. 10,463,200
525,000 Series E, Pre-Refunded, 7.50%, 02/01/18 ................................................... 582,293
4,500,000 Series F, 7.625%, 02/01/13 ................................................................ 5,008,950
315,000 Series F, 7.625%, 02/01/15 ................................................................ 350,482
685,000 Series F, 7.50%, 02/01/21.................................................................. 760,384
8,625,000 Series F, 6.625%, 02/15/25................................................................. 8,900,051
85,000 Series F, Pre-Refunded, 7.625%, 02/01/15 .................................................. 97,798
New York (cont.)
New York City GO, (cont.)
$ 7,860,000 Series F, Pre-Refunded, 7.50%, 02/01/21 ................................................... $ 9,000,565
20,480,000 Series G, 6.125%, 10/15/11 ................................................................ 20,738,662
10,000,000 Series G, 6.20%, 10/15/14 ................................................................. 10,077,500
60,000 Series G, 7.50%, 02/01/22 ................................................................. 66,082
780,000 Series G, Pre-Refunded, 7.50%, 02/01/22 ................................................... 891,337
5,000,000 Series H, 7.20%, 02/01/14 ................................................................. 5,458,800
12,600,000 Series H, 7.20%, 02/01/15 ................................................................. 13,558,230
12,000,000 Series H, 7.00%, 02/01/19 ................................................................. 12,774,000
2,925,000 Series H, 7.00%, 02/01/20 ................................................................. 3,120,098
350,000 Series H, 7.00%, 02/01/22 ................................................................. 373,345
6,825,000 New York City IDA, Civic Facility Revenue, Amboy Corp. Project, Series 1990, 9.625%, 06/01/15 7,525,928
5,000,000 eNew York City Municipal Assistance Corp., Series H, 5.00%, 07/01/08 ........................ 4,957,000
New York City Municipal Water Financing Authority, Water and Sewer System Revenue,
5,075,000 Series A, Refunding, FGIC Insured, 5.75%, 06/15/18 ........................................ 5,062,110
10,000,000 Series B, 5.75%, 06/15/26 ................................................................. 10,014,300
New York State Dormitory Authority Revenue, City University System,
21,850,000 Refunding, 3rd General Residence, Series 2, 6.00%, 07/01/26 ............................... 21,901,129
1,000,000 Series B, Pre-Refunded, 7.20%, 07/01/21 ................................................... 1,125,600
1,000,000 Series F, Pre-Refunded, 7.875%, 07/01/07 .................................................. 1,128,510
8,500,000 Series F, Pre-Refunded, 7.875%, 07/01/17 .................................................. 9,592,335
New York State Dormitory Authority Revenue, State University Educational Facilities,
5,000,000 6.00%, 05/15/18 ........................................................................... 5,027,800
33,750,000 Refunding, Series A, 6.00%, 05/15/25....................................................... 33,851,925
730,000 Series A, Pre-Refunded, 7.125%, 05/15/17 .................................................. 789,991
23,000,000 Series B, 5.75%, 05/15/24 ................................................................. 22,351,170
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 ................................. 12,013,463
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 . 5,160,000
1,000,000 Water Facility Revenue, Long Island Water Corp. Project, Series 1987-A, 10.00%, 10/01/17 .. 1,039,800
New York State HFA, Series A,
12,515,000 Revenue, Refunding, 5.90%, 11/01/05 ....................................................... 12,785,825
10,000,000 Service Contract Obligation, 6.50%, 03/15/25 .............................................. 10,385,800
9,715,000 Service Contract Obligation, Pre-Refunded, 7.80%, 09/15/20 ................................ 11,001,169
4,975,000 Service Contract Obligation, Revenue, Series A, 6.00%, 03/15/26 ........................... 4,983,060
New York State Local Government Assistance Corp.,
15,000,000 Series B, 7.25%, 04/01/05 ................................................................. 16,858,500
10,000,000 Series B, 7.25%, 04/01/06 ................................................................ 11,239,000
3,500,000 Series D, Pre-Refunded, 7.00%, 04/01/18 ................................................... 3,957,100
6,850,000 Series D, Pre-Refunded, HFA, 7.80%, 09/15/10 .............................................. 7,756,872
New York State Medical Care Facilities, Financing Agency Revenue,
6,175,000 Montefiore Medical Center, Insured Mortgage, Series A, AMBAC Insured, FHA Guaranteed,
5.75%, 02/15/25 ........................................................................... 6,174,691
2,500,000 Security Hospital, Series A, 7.35%, 08/15/11 .............................................. 2,685,500
4,000,000 St. Luke's Nursing Home Mortgage Insured, Series B, 6.95%, 02/15/32 ....................... 4,283,920
New York State Mortgage Agency Revenue, Homeowner Mortgage,
2,000,000 Series 59, 6.10%, 10/01/15 ................................................................ 2,034,760
2,750,000 Series 59, 6.15%, 10/01/17 ................................................................ 2,797,685
7,100,000 Series 61, 5.80%, 10/01/16 ................................................................ 7,135,500
New York (cont.)
$ 22,750,000 New York State Urban Development Corp. Revenue, Correctional Capital Facilities, Series 7,
5.70%, 01/01/27............................................................................ $ 21,989,013
Port Authority of New York and New Jersey, Special Obligation Revenue,
1,000,000 2nd Installment, 6.50%, 10/01/01........................................................... 1,042,340
8,000,000 3rd Installment, 7.00%, 10/01/07........................................................... 8,690,960
5,000,000 4th Installment, Special Project, 6.75%, 10/01/11.......................................... 5,207,600
17,500,000 5th Installment, 6.75%, 10/01/19 .......................................................... 18,051,950
5,000,000 Consolidated 102nd Series, MBIA Insured, 5.75%, 10/15/23 .................................. 5,039,450
10,000,000 Continental Airlines, Inc., Eastern Project, La Guardia, 9.00%, 12/01/10 .................. 11,362,900
27,650,000 Continental Airport Project, Eastern Project, La Guardia, 9.125%, 12/01/15 ................ 31,533,996
1,410,000 Warren and Wash Counties IDAR, Refunding, Resource Recovery, Series A, 7.90%, 12/15/07 ..... 1,448,733
------------
705,625,863
------------
North Carolina 0.6%
2,500,000 Asheville Water System Revenue, FGIC Insured, 5.70%, 08/01/25 .............................. 2,516,500
20,000,000 North Carolina Eastern Municipal Power Agency System Revenue, Refunding, Series B,
MBIA Insured, 5.875%, 01/01/21 ............................................................ 20,159,200
North Carolina HFA, SF, Series II, GNMA Secured, 6.20%,
2,960,000 03/01/16 .................................................................................. 3,014,257
1,970,000 09/01/17 .................................................................................. 2,006,110
------------
27,696,067
------------
North Dakota 0.5%
24,655,000 Mercer County PCR, Refunding, Basin Electric Power, Second Series, AMBAC Insured,
6.05%, 01/01/19............................................................................ 25,633,064
------------
Ohio 4.9%
2,630,000 Allen County Nursing Home, First Mortgage Revenue, Volunteers of America Care Facilities
Project, 9.00%, 03/01/18 .................................................................. 2,733,622
21,235,000 Cleveland Airport Special Revenue, Continental Airlines, Inc. Project, 9.00%, 12/01/19 ..... 23,072,889
10,065,000 Cuyahoga County Hospital Revenue, Refunding, University Hospitals Health System, Series B,
MBIA Insured, 5.50%, 01/15/16 ............................................................. 9,936,369
11,500,000 Dayton Special Facilities IDR, Refunding, 6.05%, 10/01/09 .................................. 11,805,095
1,000,000 Franklin County Health Care Facilities Revenue, Ohio Presbyterian Retirement Services, Series A,
6.625%, 07/01/13 .......................................................................... 991,520
Lucas County Health Facilities Revenue, Refunding, Ohio Presbyterian Retirement Services, Series A,
1,000,000 6.625%, 07/01/14........................................................................... 991,240
2,000,000 6.75%, 07/01/20............................................................................ 1,992,760
Montgomery County Health Systems Revenue, Franciscan,
1,200,000 Series B, 8.10%, 07/01/01 ................................................................. 1,311,684
6,300,000 Series B, 8.10%, 07/01/18 ................................................................. 7,370,307
1,100,000 Series B-1, 8.10%, 07/01/01 ............................................................... 1,202,377
6,500,000 Series B-1, 8.10%, 07/01/18 ............................................................... 7,604,285
9,600,000 Series B-2, 8.10%, 07/01/18 ............................................................... 11,230,944
1,200,000 Muskingum County, Ohio Hospital Facilities Revenue, Refunding, Franciscan Sisters, Connie Lee
Insured, 5.375%, 02/15/12.................................................................. 1,157,568
Ohio State Air Quality Authority,
17,900,000 Dayton Power and Light Company Project, Refunding, 6.10%, 09/01/30......................... 18,516,297
5,265,000 Toledo Edison, Series B, 8.00%, 05/15/19 .................................................. 5,594,958
10,100,000 Ohio State HFA, Chagrin Fall, Retirement Rental Housing Revenue, 10.375%, 04/01/09 ......... 11,002,536
6,700,000 Ohio State Solid Waste Revenue, Republic Engineered Steels Inc., 9.00%, 06/01/21 ........... 6,733,031
Ohio (cont.)
Ohio State Water Development Authority Revenue,
$ 9,250,000 Fresh Water Service, AMBAC Insured, 5.90%, 12/01/21 ....................................... $ 9,499,288
4,750,000 Refunding and Improvement, Pure Water, AMBAC Insured, 5.50%, 12/01/18 ..................... 4,719,743
Ohio State Water Development Authority, (cont.)
27,700,000 PCR, Refunding, Cleveland Electric, Series A, 8.00%, 10/01/23 ............................ 30,197,432
6,200,000 Toledo Edison, Series A, 8.00%, 05/15/19 .................................................. 6,588,554
500,000 Pike County Hospital Facilities Revenue, National Church Residences, Series 1987,
Pre-Refunded, 9.875%, 07/01/17 ............................................................ 539,710
3,670,000 Seneca County Nursing HMR, Refunding and Improvement, Volunteers of America Care Facilities,
9.00%, 01/01/13 .......................................................................... 3,802,340
Toledo-Lucas County Port Authority Airport Revenue, Burlington Air Express,
6,820,000 Project 1, 7.00%, 04/01/04 ................................................................ 7,252,320
1,125,000 Series 1991-1, 9.125%, 09/15/01 ........................................................... 1,218,398
5,875,000 Series 1991-1, 9.125%, 09/15/13 ........................................................... 6,315,038
5,385,000 Series 1994-1, 7.25%, 04/01/09 ............................................................ 5,776,328
8,200,000 Series 1994-1, 7.375%, 04/01/14 ........................................................... 8,806,882
14,365,000 Series 1994-1, 7.50%, 04/01/19 ............................................................ 15,444,099
Toledo-Lucas County Port Authority Development Revenue, Northwest Ohio Bond Fund,
1,715,000 Series 1989-B, 9.00%, 11/15/08 ............................................................ 1,851,771
1,235,000 Series 1990-A, Pre-Refunded, 8.625%, 05/15/10 ............................................. 1,416,039
3,005,000 Series 1990-D, 8.25%, 05/15/20 ............................................................ 3,186,051
1,500,000 Willoughby IDR, Refunding, Ohio Presbyterian Retirement Services, Series A, 6.875%, 07/01/16 1,502,880
------------
231,364,355
------------
Oklahoma 0.8%
6,335,000 Jackson County Memorial Hospital Authority Revenue, Refunding, Jackson County Memorial
Hospital Project, Pre-Refunded, 9.00%, 08/01/15 ........................................... 6,601,133
Tulsa Municipal Airport Transportation Revenue,
12,845,000 American Airlines, Inc., 7.375%, 12/01/20 ................................................. 13,704,202
10,050,000 American Airlines Project, Refunding, 6.25%, 06/01/20 ..................................... 10,192,911
4,000,000 Valley View Hospital Authority, Oklahoma Revenue, Refunding, Valley View Regional Medical
Center, 6.00%, 08/15/14 ................................................................... 3,808,920
2,500,000 Washington County Medical Authority Revenue, Bartlesville, Refunding, Jane Phillips Hospital,
Series A, Pre-Refunded, 8.50%, 11/01/10 ................................................... 2,764,825
------------
37,071,991
------------
Oregon 0.3%
2,500,000 Northern Wasco County, Peoples Utilities District, Electric Revenue, FGIC Insured,
5.625%, 12/01/22 .......................................................................... 2,513,700
Oregon State Department of Administrative Services, COP, MBIA Insured,
8,135,000 Series A, 5.50%, 11/01/20 ................................................................. 8,059,914
4,665,000 Series C, 5.75%, 05/01/17 ................................................................. 4,729,050
------------
15,302,664
------------
Pennsylvania 6.7%
10,000,000 Beaver County, Series A, MBIA Insured, 5.90%, 10/01/26 ..................................... 10,219,400
Chartiers Valley Industrial and Commercial Development Authority Revenue, Refunding,
5,250,000 Asbury Health Center Project, 7.40%, 12/01/15 ............................................. 5,455,695
6,000,000 First Mortgage, United Methodist Health Center, Series A, Pre-Refunded, 9.50% 12/01/15 .... 6,665,700
5,000,000 Delaware County IDAR, Resources Recovery Project, Refunding, Series A, 8.10%, 12/01/13 ..... 5,221,350
20,750,000 Delaware River Port Authority, Pennsylvania and New Jersey Revenue, Series 1995,
FGIC Insured, 5.50%, 01/01/26 ............................................................. 20,307,818
Pennsylvania (cont.)
$ 980,000 Fayette County Hospital Authority Revenue, Refunding, Uniontown Hospital Project, Pre-Refunded,
7.625%, 07/01/15 .......................................................................... $ 1,012,105
Franklin County IDA, Health Facilities Revenue, Encore Nursing Center, 07/01/11,
650,000 10.375% ................................................................................... 736,619
3,100,000 Refunding, 10.375% ........................................................................ 3,501,946
3,200,000 Gettysburg IDA, Health Facilities Revenue, Refunding, Encore Nursing Center, 10.375%, 07/01/11 3,626,432
4,000,000 Lehigh County IDA, PCR, Refunding, Pennsylvania Power & Light Co. Project, Series A,
MBIA Insured, 6.15%, 08/01/29 ............................................................. 4,165,040
Montgomery County Higher Education and Health Authority Revenue, United Hospital,
Pre-Refunded,
200,000 Series A, 8.375%, 11/01/11 ................................................................ 224,338
3,560,000 Series A, 7.50%, 11/01/12 ................................................................. 3,851,991
750,000 Series A, 7.50%, 11/01/13 ................................................................. 811,515
600,000 Series A, 7.50%, 11/01/14 ................................................................. 649,998
3,940,000 Series B, 7.50%, 11/01/14 ................................................................. 4,263,159
1,600,000 Series B, 7.50%, 11/01/15 ................................................................. 1,733,328
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 ................... 2,028,450
3,500,000 First Mortgage, Holy Redeemer Long-Term Care, Series A, 8.00%, 06/01/22 ................... 3,619,245
5,000,000 St. Joseph's University, Pre-Refunded, 8.30%, 06/01/10 .................................... 5,668,950
10,000,000 Montgomery County IDAR, Resources Recovery, 7.50%, 01/01/12 ................................ 10,736,800
Pennsylvania Convention Center Authority Revenue, Series A, Refunding,
4,960,000 5.75%, 09/01/99 ........................................................................... 5,071,600
5,000,000 6.25%, 09/01/04 ........................................................................... 5,360,600
16,000,000 6.60%, 09/01/09 ........................................................................... 17,353,440
20,760,000 6.70%, 09/01/14 ........................................................................... 22,442,183
15,800,000 6.75%, 09/01/19 ........................................................................... 17,077,588
10,000,000 Pennsylvania EDA, Resource Recovery Revenue, Colver Project, Series D, 7.125%, 12/01/15 .... 10,532,800
Pennsylvania State Higher Educational Facilities Authority Revenue, Series A,
1,200,000 Medical College of Pennsylvania, Pre-Refunded, 8.375%, 03/01/11............................ 1,319,148
15,000,000 Health Services Revenue, Allegheny Delaware Valley Obligated Group, MBIA Insured,
5.875%, 11/15/16 .......................................................................... 15,323,100
1,825,000 Pennsylvania State Pooled Finance Authority, Lease Revenue, Capital Improvement, Series B,
MBIA Insured, 8.00%, 11/01/09 ............................................................. 1,913,987
2,850,000 Philadelphia Gas Works Revenue, 14th Series A, 6.375%, 07/01/26 ............................ 2,933,933
3,080,000 Philadelphia GO, Refunding, Series A, 6.00%, 05/15/05 ...................................... 3,184,289
Philadelphia Municipal Authority Revenue, Lease,
3,500,000 Refunding, Series D, 6.30%, 07/15/17 ...................................................... 3,581,760
3,460,000 Sub-Series C, 8.625%, 11/15/16 ............................................................ 3,857,658
25,500,000 Sub-Series C, Pre-Refunded, 8.625%, 11/15/16 ............................................. 30,377,640
3,000,000 Sub-Series D, 6.25%, 07/15/13 ............................................................. 3,070,230
Philadelphia Water and Sewer Revenue,
14,405,000 10th Series, ETM, 7.35%, 09/01/04 ......................................................... 16,401,533
9,750,000 16th Series, Pre-Refunded, 7.00%, 08/01/18 ................................................ 10,754,640
11,400,000 Pittsburg Water and Sewer Authority Revenue, Series B, 5.75%, 09/01/25 ..................... 11,422,572
15,130,000 Schuylkill County IDA, Resources Recovery Revenue, Refunding, Schuylkill Energy Resources, Inc.,
6.50%, 01/01/10 ........................................................................... 14,706,057
8,130,000 South Fork Municipal Authority Hospital Revenue, Conemaugh Valley Memorial Hospital Project,
Series A, MBIA Insured, 5.75%, 07/01/16 ................................................... 8,169,512
8,870,000 South Wayne County, Water and Sewer Authority Revenue, Refunding, 8.20%, 04/15/13 .......... 9,088,734
Pennsylvania (cont.)
$ 100,000 Washington County Hospital Authority Revenue, Washington Hospital Project, Pre-Refunded,
9.50%, 07/01/17 ........................................................................... $ 102,881
5,025,000 Washington County IDA, PCR, West Pennsylvania Power Company, 6.05%, 04/01/14 ............... 5,220,523
------------
313,766,287
------------
Puerto Rico 0.1%
1,875,000 Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue,
Series A, 7.75%, 07/01/08 ................................................................ 1,987,050
------------
Rhode Island 0.4%
5,000,000 Rhode Island HFC, Homeownership Opportunity, Series 17-A, 6.25%, 04/01/17 .................. 5,096,950
Rhode Island State Health and Educational Building Corp. Revenue,
6,000,000 Landmark Medical Center Assessment, 5.875%, 10/01/19 ...................................... 5,995,920
5,000,000 Lifespan Obligation Group, Refunding, MBIA Insured, 5.75%, 05/15/23 ....................... 5,021,250
West Warwick GO, Series A,
1,715,000 6.80%, 07/15/98 ........................................................................... 1,747,071
170,000 7.00%, 08/15/02 ........................................................................... 176,249
915,000 7.30%, 07/15/08 ........................................................................... 973,093
------------
19,010,533
------------
South Carolina 1.2%
3,720,000 Charleston County Hospital Facilities, First Mortgage Revenue, Sandpiper Village, Inc.,
8.00%, 11/01/13 ........................................................................... 3,590,395
Piedmont Municipal Power Agency, Electricity Revenue, Refunding,
9,500,000 6.55%, 01/01/16 ........................................................................... 9,539,425
8,770,000 6.60%, 01/01/21 ........................................................................... 8,806,396
32,500,000 South Carolina State Public Service Authority Revenue, Refunding, Series A, MBIA Insured,
5.75%, 01/01/22 ........................................................................... 32,757,400
------------
54,693,616
------------
South Dakota 0.3%
5,000,000 South Dakota HDA, Homeownership Mortgage, Series A, 6.125%, 05/01/17........................ 5,082,300
3,500,000 South Dakota State Health and Educational Facilities Authority Revenue, Refunding, Prairie Lakes
Health Care, 7.25%, 04/01/22 .............................................................. 3,671,570
3,000,000 Watertown Hospital Facilities Revenue, Prairie Lakes Health Care System Project, Pre-Refunded,
9.125%, 04/01/13 .......................................................................... 3,222,090
------------
11,975,960
------------
Tennessee 0.5%
3,100,000 Knox County Health, Educational and Housing Facilities Board, MFHR, GNMA Secured,
Eastowne Village Project, 8.20%, 07/01/28 ................................................. 3,228,433
Memphis-Shelby County Airport Authority, Special Facilities and Project Revenue,
Federal Express Corp.,
3,250,000 Series 1982-B, 8.30%, 09/01/12 ............................................................ 3,301,870
6,000,000 Series 1984, 7.875%, 09/01/09 ............................................................. 6,726,600
5,000,000 Metropolitan Government, Nashville and Davidson County Public Improvements, 5.875%, 05/15/26 5,079,450
2,900,000 Shelby County Health and Education Housing Facility Revenue, Beverly Enterprise,
10.125%, 12/01/11 ......................................................................... 3,224,916
200,000 Tennessee HDA, Financial Mortgage, Series A, 6.90%, 07/01/25 ............................... 211,662
------------
21,772,931
------------
Texas 2.8%
10,000,000 Alliance Airport Authority, Special Facilities Revenue, Series 1990, 7.50%, 12/01/29 ....... 10,727,700
8,750,000 Bexar County Health Facilities Development Corp. Revenue, Refunding, Incarnate Word Health
Services, FSA Insured, 6.00%, 11/15/15 .................................................... 8,978,288
Texas (cont.)
Brazos River Authority, PCR,
$ 16,000,000 Houston Light and Power Co., 8.25%, 05/01/19 .............................................. $ 16,942,560
1,675,000 Texas Utilities Electric Co. Project, Collateralized, Series 1988-A, 9.25%, 03/01/18 ...... 1,781,798
4,510,000 Coppell Special Assessment Gateway Project, 8.70%, 03/01/12 ................................ 4,649,314
5,491,000 Copperas Cove Health Facilities Development Corp., Hospital Revenue, First Mortgage,
Metroplex Health, Series B, Pre-Refunded, 9.125%, 12/01/19 ................................ 6,197,033
5,725,000 El Paso HFC, SFMR, Refunding, Series A, 8.75%, 10/01/11 .................................... 6,197,599
Harris County Health Facilities Development Corp.,
15,165,000 eHospital Revenue, Refunding, Memorial Hospital System Project, Series A, MBIA Insured,
5.75%, 06/01/19 ........................................................................... 14,883,538
7,000,000 Special Facilities Revenue, Texas Medical Center Project, 6.00%, 05/15/20 ................. 7,159,670
4,550,000 Matagorda County Navigation District No. 1 Revenue, Refunding, Houston Light and Power Co.,
Collateralized, Series B, 7.70%, 02/01/19 ................................................. 4,754,477
2,000,000 Midland County Hospital District Revenue, Series 1989, Pre-Refunded, 8.375%, 06/01/02 ...... 2,127,340
5,300,000 National Research Laboratory Commission Financing Corp. Lease Revenue, Pre-Refunded,
7.10%, 12/01/21............................................................................ 5,991,862
250,000 Port of Corpus Christi IDC Revenue, Refunding, Valero Refining, Series A, 10.25%, 06/01/17 . 260,795
8,000,000 Red River Authority, PCR, Refunding, West Texas Utilities Co., Public Service Co., Oklahoma
Central Power and Light Co., MBIA Insured, 6.00%, 06/01/20 ................................ 8,216,320
7,000,000 Sabine River Authority, PCR, Refunding, Southwestern Electric Power, MBIA Insured,
6.10%, 04/01/18 ........................................................................... 7,273,770
6,000,000 San Antonio Texas Electric and Gas Revenue, Series 95, MBIA Insured, 5.375%, 02/01/18 ...... 5,841,720
3,000,000 Tarrant County, Texas Health Facilities Development Corp., Health Systems Revenue, Refunding,
Harris Methodist Health, AMBAC Insured, 5.125%, 09/01/12 .................................. 2,886,720
7,430,000 Texas State GO, Veterans Housing Assistance Fund I, Refunding, Series A, 6.15%, 12/01/25 ... 7,605,051
6,180,000 Texas State Turnpike Authority, Dallas North Throughway Revenue, President George Bush
Turnpike, FGIC Insured, 5.40%, 01/01/15 ................................................... 6,034,399
4,000,000 Texas State Water Development Board Revenue, 6.00%, 07/15/13 .............................. 4,141,400
------------
132,651,354
------------
United States Territories 0.5%
2,405,000 American Samoa EDA, Executive Office Building Revenue, 10.125%, 09/01/08 ................... 2,543,720
14,000,000 Virgin Island Public Finance Authority Revenue, Refunding, Matching Fund Loan Notes, Series A,
7.25%, 10/01/18 ........................................................................... 15,067,360
Virgin Islands Water and Power Authority,
400,000 Electric System Revenue, Series A, 7.40%, 07/01/11 ........................................ 428,452
4,000,000 Water Power Revenue, Series B, 7.60%, 01/01/12 ............................................ 4,351,560
------------
22,391,092
------------
Utah 0.9%
2,000,000 Box Elder County PCR, Nucor Corp. Project, 6.90%, 05/15/17 ................................. 2,156,860
16,800,000 Davis County Solid Waste Management Energy Recovery Revenue, Refunding, Special Services
District, 6.125%, 06/15/09 ................................................................ 17,053,848
11,000,000 Utah Assessed Municipal Power Systems Revenue, San Juan Project, 6.375%, 06/01/22 .......... 11,631,510
Utah State HFA, SFM,
65,000 Series 1988-A, 9.625%, 07/01/00 ........................................................... 67,518
75,000 Series 1988-B, 9.50%, 07/01/00 ............................................................ 77,616
45,000 Series 1988-B, 9.60%, 07/01/00 ............................................................ 46,155
170,000 Series 1988-C-1, 9.375%, 07/01/00 ......................................................... 175,374
55,000 Series 1988-E, 9.50%, 07/01/00 ............................................................ 56,934
40,000 Series 1988-F, 9.60%, 07/01/00 ............................................................ 41,521
55,000 Series 1988-G-2, 9.30%, 07/01/00 .......................................................... 55,751
Utah (cont.)
Utah State HFA, SFM, (cont.)
$ 80,000 Series 1989-B, 9.25%, 07/01/01 ............................................................ $ 82,231
75,000 Series 1990-A-2, 9.625%, 07/01/02 ......................................................... 77,315
85,000 Series 1990-B-2, 9.50%, 07/01/02 .......................................................... 87,429
220,000 Series 1991-A-2, 9.45%, 07/01/03 .......................................................... 228,173
250,000 Series 1991-B-2, 9.45%, 07/01/03 .......................................................... 259,858
280,000 Series 1991-C-2, 9.05%, 07/01/03 .......................................................... 293,888
555,000 Series 1991-D-2, 9.00%, 07/01/03 .......................................................... 582,456
495,000 Series 1991-E-1, 8.70%, 07/01/03 .......................................................... 519,572
650,000 Sub-Series B-2, 8.70%, 07/01/04 ........................................................... 682,416
435,000 Sub-Series D, 8.45%, 07/01/04 ............................................................. 449,855
5,000,000 eWeber County Municipal Building Authority, Lease Revenue, Refunding, MBIA Insured,
5.75%, 12/15/19............................................................................ 4,950,000
------------
39,576,280
------------
Virginia 0.5%
9,725,000 Hanover County, Virginia IDA Hospital Revenue, Memorial Regional Medical Center Project,
MBIA Insured, 5.50%, 08/15/25 ............................................................. 9,346,600
2,855,000 Norfolk Water Revenue, AMBAC Insured, 5.375%, 11/01/23 ..................................... 2,720,844
3,000,000 Upper Occoquan Sewer Authority, Virginia Regional Sewer Revenue, Series A, MBIA Insured,
5.15%, 07/01/20 ........................................................................... 2,847,600
9,715,000 Virginia State HDA Commonwealth Mortgage, Series D, Sub Series D-3, 6.125%, 01/01/19 ....... 9,866,165
------------
24,781,209
------------
Washington 1.0%
2,370,000 Chelan County PUD No. 1, Columbia River Rock, First Hydro Electric System Revenue,
6.375%, 06/01/29 .......................................................................... 2,395,525
2,675,000 Washington State Health Care Facilities Authority Revenue, Swedish Hospital Medical Center,
AMBAC Insured, 6.30%, 11/15/22 ............................................................ 2,778,630
Washington State Public Power Supply System Revenue, Refunding
13,395,000 Nuclear Project No. 1, Series A,MBIA Insured, 5.75%, 07/01/11 ............................. 13,650,577
5,000,000 Nuclear Project No. 1, Series C, Pre-Refunded, 8.00%, 07/01/17 ............................ 5,645,050
20,300,000 Nuclear Project No. 2, Series A, 6.00%, 07/01/12 .......................................... 20,420,379
3,000,000 Nuclear Project No. 2, Series A, 6.50%, 07/01/15 .......................................... 3,134,430
1,000,000 Yakima-Tieton Irrigation District Revenue, Refunding, Pre-Refunded, 8.40%, 06/01/18 ........ 1,055,050
------------
49,079,641
------------
West Virginia 0.4%
10,000,000 West Virginia State Hospital Finance Authority, Hospital Revenue, 7.25%, 07/01/20 .......... 10,306,100
West Virginia State Water Development Authority Revenue,
1,550,000 Loan Program II, Series A, Pre-Refunded, 8.625%, 11/01/28 ................................. 1,695,251
2,790,000 Loan Program II, Series A, Pre-Refunded, 8.125%, 11/01/29 ................................. 3,029,326
2,480,000 Solid Waste Management, Series C, 8.125%, 08/01/15 ........................................ 2,689,262
------------
17,719,939
------------
Wisconsin 1.5%
12,840,000 Wisconsin Central District, Wisconsin Tax Revenue, Junior Dedicated, Series B, 5.75%, 12/15/27 12,783,504
2,485,000 Wisconsin Housing EDA, Home Ownership Revenue, Series C, 6.15%, 09/01/17 ................... 2,525,729
Wisconsin State Health and Educational Facilities Authority Revenue,
1,000,000 Bethany Lutheran Home of La Crosse, 8.75%, 12/01/06 ....................................... 1,038,910
9,510,000 Franciscan Health System, Inc. Project, 6.25%, 11/15/20 ................................... 9,838,761
6,000,000 Franciscan Health System, Inc. Project, Pre-Refunded, 8.375%, 03/01/05 .................... 6,766,440
Wisconsin (cont.)
Wisconsin State Health and Educational Facilities Authority Revenue, (cont.)
$ 6,000,000 Franciscan Health System, Inc. Project, Pre-Refunded 8.50%, 03/01/20 ...................... $ 6,787,260
5,000,000 Refunding, Felician Health Care, Series A, AMBAC Insured, 7.00%, 01/01/15 ................. 5,335,750
22,055,000 eSisters of Sorrowful Mother, Series A, MBIA Insured, 5.90%, 08/15/24 ...................... 22,204,271
------------
67,280,625
------------
Wyoming 0.3%
1,575,000 Natrona County Health Care Facility Revenue, Luthercare, Inc. Project, 9.25%, 07/15/08 ..... 1,609,792
10,500,000 Sweetwater County PCR, Refunding, Idaho Power Co., Series A, 6.05%, 07/15/26 ............... 10,776,780
1,000,000 Wyoming CDA Revenue, Series 1, 6.15%, 06/01/17 ............................................. 1,023,520
------------
13,410,092
------------
Total Bonds (Cost $4,270,616,406) .................................................... 4,500,916,045
------------
Zero Coupon Bonds 2.5%
Akron Ohio COP, Akron Municipal Baseball Stadium Project, Capital Appreciation,
1,700,000 (original accretion rate 6.30%), 12/01/05 ................................................. 1,317,228
1,685,000 (original accretion rate 6.40%), 12/01/06 ................................................. 1,266,732
1,750,000 (original accretion rate 6.50%), 12/01/07 ................................................. 1,351,455
2,500,000 (original accretion rate 6.90%), 12/01/16 ................................................. 1,889,150
City of Troy, Municipal Assistance Corp., Series C, MBIA Insured, Capital Appreciation,
428,010 (original accretion rate 8.00%), 07/15/21 ................................................. 106,806
649,658 (original accretion rate 8.00%), 01/15/22 ................................................. 157,562
San Francisco City and County RDA, Lease Revenue, George Moscone Center,
3,750,000 (original accretion rate 7.00%), 07/01/09 ................................................. 1,844,925
4,500,000 (original accretion rate 7.00%), 07/01/10 ................................................. 2,063,205
4,500,000 (original accretion rate 7.05%), 07/01/12 ................................................. 1,800,090
4,250,000 (original accretion rate 7.05%), 07/01/13 ................................................. 1,588,778
2,250,000 (original accretion rate 7.05%), 07/01/14 ................................................. 791,910
San Joaquin Hills Transportation, Corridor Agency Toll Road Revenue, Junior Lien,
7,400,000 (original accretion rate 8.50%), 01/01/04 ................................................. 4,827,538
8,000,000 (original accretion rate 8.75%), 01/01/05 ................................................. 4,865,200
9,000,000 (original accretion rate 8.60%), 01/01/06 ................................................. 5,114,250
9,400,000 (original accretion rate 8.60%), 01/01/07 ................................................. 4,986,324
10,400,000 (original accretion rate 8.60%), 01/01/08 ................................................. 5,144,984
21,900,000 (original accretion rate 8.75%), 01/01/09 ................................................. 10,093,929
15,000,000 (original accretion rate 8.75%), 01/01/10 ................................................. 6,435,150
30,100,000 (original accretion rate 8.50%), 01/01/12 ................................................. 11,235,728
52,700,000 (original accretion rate 9.00%), 01/01/24 ................................................. 8,345,572
45,200,000 (original accretion rate 9.00%), 01/01/25 ................................................. 6,682,368
131,900,000 (original accretion rate 9.00%), 01/01/26 ................................................. 18,206,157
139,100,000 (original accretion rate 9.00%), 01/01/27 ................................................. 17,924,426
------------
Total Zero Coupon Bonds (Cost $84,946,923) ............................................ 118,039,467
------------
Total Long Term Investments (Cost $4,355,563,329) ..................................... 4,618,955,512
------------
aShort Term Investments 1.1%
Allegheny County Pennsylvania Hospital Development Authority Revenue, Presbyterian Health
Center, MBIA Insured, Weekly VRDN and Put, 3.35%, 03/01/20,
3,600,000 Series A .................................................................................. 3,600,000
2,000,000 Series C .................................................................................. 2,000,000
500,000 Series D .................................................................................. 500,000
4,400,000 Burke County Georgia Development Authority, PCR, Georgia Power Co. Vogtle, Series 4,
Daily VRDN and Put, 3.45%, 09/01/25 ....................................................... 4,400,000
aShort Term Investments (cont.)..............................................................
Fort Wayne Indiana Hospital Authority Revenue, Parkview Memorial Hospital, Weekly VRDN
and Put, Series B, 3.30%,
$ 200,000 01/01/16 .................................................................................. $ 200,000
300,000 01/01/20 .................................................................................. 300,000
9,800,000 Irvine Ranch California Water District, Construction Refunding, Series A, Daily VRDN and Put,
3.25%, 05/01/09 ........................................................................... 9,800,000
7,000,000 Irvine Ranch California Water District, Weekly VRDN and Put, 1.75%, 04/01/33 ............... 7,000,000
3,300,000 Jacksonville Florida PCR, Florida Power and Light Co. Project, Refunding, Daily VRDN and Put,
3.45%, 05/01/29 ........................................................................... 3,300,000
400,000 Kentucky Development Finance Authority Revenue, Pooled Loan Program, Series A, FGIC Insured,
Weekly VRDN and Put, 3.30%, 12/01/15 ...................................................... 400,000
6,400,000 New Jersey EDA, EDR, Dow Chemical, El Dorado Terminals, Series 1984-A, Refunding,
Daily VRDN and Put, 3.30%, 05/01/01 ....................................................... 6,400,000
4,000,000 New York City GO, Sub-Series E5, Daily VRDN and Put, 3.45%, 08/01/18 ....................... 4,000,000
900,000 .....Oregon State Health Housing Educational and Cultural Facilities Authority, Weekly VRDN
and Put, 3.35%, 07/01/25 .................................................................. 900,000
7,700,000 Perry County Mississippi PCR, Refunding, Leaf River Forest Project, Daily VRDN and Put,
3.50%, 03/01/02 ........................................................................... 7,700,000
------------
Total Short Term Investments (Cost $50,500,000) ....................................... 50,500,000
------------
Total Investments (Cost $4,406,063,329) 99.4% ................................... 4,669,455,512
Other Assets and Liabilities, Net 0.6% .......................................... 30,202,020
------------
Net Assets 100.0% ............................................................... $4,699,657,532
============
At February 28, 1997, the net unrealized appreciation based on the cost of investments
for income tax purposes of $4,406,065,829 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................. $ 280,581,874
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................. (17,192,191)
------------
Net unrealized appreciation ................................................................ $ 263,389,683
============
PORTFOLIO ABBREVIATIONS:
1915 Act - Improvement Bond Act of 1915
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Agency
CDD - Community Development District
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
FSA - Financial Security Assistance
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
IDC - Industrial Development Corp.
IDR - Industrial Development Revenue
L.P. - Limited Partnership
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing 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
aVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula
and an unconditional right of demand to receive payment of the principal balance plus accrued interest upon short notice prior to
specified dates. The interest rate may change on specified dates in relationship with changes in a designated rate (such as the
prime interest rate or U.S. Treasury bills rate).
bThe bond pays interest based upon the issuer's ability to pay which may be less than the stated interest rate.
eSee Note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN TAX-FREE TRUST
Financial Statements
Statements of Assets and Liabilities
February 28, 1997
Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
---------- ----------- ----------- ----------
Assets:
Investments in securities:
<S> <C> <C> <C> <C>
At identified cost.......................................... $709,492,712 $232,716,576 $172,431,695 $47,475,788
__________ ___________ ___________ __________
__________ ___________ ___________ __________
At value..................................................... 751,330,962 246,517,352 184,121,420 50,415,458
Cash.......................................................... 267,539 190,267 910,857 203,551
Receivables:
Interest..................................................... 9,335,364 4,109,677 2,818,562 624,530
Investment securities sold................................... -- 65,000 -- --
Capital shares sold.......................................... 523,035 1,467,768 332,357 958
__________ ___________ ___________ __________
Total assets............................................ 761,456,900 252,350,064 188,183,196 51,244,497
__________ ___________ ___________ __________
Liabilities:
Payables:
Investment securities purchased on a when-issued basis
(Note 1)................................................... 1,727,542 9,423,494 -- --
Distributions payable to shareholders....................... 1,125,693 359,617 253,058 68,193
Capital shares repurchased.................................. 319,634 133,705 -- --
Management fees............................................. 305,142 111,224 88,561 26,634
Distribution fees........................................... 101,049 37,283 29,173 6,134
Shareholder servicing costs................................. 30,000 9,070 6,303 1,855
Accrued expenses and other liabilities........................ 27,298 13,095 8,605 4,364
__________ ___________ ___________ __________
Total liabilities........................................ 3,636,358 10,087,488 385,700 107,180
__________ ___________ ___________ __________
Net assets, at value.......................................... $757,820,542 $242,262,576 $187,797,496 $51,137,317
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Net assets consist of:
Undistributed net investment income.......................... $ 163,313 $ 353,668 $ 19,798 $ 116,031
Net unrealized appreciation on investments................... 41,838,250 13,800,776 11,689,725 2,939,670
Accumulated net realized gain (loss) from investments........ 781,030 (939,203) (6,520,219) (420,541)
Class I capital shares....................................... 709,557,654 223,434,604 178,474,968 48,502,157
Class II capital shares...................................... 5,480,295 5,612,731 4,133,224 --
---------- ----------- ----------- ----------
Net assets, at value.......................................... $757,820,542 $242,262,576 $187,797,496 $51,137,317
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Class I shares:
Net assets, at value......................................... $752,334,731 $236,608,480 $183,648,719 $51,137,317
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Shares outstanding........................................... 66,912,442 20,055,377 16,811,298 4,344,574
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Net asset value per share*................................... $11.24 $11.80 $10.92 $11.77
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Maximum offering price per share (100/95.75 of
net asset value per share).................................. $11.74 $12.32 $11.40 $12.29
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Class II shares:
Net assets, at value......................................... $ 5,485,811 $ 5,654,096 $ 4,148,777 --
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Shares outstanding........................................... 485,678 477,543 379,133 --
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Net asset value per share*................................... $11.30 $11.84 $10.94 --
__________ ___________ ___________ __________
__________ ___________ ___________ __________
Maximum offering price per share (100/99 of
net asset value per share)................................... $11.41 $11.96 $11.05 --
.............................................................. __________ ___________ ___________ __________
__________ ___________ ___________ __________
*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 28, 1997
Franklin Franklin Franklin Franklin
Michigan New Jersey Oregon Pennsylvania
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
--------- ----------- ----------- -----------
Assets:
Investments in securities:
<S> <C> <C> <C> <C>
At identified cost........................................... $3,712,326 $549,037,616 $363,611,890 $624,079,339
========= =========== =========== ===========
At value..................................................... 3,780,758 578,931,965 385,452,643 658,202,955
Cash.......................................................... 23,812 200,599 268,045 534,597
Receivables:
Interest..................................................... 74,388 8,954,422 5,982,450 12,064,843
Investment securities sold................................... -- -- -- --
From affiliates.............................................. 6,381 -- -- --
Capital shares sold.......................................... 1,437 876,760 1,040,739 997,759
Unamortized organization and offering costs (Note 2) ......... 5,522 -- -- --
--------- ----------- ----------- -----------
Total assets.............................................. 3,892,298 588,963,746 392,743,877 671,800,154
--------- ----------- ----------- -----------
Liabilities:
Payables:
Investment securities purchased.............................. -- -- 206,902 --
Distributions payable to shareholders........................ 5,726 777,723 499,971 1,032,193
Capital shares repurchased................................... -- 27,217 678,558 66,730
Management fees.............................................. -- 241,203 167,398 272,113
Distribution fees............................................ 80 92,355 59,759 97,719
Shareholder servicing costs.................................. 130 16,849 13,450 28,272
Accrued expenses and other liabilities......................... 2,232 21,934 15,102 29,475
--------- ----------- ----------- -----------
Total liabilities......................................... 8,168 1,177,281 1,641,140 1,526,502
--------- ----------- ----------- -----------
Net assets, at value........................................... $3,884,130 $587,786,465 $391,102,737 $670,273,652
========= =========== =========== ===========
Net assets consist of:
Undistributed net investment income........................... $ 38,055 $ 1,032,211 $ 1,470,171 $ 373,927
Net unrealized appreciation on investments.................... 68,432 29,894,349 21,840,753 34,123,616
Accumulated net realized gain (loss) from investments......... 3,604 (3,298,503) (5,271,794) 2,801,890
Class I capital shares........................................ 3,774,039 547,122,169 366,006,722 621,102,021
Class II capital shares....................................... -- 13,036,239 7,056,885 11,872,198
--------- ----------- ----------- -----------
Net assets, at value........................................... $3,884,130 $587,786,465 $391,102,737 $670,273,652
========= =========== =========== ===========
Class I shares:
Net assets, at value.......................................... $3,884,130 $574,691,263 $384,003,056 $658,339,041
========= =========== =========== ===========
Shares outstanding............................................ 372,799 49,487,969 33,251,901 63,366,366
========= =========== =========== ===========
Net asset value per share*.................................... $10.42 $11.61 $11.55 $10.39
========= =========== =========== ===========
Maximum offering price per share (100/95.75 of
net asset value per share)................................... $10.88 $12.13 $12.06 $10.85
========= =========== =========== ===========
Class II shares:
Net assets, at value.......................................... -- $ 13,095,202 $ 7,099,681 $ 11,934,611
========= =========== =========== ===========
Shares outstanding............................................ -- 1,123,282 611,702 1,144,565
========= =========== =========== ===========
Net asset value per share*.................................... -- $11.66 $11.61 $10.43
========= =========== =========== ===========
Maximum offering price per share (100/99 of
net asset value per share)................................... -- $11.78 $11.73 $10.54
========= =========== =========== ===========
*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 28, 1997
Franklin Franklin Federal Franklin
Puerto Rico Intermediate- High Yield
Tax-Free Term Tax-Free Tax-Free
Income Fund Income Fund Income Fund
----------- ----------- -------------
Assets:
Investments in securities:
<S> <C> <C> <C>
At identified cost........................................................ $179,801,629 $99,799,239 $4,406,063,329
=========== =========== =============
At value.................................................................. 188,637,355 102,717,457 4,669,455,512
Cash....................................................................... 205,695 273,647 9,472,987
Receivables:
Interest.................................................................. 2,974,316 1,628,102 82,962,603
Investment securities sold................................................ 2,268,302 -- 10,581,791
Capital shares sold....................................................... 614,858 332,400 15,675,778
----------- ----------- -------------
Total assets........................................................... 194,700,526 104,951,606 4,788,148,671
----------- ----------- -------------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery......................................................... -- -- 29,510,000
When-issued basis (Note 1)............................................... -- -- 47,323,016
Distributions payable to shareholders..................................... 291,544 140,376 7,205,040
Capital shares repurchased................................................ 60,283 33,173 1,403,113
Management fees........................................................... 91,322 43,988 1,781,791
Distribution fees......................................................... 26,032 7,818 864,552
Shareholder servicing costs............................................... 10,300 3,670 156,100
Accrued expenses and other liabilities..................................... 16,607 7,411 247,527
----------- ----------- -------------
Total liabilities...................................................... 496,088 236,436 88,491,139
----------- ----------- -------------
Net assets, at value........................................................ $194,204,438 $104,715,170 $4,699,657,532
=========== =========== =============
Net assets consist of:
Undistributed net investment income........................................ $-- $ 265,520 $--
Accumulated distributions in excess of net investment income............... (107,458) -- (3,265,863)
Net unrealized appreciation on investments................................. 8,835,726 2,918,218 263,392,183
Accumulated net realized gain (loss) from investments...................... 238,515 (1,166,099) (47,958,683)
Class I capital shares..................................................... 183,556,082 102,697,531 4,295,050,285
Class II capital shares.................................................... 1,681,573 -- 192,439,610
----------- ----------- -------------
Net assets, at value........................................................ $194,204,438 $104,715,170 $4,699,657,532
=========== =========== =============
Class I shares:
Net assets, at value....................................................... $192,524,924 $104,715,170 $4,505,257,865
=========== =========== =============
Shares outstanding......................................................... 16,724,178 9,571,206 402,071,454
=========== =========== =============
Net asset value per share*................................................. $11.51 $10.94 $11.21
=========== =========== =============
Maximum offering price per share (100/95.75 of net asset value per share).. $12.02 $11.19+ $11.71
=========== =========== =============
Class II shares:
Net assets, at value....................................................... $ 1,679,514 -- $ 194,399,667
=========== =========== =============
Shares outstanding......................................................... 145,675 -- 17,258,275
=========== =========== =============
Net asset value per share*................................................. $11.53 -- $11.26
=========== =========== =============
Maximum offering price per share (100/99 of net asset value per share)..... $11.65 -- $11.37
=========== =========== =============
*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 $10.94.
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 28, 1997
Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- ---------
Investment income:
<S> <C> <C> <C> <C>
Interest ........................................................ $46,564,625 $14,255,850 $11,209,703 $3,241,085
--------- --------- --------- ---------
Expenses:
Management fees (Note 6)......................................... 3,627,685 1,259,548 1,012,114 311,799
Distribution fees - Class I (Note 6)............................. 597,968 185,151 147,447 43,261
Distribution fees - Class II (Note 6)............................ 23,510 22,601 19,030 --
Shareholder servicing costs (Note 6)............................. 193,676 72,679 53,092 21,411
Reports to shareholders.......................................... 128,185 44,066 30,814 11,887
Pricing service fees............................................. 43,782 19,501 12,432 11,496
Professional fees................................................ 19,805 6,636 5,480 2,278
Registration and filing fees..................................... 11,640 5,217 3,761 251
Trustees' fees and expenses...................................... 9,794 2,923 2,284 658
Custodian fees................................................... 7,446 2,205 1,692 969
Other............................................................ 3,723 4,379 6,206 4,605
--------- --------- --------- ---------
Total expenses............................................... 4,667,214 1,624,906 1,294,352 408,615
_________ _________ _________ _________
Net investment income........................................ 41,897,411 12,630,944 9,915,351 2,832,470
_________ _________ _________ _________
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)......................................... 2,134,164 947,229 (367,976) 451,723
Net unrealized appreciation (depreciation)....................... (4,443,512) (1,527,211) 244,537 (363,352)
--------- --------- --------- ---------
Net realized and unrealized gain (loss) on investments............ (2,309,348) (579,982) (123,439) 88,371
--------- --------- --------- ---------
Net increase in net assets resulting from operations.............. $39,588,063 $12,050,962 $ 9,791,912 $2,920,841
========= ========= ========= =========
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 28, 1997
Franklin Franklin Franklin Franklin
Michigan New Jersey Oregon Pennsylvania
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund* Income Fund Income Fund Income Fund
--------- --------- --------- ---------
Investment income:
<S> <C> <C> <C> <C>
Interest .......................................................... $107,197 $35,570,143 $23,503,310 $42,166,002
--------- --------- --------- ---------
Expenses:
Management fees (Note 6)........................................... 12,802 2,827,318 1,964,313 3,181,417
Distribution fees - Class I (Note 6)............................... 425 465,966 310,677 530,612
Distribution fees - Class II (Note 6).............................. -- 54,156 27,073 46,762
Shareholder servicing costs (Note 6)............................... 465 197,300 112,939 239,985
Reports to shareholders............................................ 709 127,693 67,131 141,106
Pricing service fees .............................................. 2,399 25,035 33,096 27,216
Professional fees.................................................. 1,067 15,722 10,516 17,333
Registration and filing fees....................................... -- 5,739 5,358 6,303
Trustees' fees and expenses........................................ 42 7,438 4,938 8,458
Custodian fees..................................................... 20 5,630 3,857 6,429
Amortization of organization and offering costs (Note 2)........... 6,843 -- -- --
Other.............................................................. 100 14,966 988 21,793
Management fees waived by manager (Note 6)......................... (12,802) -- -- --
Other expenses assumed by manager (Note 6)......................... (5,205) -- -- --
--------- --------- --------- ---------
Total expenses................................................. 6,865 3,746,963 2,540,886 4,227,414
--------- --------- --------- ---------
Net investment income.......................................... 100,332 31,823,180 20,962,424 37,938,588
--------- --------- --------- ---------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)........................................... 3,604 2,380,405 (67,453) 5,857,039
Net unrealized appreciation (depreciation)......................... 68,432 (5,332,217) (1,899,285) (8,671,626)
--------- --------- --------- ---------
Net realized and unrealized gain (loss) on investments.............. 72,036 (2,951,812) (1,966,738) (2,814,587)
--------- --------- --------- ---------
Net increase in net assets resulting from operations................ $172,368 $28,871,368 $18,995,686 $35,124,001
========= ========= ========= =========
*For the period July 1, 1996 (effective date) to February 28, 1997.
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 28, 1997
Franklin Franklin Federal Franklin
Puerto Rico Intermediate-Term High Yield
Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund
--------- ------------ -----------
Investment income:
<S> <C> <C> <C>
Interest .................................................................... $12,160,727 $5,446,523 $292,727,577
--------- ------------ -----------
Expenses:
Management fees (Note 6)..................................................... 1,083,818 586,462 19,114,157
Distribution fees - Class I (Note 6)......................................... 153,743 86,612 3,477,778
Distribution fees - Class II (Note 6)........................................ 6,694 -- 701,819
Shareholder servicing costs (Note 6)......................................... 82,854 29,676 1,271,298
Reports to shareholders...................................................... 49,099 27,102 803,018
Pricing service fees ........................................................ 1,216 17,130 113,704
Professional fees............................................................ 2,444 3,460 370,619
Registration and filing fees................................................. 22,973 23,776 347,975
Trustees' fees and expenses.................................................. 2,488 1,197 53,787
Custodian fees............................................................... 1,917 956 51,155
Other........................................................................ 5,367 3,760 127,968
Management fees waived by manager (Note 6)................................... -- (147,619) --
--------- ------------ -----------
Total expenses........................................................... 1,412,613 632,512 26,433,278
--------- ------------ -----------
Net investment income.................................................... 10,748,114 4,814,011 266,294,299
--------- ------------ -----------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)..................................................... 2,031,659 (99,478) (1,562,428)
Net unrealized appreciation (depreciation) .................................. (1,447,567) 157,409 23,745,558
--------- ------------ -----------
Net realized and unrealized gain on investments............................... 584,092 57,931 22,183,130
--------- ------------ -----------
Net increase in net assets resulting from operations.......................... $11,332,206 $4,871,942 $288,477,429
========= ============ ===========
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 28, 1997
and February 29, 1996
Franklin Arizona Franklin Colorado
Tax-Free Income Fund Tax-Free Income Fund
----------------------- -----------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income......................................... $ 41,897,411 $ 41,892,601 $ 12,630,944 $ 11,758,049
Net realized gain from security transactions.................. 2,134,164 11,019,710 947,229 1,875,938
Net unrealized appreciation (depreciation) on investments..... (4,443,512) 12,069,384 (1,527,211) 6,034,367
----------- ----------- ----------- -----------
Net increase in net assets resulting from operations.... 39,588,063 64,981,695 12,050,962 19,668,354
Distributions to shareholders from:
Undistributed net investment income (Note 8):
Class I...................................................... (42,443,851) (42,358,865) (12,524,223) (11,642,273)
Class II..................................................... (182,399) (39,644) (173,036) (27,047)
Accumulated net realized capital gains:
Class I...................................................... (3,059,354) (7,829,470) -- --
Class II..................................................... (16,297) (17,168) -- --
Increase in net assets from capital share transactions (Note 3) 11,244,680 17,152,083 25,643,888 14,702,000
----------- ----------- ----------- -----------
Net increase in net assets............................... 5,130,842 31,888,631 24,997,591 22,701,034
Net assets:
Beginning of year............................................. 752,689,700 720,801,069 217,264,985 194,563,951
----------- ----------- ----------- -----------
End of year................................................... $757,820,542 $752,689,700 $242,262,576 $217,264,985
=========== =========== =========== ===========
Undistributed net investment income included in net assets:
Beginning of year............................................. $ 892,152 $ 1,398,060 $ 419,983 $ 331,254
=========== =========== =========== ===========
End of year................................................... $ 163,313 $ 892,152 $ 353,668 $ 419,983
=========== =========== =========== ===========
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 28, 1997
and February 29, 1996
Franklin Connecticut Franklin Indiana
Tax-Free Income Fund Tax-Free Income Fund
----------------------- ---------------------
1997 1996 1997 1996
----------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income........................................... $ 9,915,351 $ 9,270,000 $ 2,832,470 $ 2,763,463
Net realized gain (loss) from security transactions............. (367,976) (46,957) 451,723 354,703
Net unrealized appreciation (depreciation) on investments....... 244,537 4,696,045 (363,352) 1,058,994
----------- ----------- ---------- ----------
Net increase in net assets resulting from operations....... 9,791,912 13,919,088 2,920,841 4,177,160
Distributions to shareholders from:
Undistributed net investment income (Note 8):
Class I........................................................ (9,979,953) (9,244,580) (2,822,030) (2,714,978)
Class II....................................................... (150,117) (25,612) -- --
Increase in net assets from capital share transactions (Note 3).. 19,434,877 8,428,442 2,089,230 903,637
----------- ----------- ---------- ----------
Net increase in net assets................................. 19,096,719 13,077,338 2,188,041 2,365,819
Net assets:
Beginning of year............................................... 168,700,777 155,623,439 48,949,276 46,583,457
----------- ----------- ---------- ----------
End of year..................................................... $187,797,496 $168,700,777 $51,137,317 $48,949,276
=========== =========== ========== ==========
Undistributed net investment income included in net assets:
Beginning of year............................................... $ 234,517 $ 234,709 $ 105,591 $ 57,106
=========== =========== ========== ==========
End of year..................................................... $ 19,798 $ 234,517 $ 116,031 $ 105,591
=========== =========== ========== ==========
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 28, 1997
and February 29, 1996
Franklin
Michigan Tax-Free Franklin New Jersey Franklin Oregon
Income Fund Tax-Free Income Fund Tax-Free Income Fund
------------ ------------------------ ------------------------
1997* 1997 1996 1997 1996
------------ ----------- ----------- ----------- ------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C>
Net investment income......................... $ 100,332 $ 31,823,180 $ 31,357,363 $ 20,962,424 $ 19,990,315
Net realized gain (loss) from
security transactions........................ 3,604 2,380,405 4,841,385 (67,453) 212,997
Net unrealized appreciation (depreciation)
on investments............................... 68,432 (5,332,217) 13,508,714 (1,899,285) 11,590,457
------------ ----------- ----------- ----------- ------------
Net increase in net assets resulting
from operations......................... 172,368 28,871,368 49,707,462 18,995,686 31,793,769
Distributions to shareholders from:
Undistributed net investment income (Note 8):
Class I...................................... (62,277) (31,578,177) (30,636,840) (20,472,473) (19,773,493)
Class II..................................... -- (413,207) (64,859) (200,164) (35,195)
Increase in net assets from capital share
transactions (Note 3)......................... 3,774,039 21,501,084 16,462,806 15,320,784 16,015,941
------------ ----------- ----------- ----------- ------------
Net increase in net assets............... 3,884,130 18,381,068 35,468,569 13,643,833 28,001,022
Net assets:
Beginning of year............................. -- 569,405,397 533,936,828 377,458,904 349,457,882
------------ ----------- ----------- ----------- ------------
End of year................................... $3,884,130 $587,786,465 $569,405,397 $391,102,737 $377,458,904
============ =========== =========== =========== ============
Undistributed net investment income included
in net assets:
Beginning of year............................ -- $ 1,200,415 $ 544,751 $ 1,180,384 $ 998,757
============ =========== =========== =========== ============
End of year.................................. $ 38,055 $ 1,032,211 $ 1,200,415 $ 1,470,171 $ 1,180,384
============ =========== =========== =========== ============
*For the period July 1, 1996 (effective date) to February 28, 1997.
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 28, 1997
and February 29, 1996
Franklin Pennsylvania Franklin Puerto Rico
Tax-Free Income Fund Tax-Free Income Fund
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income......................................... $ 37,938,588 $ 36,650,100 $ 10,748,114 $ 10,582,586
Net realized gain from security transactions.................. 5,857,039 1,771,090 2,031,659 874,797
Net unrealized appreciation (depreciation) on investments..... (8,671,626) 15,569,248 (1,447,567) 3,863,282
---------- ---------- ----------- -----------
Net increase in net assets resulting from operations..... 35,124,001 53,990,438 11,332,206 15,320,665
Distributions to shareholders from:
From undistributed net investment income (Note 8):
Class I...................................................... (37,722,774) (37,185,584) (10,680,927) (10,726,805)
Class II..................................................... (374,193) (53,292) (52,013) (7,485)
In excess of net investment income:
Class I...................................................... -- -- (107,458) (15,174)
Accumulated net realized capital gains:
Class I...................................................... -- -- (1,706,390) (154,421)
Class II..................................................... -- -- (13,384) (176)
Increase in net assets from capital share transactions (Note 3) 30,290,107 38,838,955 4,322,499 9,805,800
---------- ---------- ----------- -----------
Net increase in net assets................................ 27,317,141 55,590,517 3,094,533 14,222,404
Net assets:
Beginning of year............................................. 642,956,511 587,365,994 191,109,905 176,887,501
---------- ---------- ----------- -----------
End of year................................................... $670,273,652 $642,956,511 $194,204,438 $191,109,905
========== ========== =========== ===========
Undistributed net investment income (accumulated distributions
in excess of net investment income) included in net assets:
Beginning of year............................................ $ 532,306 $ 1,121,082 $ (15,174) $ 151,704
========== ========== =========== ===========
End of year.................................................. $ 373,927 $ 532,306 $ (107,458) $ (15,174)
========== ========== =========== ===========
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 28, 1997
and February 29, 1996
Franklin
Federal Intermediate-Term Franklin High Yield
Tax-Free Income Fund Tax-Free Income Fund
---------------------- -------------------------
1997 1996 1997 1996
----------- ---------- ------------ ------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income....................................... $ 4,814,011 $ 4,009,484 $ 266,294,299 $ 236,161,328
Net realized gain (loss) from security transactions......... (99,478) 28,851 (1,562,428) 10,004,172
Net unrealized appreciation on investments.................. 157,409 3,289,690 23,745,558 127,528,753
----------- ---------- ------------ ------------
Net increase in net assets resulting from operations... 4,871,942 7,328,025 288,477,429 373,694,253
Distributions to shareholders from:
Undistributed net investment income (Note 8):
Class I.................................................... (4,748,392) (3,973,970) (263,983,718) (233,856,809)
Class II................................................... -- -- (6,203,344) (937,218)
In excess of net investment income:
Class I.................................................... -- -- (3,211,797) --
Class II................................................... -- -- (54,066) --
Increase in net assets from capital share transactions (Note 3) 18,624,135 8,636,138 849,323,079 409,140,087
----------- ---------- ------------ ------------
Net increase in net assets................................... 18,747,685 11,990,193 864,347,583 548,040,313
Net assets:
Beginning of year........................................... 85,967,485 73,977,292 3,835,309,949 3,287,269,636
----------- ---------- ------------ ------------
End of year................................................. $104,715,170 $85,967,485 $4,699,657,532 $3,835,309,949
=========== ========== ============ ============
Undistributed net investment income (accumulated distributions
in excess of net investment income) included in net assets:
Beginning of year.......................................... $ 199,901 $ 164,387 $ 3,892,763 $ 2,525,462
=========== ========== ============ ============
End of year................................................ $ 265,520 $ 199,901 $ (3,265,863) $ 3,892,763
----------- ---------- ------------ ------------
----------- ---------- ------------ ------------
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-eight separate funds. This
report pertains only to the eleven Funds (the Funds) included in the
accompanying financial statements. Each fund seeks to provide tax-free income.
Each of the Funds issues a separate series of the Trust's shares and maintains a
totally separate investment portfolio. All funds in this report are diversified
except the Franklin Connecticut Tax-Free Income Fund, the Franklin Michigan
Tax-Free Income Fund, and the Franklin Federal Intermediate-Term Tax-Free Income
Fund.
All of the funds within this report, except the Franklin Indiana Tax-Free Income
Fund, the Franklin Michigan Tax-Free Income Fund, and the Franklin Federal
Intermediate-Term Tax-Free Income Fund, offer two classes of shares, Class I and
Class II. Class I shares are sold with a higher front-end sales charge than
Class II shares. Each class of shares may be subject to a contingent deferred
sales charge and has the same rights, except with respect to the effect of the
respective sales charges, the distribution fees borne by each class, voting
rights on matters affecting a single class and the exchange privilege of each
class.
The offering of Class II shares began May 1, 1995, at which time all previously
outstanding shares became Class I shares.
The Franklin Michigan Tax-Free Income Fund became effective July 1, 1996.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
Tax-free bonds generally trade in the over-the-counter market rather than on a
national securities exchange. In the absence of a sale or reported bid and asked
prices, information with respect to bond and note transactions, quotations from
bond dealers, market transactions in comparable securities, and various
relationships between securities are used to determine the value of a security.
The Trust may utilize a pricing service, bank or broker/dealer experienced in
such matters to perform any of the pricing functions under procedures approved
by the Board of Trustees (the Board). Securities for which market quotations are
not available are valued in accordance with procedures established by the Board.
b. Municipal Bonds or Notes with "Puts":
The Funds have purchased municipal bonds or notes with the right to resell the
bonds or notes to the seller at an agreed upon price or yield on a specified
date or within a specified period (which will be prior to the maturity date of
the bonds or notes). Such a right to resell is commonly known as a "put". In
determining the weighted average to maturity of the Fund's portfolio, municipal
bonds and notes as to which the Fund holds a put will be deemed to mature on the
last day on which the put may be exercised.
c. Income Taxes:
The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to shareholders which will be sufficient to relieve the
Funds from income and excise taxes. Each Fund is treated as a separate entity in
the determination of compliance with the Internal Revenue Code.
d. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification.
e. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Original issue discount and
premium are amortized as required by the Internal Revenue Code. The Funds
normally declare dividends from their net investment income daily and distribute
monthly. Daily allocations of net investment income will commence on the day
following the receipt of an investor's funds. Dividends are normally declared
each day the New York Stock Exchange is open for business and are equal to an
amount per day set from time to time by the Board, and are payable to
shareholders of record at the beginning of business on the ex-dividend date.
Once each month dividends are reinvested in additional shares of the Funds, or
paid in cash as requested by the shareholders.
Realized and unrealized gains or losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
Net investment income differs for financial statement and tax purposes primarily
due to 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.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. Expense Allocation:
Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.
g. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
h. Securities Purchased on a When-Issued Basis or Delayed Delivery Basis:
The Funds may trade securities on a when-issued or delayed delivery basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Funds will
generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Funds have set aside sufficient investment
securities as collateral for these purchase commitments.
2. UNAMORTIZED ORGANIZATION AND OFFERING COSTS
Organization costs are amortized on a straight-line basis over five years.
Offering costs are amortized on a straight-line basis over one year.
<TABLE>
<CAPTION>
3. TRUST SHARES
At February 28, 1997, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in each of the Funds' shares for
the years ended February 28, 1997 and February 29, 1996 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
-------- ---------- -------- ---------- -------- -----------
1997
<S> <C> <C> <C> <C> <C> <C>
Shares sold................................ 7,998,298 $89,211,140 3,365,949 $39,446,492 3,013,488 $32,678,988
Shares issued in reinvestment
of distributions.......................... 1,620,931 18,115,046 515,694 6,032,862 403,771 4,380,528
Shares redeemed............................ (8,930,597) (99,662,995) (2,036,403) (23,803,038) (1,853,538) (20,103,171)
-------- ---------- -------- ---------- -------- -----------
Net increase................................ 688,632 $ 7,663,191 1,845,240 $21,676,316 1,563,721 $16,956,345
======== ========== ======== ========== ======== ===========
1996
Shares sold................................ 7,740,101 $87,844,314 2,791,482 $32,551,013 2,410,965 $26,182,802
Shares issued in reinvestment
of distributions.......................... 1,757,603 19,931,360 476,428 5,551,957 388,517 4,213,410
Shares redeemed............................ (8,159,585) (92,522,397) (2,153,219) (25,046,129) (2,173,137) (23,622,462)
-------- ---------- -------- ---------- -------- -----------
Net increase................................ 1,338,119 $15,253,277 1,114,691 $13,056,841 626,345 $ 6,773,750
======== ========== ======== ========== ======== ===========
Class II Shares:
1997
Shares sold................................ 376,534 $ 4,223,178 429,745 $ 5,050,296 231,440 $ 2,513,435
Shares issued in reinvestment
of distributions.......................... 11,069 124,484 10,140 119,253 9,160 99,611
Shares redeemed............................ (68,188) (766,173) (101,865) (1,201,977) (12,392) (134,514)
-------- ---------- -------- ---------- -------- -----------
Net increase................................ 319,415 $ 3,581,489 338,020 $ 3,967,572 228,208 $ 2,478,532
======== ========== ======== ========== ======== ===========
1996*
Shares sold................................ 177,823 $ 2,030,215 141,464 $ 1,668,359 152,190 $ 1,668,825
Shares issued in reinvestment
of distributions.......................... 2,660 30,423 1,733 20,489 1,584 17,430
Shares redeemed............................ (14,220) (161,832) (3,674) (43,689) (2,849) (31,563)
-------- ---------- -------- ---------- -------- -----------
Net increase................................ 166,263 $ 1,898,806 139,523 $ 1,645,159 150,925 $ 1,654,692
======== ========== ======== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
3. TRUST SHARES (cont.)
Franklin Indiana Franklin Michigan Franklin New Jersey
Tax-Free Income Fund Tax-Free Income Fund ** Tax-Free Income Fund
------------------ ----------------- ---------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
------- --------- ------ --------- -------- -----------
1997
<S> <C> <C> <C> <C> <C> <C>
Shares sold..................................... 534,226 $6,210,915 379,169 $3,839,046 6,265,119 $72,134,679
Shares issued in reinvestment of distributions.. 128,039 1,490,773 4,786 49,840 1,388,739 15,999,117
Shares redeemed................................. (481,802) (5,612,458) (11,156) (114,847) (6,530,752) (75,138,395)
------- --------- ------ --------- -------- -----------
Net increase..................................... 180,463 $2,089,230 372,799 $3,774,039 1,123,106 $12,995,401
======= ========= ====== ========= ======== ===========
1996
Shares sold..................................... 479,381 $5,583,028 -- -- 6,190,382 $71,492,146
Shares issued in reinvestment of distributions.. 126,481 1,469,667 -- -- 1,344,993 15,524,726
Shares redeemed................................. (529,309) (6,149,058) -- -- (6,497,336) (75,084,622)
------- --------- ------ --------- -------- -----------
Net increase..................................... 76,553 $ 903,637 -- -- 1,038,039 $11,932,250
======= ========= ====== ========= ======== ===========
Class II Shares:
1997
Shares sold..................................... -- -- -- -- 823,396 $ 9,520,495
Shares issued in reinvestment of distributions.. -- -- -- -- 25,105 290,846
Shares redeemed................................. -- -- -- -- (112,665) (1,305,658)
------- --------- ------ --------- -------- -----------
Net increase..................................... -- -- -- -- 735,836 $ 8,505,683
======= ========= ====== ========= ======== ===========
1996*
Shares sold..................................... -- -- -- -- 404,242 $ 4,729,454
Shares issued in reinvestment of distributions.. -- -- -- -- 3,829 44,861
Shares redeemed................................. -- -- -- -- (20,625) (243,759)
------- --------- ------ --------- -------- -----------
Net increase..................................... -- -- -- -- 387,446 $ 4,530,556
======= ========= ====== ========= ======== ===========
Franklin Oregon Franklin Pennsylvania Franklin Puerto Rico
Tax-Free Income Fund Tax-Free Income Fund Tax-Free Income Fund
-------------------- -------------------- ---------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- -------- ---------- -------- -----------
1997
<S> <C> <C> <C> <C> <C> <C>
Shares sold............................... 3,911,445 $44,814,258 7,716,132 $79,515,366 1,806,977 $20,742,655
Shares issued in reinvestment
of distributions......................... 1,008,332 11,559,976 1,565,965 16,144,953 539,619 6,199,054
Shares redeemed........................... (4,024,495) (46,078,866) (7,195,099) (74,139,499) (2,068,913) (23,766,109)
-------- ---------- -------- ---------- -------- -----------
Net increase............................... 895,282 $10,295,368 2,086,998 $21,520,820 277,683 $ 3,175,600
======== ========== ======== ========== ======== ===========
1996
Shares sold............................... 3,896,034 $44,750,241 8,023,170 $83,104,424 2,153,385 $24,780,430
Shares issued in reinvestment
of distributions......................... 954,645 10,942,187 1,487,883 15,404,590 448,570 5,163,882
Shares redeemed........................... (3,636,816) (41,707,956) (6,062,378) (62,772,970) (1,796,798) (20,673,187)
-------- ---------- -------- ---------- -------- -----------
Net increase............................... 1,213,863 $13,984,472 3,448,675 $35,736,044 805,157 $ 9,271,125
======== ========== ======== ========== ======== ===========
Class II Shares:
1997
Shares sold............................... 464,993 $ 5,357,866 881,728 $ 9,122,622 144,789 $ 1,664,480
Shares issued in reinvestment
of distributions......................... 13,728 158,332 23,191 240,276 3,261 37,572
Shares redeemed........................... (42,568) (490,782) (57,329) (593,611) (48,280) (555,153)
-------- ---------- -------- ---------- -------- -----------
Net increase............................... 436,153 $ 5,025,416 847,590 $ 8,769,287 99,770 $ 1,146,899
======== ========== ======== ========== ======== ===========
1996*
Shares sold............................... 192,124 $ 2,224,478 301,187 $ 3,147,038 46,373 $ 540,107
Shares issued in reinvestment
of distributions......................... 2,129 24,744 2,993 31,318 372 4,344
Shares redeemed........................... (18,704) (217,753) (7,205) (75,445) (840) (9,777)
-------- ---------- -------- ---------- -------- -----------
Net increase............................... 175,549 $ 2,031,469 296,975 $ 3,102,911 45,905 $ 534,674
======== ========== ======== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
3. TRUST SHARES (cont.)
Franklin Federal
Intermediate-Term Franklin High Yield
Tax-Free Income Fund Tax-Free Income Fund
-------------------- -----------------------
Class I Shares: Shares Amount Shares Amount
-------- ---------- --------- -------------
1997
<S> <C> <C> <C> <C>
Shares sold........................................................ 4,345,155 $47,044,282 96,413,033 $1,068,273,093
Shares issued in reinvestment of distributions..................... 258,673 2,803,060 9,358,868 103,625,570
Shares redeemed.................................................... (2,881,216) (31,223,207) (42,224,510) (467,143,238)
-------- ---------- --------- -------------
Net increase........................................................ 1,722,612 $18,624,135 63,547,391 $ 704,755,425
======== ========== ========= =============
1996
Shares sold........................................................ 2,586,067 $28,048,002 62,180,938 $ 688,556,031
Shares issued in reinvestment of distributions..................... 204,492 2,206,996 7,940,979 87,687,277
Shares redeemed.................................................... (2,002,142) (21,618,860) (37,569,351) (414,975,177)
-------- ---------- --------- -------------
Net increase........................................................ 788,417 $ 8,636,138 32,552,566 $ 361,268,131
======== ========== ========= =============
Class II Shares:
1997
Shares sold........................................................ -- -- 13,680,514 $ 152,469,159
Shares issued in reinvestment of distributions..................... -- -- 304,948 3,402,828
Shares redeemed.................................................... -- -- (1,013,757) (11,304,333)
-------- ---------- --------- -------------
Net increase........................................................ -- -- 12,971,705 $ 144,567,654
======== ========== ========= =============
1996*
Shares sold........................................................ -- -- 4,395,108 $ 49,085,510
Shares issued in reinvestment of distributions..................... -- -- 40,544 454,078
Shares redeemed.................................................... -- -- (149,082) (1,667,632)
-------- ---------- --------- -------------
Net increase........................................................ -- -- 4,286,570 $ 47,871,956
======== ========== ========= =============
*For the period May 1, 1995 to February 29, 1996.
**For the period July 1, 1996 (effective date) to February 28,1997.
</TABLE>
<TABLE>
<CAPTION>
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At February 28, 1997, for tax purposes, the Funds had accumulated net realized
gains or capital loss carryovers as follows:
Franklin Franklin Franklin Franklin
Arizona Michigan Pennsylvania Puerto Rico
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Accumulated net realized gains ......................................... $784,812 $3,604 $2,801,890 $238,515
========= ========= ========= =========
Franklin Franklin Franklin Franklin
Colorado Connecticut Indiana New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- ---------
Capital loss carryovers
<S> <C> <C> <C> <C> <C>
Expiring in: 2001...................................................... $ -- $ 261,598 $ -- $ --
2003...................................................... 938,315 5,817,978 420,541 3,298,503
2004...................................................... -- 46,957 -- --
2005...................................................... -- 322,502 -- --
--------- --------- --------- ---------
$938,315 $6,449,035 $420,541 $3,298,503
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS (cont.)
Franklin Franklin Franklin
Oregon Intermediate- High Yield
Tax-Free Term Tax-Free Tax-Free
Income Fund Income Fund Income Fund
--------- --------- ---------
Capital loss carryovers
<S> <C> <C> <C> <C>
Expiring in: 2001..................................................... $ 74,144 $ -- $ --
2002..................................................... 54,202 -- 22,886,561
2003..................................................... 5,075,995 1,066,621 23,501,819
2005..................................................... 67,453 99,478 1,567,803
--------- --------- ---------
$5,271,794 $1,166,099 $47,956,183
========= ========= =========
</TABLE>
For income tax purposes, the aggregate cost of securities is higher (and
unrealized appreciation is lower) than for financial reporting purposes at
February 28, 1997, by $3,782 in the Franklin Arizona Tax-Free Income Fund, $888
in the Franklin Colorado Tax-Free Income Fund, $25,710 in the Franklin
Connecticut Tax-Free Income Fund, and $2,500 in the Franklin High Yield Income
Fund.
From November 1, 1996 through February 28, 1997, the Franklin Connecticut
Tax-Free Income Fund incurred $45,474 of net realized capital loss. As permitted
by tax regulations, the Fund intends to elect to defer this loss and treat it as
having arisen in the year ended February 28, 1998.
<TABLE>
<CAPTION>
5. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended February 28, 1997 were as follows:
Franklin Franklin Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana Michigan New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund* Income Fund
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Purchases .............................. $129,908,867 $60,821,610 $41,903,034 $14,012,356 $4,977,346 $70,297,766
Sales .................................. $122,961,347 $31,497,889 $25,035,280 $11,473,269 $1,268,994 $49,868,458
</TABLE>
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Federal Franklin
Oregon Pennsylvania Puerto Rico Intermediate- High Yield
Tax-Free Tax-Free Tax-Free Term Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Purchases ........................................ $34,017,652 $174,463,751 $40,465,281 $37,644,410 $1,122,050,189
Sales ............................................ $16,649,637 $142,957,704 $39,684,403 $20,611,320 $ 284,554,364
</TABLE>
*For the period July 1, 1996 (effective date) to February 28, 1997.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement:
Under the terms of a management agreement, Franklin Investment Advisory
Services, Inc. (Investment Advisory) and Franklin Advisers, Inc. (Advisers)
provide investment advice, administrative services, office space and facilities
for the Franklin Connecticut Tax-Free Income Fund and the remaining Funds,
respectively, and receive 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
Under agreements with Advisers and Investment Advisory, Franklin Templeton
Services, Inc. (FT Services) provides administrative services and facilities for
the Funds. The fee is paid by Advisers and Investment Advisory and computed
monthly based on average daily net assets. It is not a separate expense of the
Funds.
Advisers agreed in advance to waive management fees for the Michigan Tax-Free
Income Fund and the Federal Intermediate-Term Income Fund, as noted in the
Statement of Operations.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
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 28, 1997, aggregated $2,275,375, of which $2,103,261 was
paid to Investor Services.
c. Distribution Plans and Underwriting Agreement:
Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Funds reimburse Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to a maximum of 0.10% per
annum for Class I and 0.65% per annum for Class II, if applicable, of the
average daily net assets of such class of all the Funds, for costs incurred in
the promotion, offering and marketing of the Funds' shares. The Plans do not
permit nor require payments of excess costs after termination. Fees incurred by
the Funds under the Plans aggregated $6,901,285 for the year ended February 28,
1997.
In its capacity as underwriter for the shares of the Funds, Distributors
receives commissions on sales of the Funds' shares of beneficial interest.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Funds, and as such are not expenses of the Funds. Distributors may
also make payments, out of its own resources, to the dealers for certain sales
of the Funds' shares. Commissions received by Distributors and the amounts paid
to other dealers and any applicable contingent deferred sales charges for the
year ended February 28, 1997 were as follows:
<TABLE>
<CAPTION>
Franklin Franklin Franklin Franklin Franklin Franklin
Arizona Colorado Connecticut Indiana Michigan New Jersey
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund * Income Fund
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total commissions received...................... $2,438,719 $838,759 $958,649 $200,618 $43,942 $2,075,332
Paid to other dealers........................... $2,349,878 $894,731 $941,716 $187,512 $41,357 $2,053,792
Contingent deferred sales charges............... $ 2,749 $ 6,126 $ 711 -- -- $ 4,080
</TABLE>
<TABLE>
<CAPTION>
Franklin
Franklin Franklin Franklin Federal Franklin
Oregon Pennsylvania Puerto Rico Intermediate- High Yield
Tax-Free Tax-Free Tax-Free Term Tax-Free Tax-Free
Income Fund Income Fund Income Fund Income Fund Income Fund
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Total commissions received...................... $1,398,757 $2,594,028 $621,195 $301,298 $26,688,526
Paid to other dealers........................... $1,352,774 $2,516,617 $594,810 $313,622 $27,555,809
Contingent deferred sales charges............... $ 2,950 $ 31,296 $ 2,964 -- $ 52,856
*For the period July 1, 1996 (effective date) to February 28, 1997.
</TABLE>
d. Other Affiliates and Related Party Transactions:
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, Investment Advisory, FT Services and Investor Services,
all wholly-owned subsidiaries of Franklin Resources, Inc.
7. CREDIT RISK
All of the Funds' investments are in the securities of issuers within their
respective states and U.S. territories and possessions except for the Franklin
Federal Intermediate-Term Tax-Free Income Fund and the Franklin High Yield
Tax-Free Income Fund. The Franklin Federal Intermediate-Term Tax-Free Income
Fund has investments in excess of 10% of its total net assets in the states of
California, Florida and New York. The Franklin High Yield Tax-Free Income Fund
has investments in excess of 10% of its total net assets in the states of
California and New York. Such concentration may subject the Funds more
significantly to economic changes occurring within those states and U.S.
territories and possessions.
The Franklin High Yield Tax-Free Income Fund has 28.1% of its portfolio invested
in lower rated and comparable quality unrated high yield securities. Investments
in high yield securities are accompanied by a greater degree of credit risk and
such lower rated 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.
<TABLE>
<CAPTION>
8. 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
------------------------------------------------------- ------------------------------------
Ratio of
Net Net
Net Realized Total Distri- Distri- Net Ratio of Invest-
Asset & Unreal- From butions butions Asset Net Expenses ment Port-
Value Net ized Gain Invest- From Net From Value Assets at to Income to folio
Year at Begin- Invest- (Loss) ment Invest- Realized Total at End of Average Average Turn-
Ended ning of ment on Securi- Opera- ment Capital Distri- End of Total Period Net Net over
Feb. 28, Period Income ties tions Income Gains butions Period Return++++ (in 000's) Assets*** 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>
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
1997 11.34 .62 (.038) .582 (.636) (.046) (.682) 11.24** 5.33 752,335 .62 5.59 16.57
Class II Shares:
19962 11.15 .49 .344 .834 (.483) (.121) (.604) 11.38 7.60 1,892 1.20* 5.05* 25.12
1997 11.38 .57 (.033) .537 (.571) (.046) (.617) 11.30 4.89 5,486 1.19 5.01 16.57
Franklin Colorado Tax-Free Income Fund:
Class I Shares:
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
1997 11.84 .66 (.039) .621 (.661) -- (.661) 11.80 5.44 236,609 .71 5.59 14.13
Class II Shares:
19962 11.40 .50 .461 .961 (.491) -- (.491) 11.87 8.57 1,656 1.29* 5.12* 17.58
1997 11.87 .59 (.024) .566 (.596) -- (.596) 11.84 4.93 5,654 1.28 4.99 14.13
Franklin Connecticut Tax-Free Income Fund:
Class I Shares:
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
1997 10.96 .61 (.025) .585 (.625) -- (.625) 10.92 5.52 183,649 .72 5.62 14.53
Class II Shares:
19962 10.65 .47 .312 .782 (.462) -- (.462) 10.97 7.45 1,656 1.30* 5.12* 3.88
1997 10.97 .60 (.066) .529 (.564) -- (.564) 10.94 5.03 4,149 1.29 5.01 14.53
Franklin Indiana Tax-Free Income Fund:
Class I Shares:
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
1997 11.76 .66 .011 .671 (.661) -- (.661) 11.77 5.91 51,137 .82 5.69 23.54
Franklin Michigan Tax-Free Income Fund:
Class I Shares:
19973 10.00 .30 .315 .615 (.195) -- (.195) 10.42 6.17 3,884 .34* 4.90* 42.83
Franklin New Jersey Tax-Free Income Fund:
Class I Shares:
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
1997 11.68 .64 (.063) .577 (.647) -- (.647) 11.61 5.13 574,691 .64 5.58 8.87
Class II Shares:
19962 11.30 .49 .403 .893 (.473) -- (.473) 11.72 8.02 4,542 1.23* 5.15* 12.04
1997 11.72 .57 (.053) .517 (.577) -- (.577) 11.66 4.57 13,095 1.21 5.01 8.87
</TABLE>
<TABLE>
<CAPTION>
8. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------------- ------------------------------------
Ratio of
Net Net
Net Realized Total Distri- Distri- Net Ratio of Invest-
Asset & Unreal- From butions butions Asset Net Expenses ment Port-
Value Net ized Gain Invest- From Net From Value Assets at to Income to folio
Year at Begin- Invest- (Loss) ment Invest- Realized Total at End of Average Average Turn-
Ended ning of ment on Securi- Opera- ment Capital Distri- End of Total Period Net Net over
Feb. 28, Period Income ties tions Income Gains butions Period Return++++ (in 000's) Assets*** Assets Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Oregon Tax-Free Income Fund:
Class I Shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
1997 11.60 .63 (.055) .575 (.625) -- (.625) 11.55 5.13 384,003 .66 5.52 4.47
Class II Shares:
19962 11.23 .47 .414 .884 (.464) -- (.464) 11.65 7.99 2,044 1.24* 4.87* 6.52
1997 11.65 .56 (.042) .518 (.558) -- (.558) 11.61 4.59 7,100 1.23 4.93 4.47
Franklin Pennsylvania Tax-Free Income Fund:
Class I Shares:
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
1997 10.44 .60 (.044) .559 (.606) -- (.606) 10.39 5.53 658,339 .64 5.84 22.24
Class II Shares:
19962 10.17 .47 .302 .772 (.472) -- (.472) 10.47 7.71 3,110 1.22* 5.36* 9.71
1997 10.47 .55 (.047) .503 (.543) -- (.543) 10.43 4.98 11,935 1.21 5.22 22.24
Franklin Puerto Rico Tax-Free Income Fund:
Class I Shares:
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)+ (.010) (.679) 11.59 8.68 190,577 .74 5.71 27.99
1997 11.59 .65 .025 .675 (.651)++ (.104) (.755) 11.51 6.03 192,525 .73 5.62 21.09
Class II Shares:
19962 11.32 .50 .304 .804 (.494) (.010) (.504) 11.62 7.21 533 1.32* 5.16* 27.99
1997 11.62 .58 .020 .600 (.586) (.104) (.690) 11.53 5.33 1,679 1.30 5.04 21.09
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
1997 10.95 .55 (.007) .543 (.553) -- (.553) 10.94 5.12 104,715 .68 5.16 22.54
Franklin High Yield Tax-Free Income Fund:
Class I Shares:
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
1997 11.19 .71 .043 .753 (.733)+++ -- (.733) 11.21** 7.01 4,505,258 .62 6.41 6.98
Class II Shares:
19962 10.81 .56 .423 .983 (.553) -- (.553) 11.24 9.27 48,163 1.18* 6.07* 9.23
1997 11.24 .66 .028 .688 (.668)+++ -- (.668) 11.26 6.36 194,400 1.18 5.78 6.98
</TABLE>
1For the period September 21, 1992 (effective date) to February 28, 1993.
2For the period May 1, 1995, to February 29, 1996.
3For the period July 1, 1996 (effective date) to February 28, 1997.
+Includes distributions in excess of net investment income in the amount of
$0.001.
++Includes distributions in excess of net investment income in the amount of
$0.006.
+++Includes distributions in excess of net investment income in the amount of
$0.008 and $0.003, respectively, for Class I and Class II.
++++Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or contingent deferred sales charge and assumes reinvestment of dividends
and capital gains at net asset value. Prior to May 1, 1994 dividends were
reinvested at the maximum offering price, and capital gains at net asset value
except for the Franklin Federal Intermediate-Term Tax-Free Income Fund.
Effective May 1, 1994, with the implementation of the Rule 12b-1 distribution
plan for Class I shares, the sales charges on reinvested dividends were
eliminated. 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.
*Annualized
**The net asset value differs from the net asset value used to process
shareholder activity as of the reporting date, which does not include market
adjustment for portfolio trades made on that date. These adjustments are
generally accounted for on the day following the trade date.
***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
1993........................................... 0.73%
Franklin Michigan Tax-Free Income Fund
19973.......................................... 1.21
Franklin Federal Intermediate-Term Tax-Free Income Fund
19931.......................................... 1.60*
1994........................................... .89
1995........................................... .84
1996........................................... .85
1997........................................... .84
Each fund hereby designates 100% of the distributions paid from net investment
income for the taxable year ended February 28, 1997, as exempt-interest
dividends per Section 852(b)(5) of the Internal Revenue Code.
FRANKLIN TAX-FREE TRUST
Report of Independent Accountants
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 (eleven of which are included
in this report), including each Fund's statement of investments in securities
and net assets, as of February 28, 1997, and the related statements of
operations for the year then ended, 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 presented. 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 include confirmation of securities owned as of
February 28, 1997, by correspondence with the custodian. 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 28, 1997, 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 their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
April 4, 1997
Franklin Tax-Free Trust (Arizona Series) Annual Report February 28, 1997.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM 304
(a)OF REGULATION S-T)
GRAPHIC MATERIAL (1)
The following line graph compares the Federal Funds Rate to the Consumer Price
Index - Year over Year change from 3/31/94 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fed Funds CPI
<S> <C> <C>
Mar-94 2.50% 3.50%
Apr-94 2.40% 3.75%
May-94 2.30% 4.25%
Jun-94 2.50% 4.25%
Jul-94 2.80% 4.25%
Aug-94 2.90% 4.75%
Sep-94 3.00% 4.75%
Oct-94 2.60% 4.75%
Nov-94 2.70% 5.50%
Dec-94 2.70% 5.50%
Jan-95 2.80% 5.50%
Feb-95 2.90% 6.00%
Mar-95 2.90% 6.00%
Apr-95 3.10% 6.00%
May-95 3.20% 6.00%
Jun-95 3.00% 6.00%
Jul-95 2.80% 5.75%
Aug-95 2.60% 5.75%
Sep-95 2.50% 5.75%
Oct-95 2.80% 5.75%
Nov-95 2.60% 5.75%
Dec-95 2.50% 5.50%
Jan-96 2.70% 5.25%
Feb-96 2.70% 5.25%
Mar-96 2.80% 5.25%
Apr-96 2.90% 5.25%
May-96 2.90% 5.25%
Jun-96 2.80% 5.25%
Jul-96 3.00% 5.25%
Aug-96 2.90% 5.25%
Sep-96 3.00% 5.25%
Oct-96 3.00% 5.25%
Nov-96 3.30% 5.25%
Dec-96 3.30% 5.25%
Jan-97 3.00% 5.25%
Feb-97 3.00% 5.25%
</TABLE>
GRAPHIC MATERIAL (2)
This bar chart shows the percentage of insured vs. Non-insured bonds issued
during the following years: 1994 (37% insured, 63% non-insured), 1995 (43%
insured, 57% non-insured), 1996 (47% insured, 53% non-insured).
GRAPHIC MATERIAL (3)
This bar chart shows new long-term municipal bond issuance from 1987 through
1996 in terms of billion: 1987/$105 billion; 1988/$117.3 billion; 1989/$125
billion; 1990/$127.8 billion; 1991/$172.4 billion; 1992/$234.7 billion;
1993/$292.2 billion; 1994/$164.8 billion; 1995/$160.3 billion; 1996/$183.5
billion.
GRAPHIC MATERIAL (4)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 55.0%
AA 18.3%
A 26.2%
BBB 0.5%
</TABLE>
GRAPHIC MATERIAL (5)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.31% and the taxable equivalent rate of 9.31%.
GRAPHIC MATERIAL (6)
The following line graph hypothetically compares the performance of the fund's
Class I shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/1/87 9,573 10000 10,000
9/30/87 8,947 9631 10,052
10/31/87 8,994 9665 10,078
11/30/87 9,364 9917 10,087
12/31/87 9,545 10061 10,087
1/31/88 9,928 10419 10,113
2/29/88 10,053 10529 10,140
3/31/88 9,851 10407 10,183
4/30/88 9,880 10486 10,236
5/31/88 9,919 10456 10,271
6/30/88 10,107 10609 10,315
7/31/88 10,107 10678 10,359
8/31/88 10,151 10687 10,402
9/30/88 10,365 10881 10,472
10/31/88 10,602 11072 10,506
11/30/88 10,506 10970 10,515
12/31/88 10,653 11082 10,533
1/31/89 10,874 11311 10,585
2/28/89 10,774 11183 10,629
3/31/89 10,748 11156 10,690
4/30/89 10,993 11420 10,760
5/31/89 11,229 11658 10,821
6/30/89 11,371 11816 10,847
7/31/89 11,471 11977 10,873
8/31/89 11,389 11859 10,891
9/30/89 11,329 11824 10,925
10/31/89 11,431 11968 10,978
11/30/89 11,599 12178 11,004
12/31/89 11,692 12277 11,022
1/31/90 11,607 12220 11,135
2/28/90 11,745 12329 11,188
3/31/90 11,750 12332 11,249
4/30/90 11,686 12243 11,267
5/31/90 11,929 12510 11,293
6/30/90 12,047 12620 11,354
7/31/90 12,247 12807 11,397
8/31/90 11,929 12622 11,502
9/30/90 11,921 12629 11,599
10/31/90 12,102 12858 11,668
11/30/90 12,365 13116 11,694
12/31/90 12,370 13174 11,694
1/31/91 12,589 13350 11,764
2/28/91 12,713 13466 11,782
3/31/91 12,742 13472 11,799
4/30/91 12,916 13652 11,817
5/31/91 13,007 13774 11,853
6/30/91 12,983 13760 11,887
7/31/91 13,180 13928 11,905
8/31/91 13,317 14112 11,939
9/30/91 13,504 14295 11,992
10/31/91 13,579 14424 12,010
11/30/91 13,630 14464 12,045
12/31/91 13,884 14775 12,053
1/31/92 13,934 14809 12,071
2/29/92 13,929 14814 12,115
3/31/92 13,937 14820 12,176
4/30/92 14,048 14952 12,193
5/31/92 14,225 15128 12,211
6/30/92 14,403 15382 12,254
7/31/92 14,924 15844 12,280
8/31/92 14,760 15688 12,315
9/30/92 14,875 15790 12,349
10/31/92 14,709 15636 12,392
11/30/92 15,052 15915 12,410
12/31/92 15,249 16078 12,401
1/31/93 15,447 16264 12,462
2/28/93 15,823 16853 12,505
3/31/93 15,735 16674 12,549
4/30/93 15,825 16843 12,584
5/31/93 15,917 16937 12,602
6/30/93 16,175 17220 12,620
7/31/93 16,169 17242 12,620
8/31/93 16,486 17601 12,655
9/30/93 16,662 17802 12,681
10/31/93 16,711 17836 12,733
11/30/93 16,633 17679 12,742
12/31/93 16,954 18052 12,742
1/31/94 17,120 18257 12,777
2/28/94 16,766 17785 12,820
3/31/94 16,222 17061 12,864
4/30/94 16,299 17206 12,882
5/31/94 16,377 17355 12,891
6/30/94 16,336 17250 12,935
7/31/94 16,592 17565 12,970
8/31/94 16,656 17627 13,021
9/30/94 16,496 17368 13,057
10/31/94 16,260 17058 13,066
11/30/94 15,965 16750 13,083
12/31/94 16,271 17118 13,083
1/31/95 16,626 17608 13,135
2/28/95 17,043 18120 13,188
3/31/95 17,218 18328 13,231
4/30/95 17,270 18350 13,275
5/31/95 17,695 18936 13,301
6/30/95 17,576 18771 13,328
7/31/95 17,692 18949 13,328
8/31/95 17,872 19190 13,363
9/30/95 17,957 19311 13,389
10/31/95 18,201 19591 13,433
11/30/95 18,479 19916 13,424
12/31/95 18,649 20107 13,415
1/31/96 18,737 20260 13,494
2/29/96 18,612 20122 13,537
3/31/96 18,406 19865 13,607
4/30/96 18,379 19809 13,660
5/31/96 18,402 19801 13,686
6/30/96 18,626 20017 13,695
7/31/96 18,750 20199 13,721
8/31/96 18,765 20195 13,747
9/30/96 19,023 20478 13,791
10/31/96 19,196 20709 13,835
11/30/96 19,474 21088 13,861
12/31/96 19,426 21000 13,861
1/31/97 19,464 21040 13,905
2/28/97 19,623 21233 13,949
Total Return 96.23% 112.33% 39.49%
</TABLE>
GRAPHIC MATERIAL (7)
This bar chart shows the comparison between the fund's Class II distribution
rate of 5.04% and the taxable equivalent rate of 8.84%.
GRAPHIC MATERIAL (8)
The following line graph hypothetically compares the performance of the fund's
Class II shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9902 10000 10,000
5/31/95 10155 10319 10,020
6/30/95 10082 10229 10,040
7/31/95 10142 10326 10,040
8/31/95 10249 10458 10,066
9/30/95 10301 10523 10,086
10/30/95 10426 10676 10,120
11/30/95 10588 10853 10,112
12/31/95 10671 10957 10,105
1/31/96 10724 11041 10,165
2/29/96 10638 10966 10,198
3/31/96 10527 10825 10,251
4/30/96 10507 10795 10,291
5/31/96 10515 10791 10,310
6/30/96 10627 10908 10,316
7/31/96 10701 11008 10,336
8/31/96 10704 11005 10,356
9/30/96 10844 11159 10,389
10/31/96 10947 11286 10,422
11/30/96 11098 11492 10,442
12/31/96 11065 11444 10,442
1/31/97 11072 11466 10,475
2/28/97 11158 11571 10,508
Total Return 11.58% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (9)
This chart shows in pie format the fund's quality breakdown on 2/28/97, based on
total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 64.4%
AA 12.2%
A 9.5%
BBB 13.9%
</TABLE>
GRAPHIC MATERIAL (10)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.36% and the taxable equivalent rate of 9.34%.
GRAPHIC MATERIAL (11)
The following line graph hypothetically compares the performance of the fund's
Class I shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 9/1/87 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/1/87 9574 10000 10,000
9/30/87 8931 9631 10,052
10/31/87 8950 9665 10,078
11/30/87 9347 9917 10,087
12/31/87 9527 10061 10,087
1/31/88 9965 10419 10,113
2/29/88 10012 10529 10,140
3/31/88 9828 10407 10,183
4/30/88 9876 10486 10,236
5/31/88 9924 10456 10,271
6/30/88 10109 10609 10,315
7/31/88 10168 10678 10,359
8/31/88 10221 10687 10,402
9/30/88 10433 10881 10,472
10/31/88 10657 11072 10,506
11/30/88 10590 10970 10,515
12/31/88 10725 11082 10,533
1/31/89 10964 11311 10,585
2/28/89 10885 11183 10,629
3/31/89 10847 11156 10,690
4/30/89 11058 11420 10,760
5/31/89 11302 11658 10,821
6/30/89 11453 11816 10,847
7/31/89 11552 11977 10,873
8/31/89 11491 11859 10,891
9/30/89 11430 11824 10,925
10/31/89 11530 11968 10,978
11/30/89 11685 12178 11,004
12/31/89 11787 12277 11,022
1/31/90 11713 12220 11,135
2/28/90 11871 12329 11,188
3/31/90 11863 12332 11,249
4/30/90 11777 12243 11,267
5/31/90 12027 12510 11,293
6/30/90 12167 12620 11,354
7/31/90 12364 12807 11,397
8/31/90 12058 12622 11,502
9/30/90 12050 12629 11,599
10/31/90 12204 12858 11,668
11/30/90 12487 13116 11,694
12/31/90 12467 13174 11,694
1/31/91 12636 13350 11,764
2/28/91 12746 13466 11,782
3/31/91 12797 13472 11,799
4/30/91 12981 13652 11,817
5/31/91 13093 13774 11,853
6/30/91 13098 13760 11,887
7/31/91 13297 13928 11,905
8/31/91 13411 14112 11,939
9/30/91 13588 14295 11,992
10/31/91 13654 14424 12,010
11/30/91 13720 14464 12,045
12/31/91 14007 14775 12,053
1/31/92 14004 14809 12,071
2/29/92 14027 14814 12,115
3/31/92 14063 14820 12,176
4/30/92 14188 14952 12,193
5/31/92 14392 15128 12,211
6/30/92 14585 15382 12,254
7/31/92 15132 15844 12,280
8/31/92 14973 15688 12,315
9/30/92 15011 15790 12,349
10/31/92 14758 15636 12,392
11/30/92 15155 15915 12,410
12/31/92 15381 16078 12,401
1/31/93 15555 16264 12,462
2/28/93 16081 16853 12,505
3/31/93 15984 16674 12,549
4/30/93 16105 16843 12,584
5/31/93 16186 16937 12,602
6/30/93 16433 17220 12,620
7/31/93 16470 17242 12,620
8/31/93 16800 17601 12,655
9/30/93 17006 17802 12,681
10/31/93 17071 17836 12,733
11/30/93 17025 17679 12,742
12/31/93 17344 18052 12,742
1/31/94 17523 18257 12,777
2/28/94 17157 17785 12,820
3/31/94 16473 17061 12,864
4/30/94 16509 17206 12,882
5/31/94 16618 17355 12,891
6/30/94 16508 17250 12,935
7/31/94 16823 17565 12,970
8/31/94 16860 17627 13,021
9/30/94 16646 17368 13,057
10/31/94 16369 17058 13,066
11/30/94 16064 16750 13,083
12/31/94 16402 17118 13,083
1/31/95 16908 17608 13,135
2/28/95 17341 18120 13,188
3/31/95 17486 18328 13,231
4/30/95 17539 18350 13,275
5/31/95 17993 18936 13,301
6/30/95 17877 18771 13,328
7/31/95 17978 18949 13,328
8/31/95 18237 19190 13,363
9/30/95 18323 19311 13,389
10/31/95 18567 19591 13,433
11/30/95 18860 19916 13,424
12/31/95 19044 20107 13,415
1/31/96 19132 20260 13,494
2/29/96 19091 20122 13,537
3/31/96 18922 19865 13,607
4/30/96 18914 19809 13,660
5/31/96 18921 19801 13,686
6/30/96 19094 20017 13,695
7/31/96 19234 20199 13,721
8/31/96 19241 20195 13,747
9/30/96 19499 20478 13,791
10/31/96 19690 20709 13,835
11/30/96 19984 21088 13,861
12/31/96 19942 21000 13,861
1/31/97 19967 21040 13,905
2/28/97 20128 21233 13,949
Total Return 101.28% 112.33% 39.49%
</TABLE>
GRAPHIC MATERIAL (12)
This bar chart shows the comparison between the fund's Class II distribution
rate of 4.96% and the taxable equivalent rate of 8.64%.
GRAPHIC MATERIAL (13)
The following line graph hypothetically compares the performance of the fund's
Class II shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9896 10000 10,000
5/31/95 10143 10319 10,020
6/30/95 10082 10229 10,040
7/31/95 10133 10326 10,040
8/31/95 10273 10458 10,066
9/30/95 10316 10523 10,086
10/30/95 10457 10676 10,120
11/30/95 10617 10853 10,112
12/31/95 10714 10957 10,105
1/31/96 10758 11041 10,165
2/29/96 10730 10966 10,198
3/31/96 10630 10825 10,251
4/30/96 10621 10795 10,291
5/31/96 10620 10791 10,310
6/30/96 10720 10908 10,316
7/31/96 10785 11008 10,336
8/31/96 10794 11005 10,356
9/30/96 10933 11159 10,389
10/31/96 11035 11286 10,422
11/30/96 11194 11492 10,442
12/31/96 11165 11444 10,442
1/31/97 11174 11466 10,475
2/28/97 11,259 11571 10,508
Total Return 12.59% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (14)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 39.3%
AA 22.3%
A 8.3%
BBB 30.1%
</TABLE>
GRAPHIC MATERIAL (15)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.47% and the taxable equivalent rate of 9.48%.
GRAPHIC MATERIAL (16)
The following line graph hypothetically compares the performance of the fund's
Class I shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 10/3/88 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
10/3/88 9579 10000 10,000
10/31/88 9607 10176 10,033
11/30/88 9540 10082 10,041
12/31/88 9646 10185 10,058
1/31/89 9837 10396 10,108
2/28/89 9786 10278 10,150
3/31/89 9764 10253 10,209
4/30/89 9994 10496 10,275
5/31/89 10196 10714 10,334
6/30/89 10311 10860 10,358
7/31/89 10407 11008 10,383
8/31/89 10334 10900 10,400
9/30/89 10282 10867 10,433
10/31/89 10349 11000 10,483
11/30/89 10507 11192 10,508
12/31/89 10605 11284 10,525
1/31/90 10531 11231 10,634
2/28/90 10661 11331 10,684
3/31/90 10637 11334 10,742
4/30/90 10561 11253 10,760
5/31/90 10798 11498 10,784
6/30/90 10899 11599 10,843
7/31/90 11065 11771 10,884
8/31/90 10786 11600 10,984
9/30/90 10751 11607 11,076
10/31/90 10887 11817 11,143
11/30/90 11142 12055 11,167
12/31/90 11128 12108 11,167
1/31/91 11310 12270 11,234
2/28/91 11373 12377 11,251
3/31/91 11413 12382 11,268
4/30/91 11554 12548 11,285
5/31/91 11640 12659 11,319
6/30/91 11492 12647 11,351
7/31/91 11657 12801 11,368
8/31/91 11801 12970 11,401
9/30/91 11968 13138 11,452
10/31/91 12045 13257 11,469
11/30/91 12099 13294 11,502
12/31/91 12327 13580 11,510
1/31/92 12335 13611 11,527
2/29/92 12317 13615 11,569
3/31/92 12333 13620 11,628
4/30/92 12420 13742 11,644
5/31/92 12603 13904 11,660
6/30/92 12751 14137 11,702
7/31/92 13164 14561 11,727
8/31/92 13000 14419 11,760
9/30/92 13028 14512 11,793
10/31/92 12825 14370 11,834
11/30/92 13122 14627 11,851
12/31/92 13334 14777 11,842
1/31/93 13511 14948 11,900
2/28/93 13912 15489 11,942
3/31/93 13841 15325 11,984
4/30/93 13944 15480 12,017
5/31/93 13999 15566 12,034
6/30/93 14243 15826 12,051
7/31/93 14247 15847 12,051
8/31/93 14557 16177 12,085
9/30/93 14728 16361 12,110
10/31/93 14767 16392 12,160
11/30/93 14704 16248 12,168
12/31/93 14978 16591 12,168
1/31/94 15111 16780 12,201
2/28/94 14797 16345 12,243
3/31/94 14270 15680 12,284
4/30/94 14258 15813 12,301
5/31/94 14392 15951 12,310
6/30/94 14299 15854 12,352
7/31/94 14556 16144 12,385
8/31/94 14585 16200 12,435
9/30/94 14410 15962 12,468
10/31/94 14138 15678 12,477
11/30/94 13784 15394 12,493
12/31/94 14171 15733 12,493
1/31/95 14532 16183 12,543
2/28/95 14854 16654 12,593
3/31/95 14953 16845 12,635
4/30/95 15010 16865 12,677
5/31/95 15364 17403 12,702
6/30/95 15237 17252 12,727
7/31/95 15324 17416 12,727
8/31/95 15527 17637 12,761
9/30/95 15657 17748 12,786
10/31/95 15847 18006 12,828
11/30/95 16053 18304 12,819
12/31/95 16202 18480 12,810
1/31/96 16278 18621 12,886
2/29/96 16192 18494 12,927
3/31/96 16048 18257 12,994
4/30/96 16065 18206 13,045
5/31/96 16098 18199 13,070
6/30/96 16266 18397 13,078
7/31/96 16375 18565 13,103
8/31/96 16422 18561 13,127
9/30/96 16593 18821 13,169
10/31/96 16719 19033 13,212
11/30/96 16937 19382 13,237
12/31/96 16925 19300 13,237
1/31/97 16959 19337 13,279
2/28/97 17086 19515 13,320
Total Return 70.86% 95.15% 33.20%
</TABLE>
GRAPHIC MATERIAL (17)
This bar shows the comparison between the fund's Class II distribution rate of
5.05% and the taxable equivalent rate of 8.75%.
GRAPHIC MATERIAL (18)
The following line graph hypothetically compares the performance of the fund's
Class II shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9898 10000 10,000
5/31/95 10125 10319 10,020
6/30/95 10045 10229 10,040
7/31/95 10097 10326 10,040
8/31/95 10234 10458 10,066
9/30/95 10323 10523 10,086
10/30/95 10442 10676 10,120
11/30/95 10572 10853 10,112
12/31/95 10644 10957 10,105
1/31/96 10689 11041 10,165
2/29/96 10618 10966 10,198
3/31/96 10523 10825 10,251
4/30/96 10539 10795 10,291
5/31/96 10555 10791 10,310
6/30/96 10631 10908 10,316
7/31/96 10708 11008 10,336
8/31/96 10754 11005 10,356
9/30/96 10861 11159 10,389
10/31/96 10938 11286 10,422
11/30/96 11076 11492 10,442
12/31/96 11053 11444 10,442
1/31/97 11069 11466 10,475
2/28/97 11157 11571 10,508
Total Return 11.57% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (19)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 39.5%
AA 7.1%
A 23.3%
BBB 29.7%
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 rate of 9.20%.
GRAPHIC MATERIAL (21)
The following line graph hypothetically compares the performance of the fund's
shares to that of the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 9/1/87 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/1/87 9573 10000 10,000
9/30/87 8985 9631 10,052
10/31/87 8966 9665 10,078
11/30/87 9317 9917 10,087
12/31/87 9491 10061 10,087
1/31/88 9973 10419 10,113
2/29/88 10120 10529 10,140
3/31/88 9930 10407 10,183
4/30/88 9953 10486 10,236
5/31/88 9995 10456 10,271
6/30/88 10165 10609 10,315
7/31/88 10198 10678 10,359
8/31/88 10261 10687 10,402
9/30/88 10455 10881 10,472
10/31/88 10721 11072 10,506
11/30/88 10643 10970 10,515
12/31/88 10769 11082 10,533
1/31/89 10967 11311 10,585
2/28/89 10908 11183 10,629
3/31/89 10922 11156 10,690
4/30/89 11114 11420 10,760
5/31/89 11359 11658 10,821
6/30/89 11522 11816 10,847
7/31/89 11632 11977 10,873
8/31/89 11581 11859 10,891
9/30/89 11541 11824 10,925
10/31/89 11653 11968 10,978
11/30/89 11820 12178 11,004
12/31/89 11966 12277 11,022
1/31/90 11892 12220 11,135
2/28/90 12018 12329 11,188
3/31/90 12010 12332 11,249
4/30/90 11934 12243 11,267
5/31/90 12234 12510 11,293
6/30/90 12376 12620 11,354
7/31/90 12565 12807 11,397
8/31/90 12260 12622 11,502
9/30/90 12254 12629 11,599
10/31/90 12424 12858 11,668
11/30/90 12675 13116 11,694
12/31/90 12681 13174 11,694
1/31/91 12913 13350 11,764
2/28/91 12990 13466 11,782
3/31/91 13045 13472 11,799
4/30/91 13220 13652 11,817
5/31/91 13311 13774 11,853
6/30/91 13306 13760 11,887
7/31/91 13496 13928 11,905
8/31/91 13639 14112 11,939
9/30/91 13832 14295 11,992
10/31/91 13901 14424 12,010
11/30/91 13970 14464 12,045
12/31/91 14230 14775 12,053
1/31/92 14249 14809 12,071
2/29/92 14249 14814 12,115
3/31/92 14288 14820 12,176
4/30/92 14417 14952 12,193
5/31/92 14690 15128 12,211
6/30/92 14874 15382 12,254
7/31/92 15387 15844 12,280
8/31/92 15216 15688 12,315
9/30/92 15256 15790 12,349
10/31/92 15028 15636 12,392
11/30/92 15364 15915 12,410
12/31/92 15607 16078 12,401
1/31/93 15797 16264 12,462
2/28/93 16312 16853 12,505
3/31/93 16212 16674 12,549
4/30/93 16373 16843 12,584
5/31/93 16452 16937 12,602
6/30/93 16726 17220 12,620
7/31/93 16721 17242 12,620
8/31/93 17040 17601 12,655
9/30/93 17248 17802 12,681
10/31/93 17325 17836 12,733
11/30/93 17290 17679 12,742
12/31/93 17612 18052 12,742
1/31/94 17777 18257 12,777
2/28/94 17409 17785 12,820
3/31/94 16762 17061 12,864
4/30/94 16828 17206 12,882
5/31/94 16923 17355 12,891
6/30/94 16885 17250 12,935
7/31/94 17159 17565 12,970
8/31/94 17196 17627 13,021
9/30/94 16980 17368 13,057
10/31/94 16732 17058 13,066
11/30/94 16409 16750 13,083
12/31/94 16734 17118 13,083
1/31/95 17123 17608 13,135
2/28/95 17513 18120 13,188
3/31/95 17659 18328 13,231
4/30/95 17697 18350 13,275
5/31/95 18093 18936 13,301
6/30/95 18038 18771 13,328
7/31/95 18124 18949 13,328
8/31/95 18338 19190 13,363
9/30/95 18425 19311 13,389
10/31/95 18639 19591 13,433
11/30/95 18871 19916 13,424
12/31/95 19104 20107 13,415
1/31/96 19193 20260 13,494
2/29/96 19120 20122 13,537
3/31/96 18965 19865 13,607
4/30/96 18941 19809 13,660
5/31/96 18965 19801 13,686
6/30/96 19155 20017 13,695
7/31/96 19280 20199 13,721
8/31/96 19304 20195 13,747
9/30/96 19547 20478 13,791
10/31/96 19740 20709 13,835
11/30/96 20087 21088 13,861
12/31/96 20061 21000 13,861
1/31/97 20087 21040 13,905
2/28/97 20249 21233 13,949
Total Return 102.49% 112.33% 39.49%
</TABLE>
GRAPHIC MATERIAL (22)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 74.2%
AA 18.6%
A 3.8%
BBB 3.4%
</TABLE>
GRAPHIC MATERIAL (23)
This bar chart shows the comparison between the fund's distribution rate of
5.29% and the taxable equivalent rate of 9.17%.
GRAPHIC MATERIAL (24)
The following line graph hypothetically compares the performance of the fund's
shares to that of the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 7/1/96 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
7/1/96 9,579 10,000 10,000
7/31/96 9,703 10,091 10,019
8/30/96 9,655 10,089 10,038
9/30/96 9,856 10,230 10,070
10/31/96 9,933 10,346 10,102
11/29/96 10,101 10,535 10,122
12/31/96 10,058 10,491 10,122
1/31/97 10,053 10,511 10,154
2/28/97 10,155 10,608 10,185
Total Return 1.55% 6.08% 1.85%
</TABLE>
GRAPHIC MATERIAL (25)
This chart shows in pie format the quality breakdown of the fund's securities on
2/82/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 60.7%
AA 10.9%
A 11.3%
BBB 15.6%
Below Investment Grade 1.5%
</TABLE>
GRAPHIC MATERIAL (26)
This bar chart shows the comparison between the fund's Class I distribution rate
of 5.34% and the taxable equivalent of 9.44%.
GRAPHIC MATERIAL (27)
The following line graph hypothetically compares the performance of the fund's
Class I shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/12/88 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/12/88 9579 10,000 10,000
5/31/88 9569 9,982 10,021
6/30/88 9741 10,128 10,064
7/31/88 9789 10,194 10,106
8/31/88 9885 10,203 10,149
9/30/88 10106 10,388 10,217
10/31/88 10337 10,570 10,250
11/30/88 10240 10,473 10,259
12/31/88 10384 10,580 10,276
1/31/89 10487 10,799 10,327
2/28/89 10443 10,676 10,370
3/31/89 10438 10,650 10,430
4/30/89 10693 10,903 10,498
5/31/89 10919 11,130 10,557
6/30/89 11056 11,281 10,583
7/31/89 11132 11,434 10,608
8/31/89 11025 11,322 10,625
9/30/89 10948 11,288 10,659
10/31/89 11129 11,426 10,710
11/30/89 11291 11,626 10,736
12/31/89 11359 11,721 10,753
1/31/90 11269 11,666 10,864
2/28/90 11402 11,770 10,915
3/31/90 11386 11,774 10,975
4/30/90 11305 11,689 10,993
5/31/90 11537 11,944 11,018
6/30/90 11663 12,049 11,077
7/31/90 11877 12,227 11,120
8/31/90 11573 12,050 11,222
9/30/90 11590 12,057 11,316
10/31/90 11808 12,275 11,384
11/30/90 12080 12,522 11,409
12/31/90 12104 12,577 11,409
1/31/91 12300 12,746 11,477
2/28/91 12439 12,856 11,495
3/31/91 12476 12,862 11,512
4/30/91 12629 13,034 11,529
5/31/91 12736 13,150 11,564
6/30/91 12746 13,137 11,597
7/31/91 12943 13,297 11,615
8/31/91 13059 13,473 11,648
9/30/91 13235 13,648 11,700
10/31/91 13316 13,771 11,717
11/30/91 13373 13,809 11,751
12/31/91 13612 14,106 11,759
1/31/92 13646 14,138 11,777
2/29/92 13656 14,143 11,819
3/31/92 13678 14,148 11,880
4/30/92 13798 14,274 11,896
5/31/92 13969 14,443 11,913
6/30/92 14166 14,685 11,956
7/31/92 14664 15,126 11,981
8/31/92 14485 14,978 12,015
9/30/92 14496 15,075 12,048
10/31/92 14328 14,927 12,090
11/30/92 14657 15,194 12,107
12/31/92 14841 15,349 12,099
1/31/93 14980 15,528 12,158
2/28/93 15418 16,090 12,201
3/31/93 15324 15,919 12,243
4/30/93 15426 16,080 12,278
5/31/93 15502 16,170 12,295
6/30/93 15764 16,440 12,312
7/31/93 15785 16,461 12,312
8/31/93 16073 16,804 12,347
9/30/93 16229 16,995 12,372
10/31/93 16277 17,028 12,423
11/30/93 16204 16,878 12,432
12/31/93 16470 17,234 12,432
1/31/94 16616 17,430 12,465
2/28/94 16281 16,979 12,508
3/31/94 15681 16,288 12,550
4/30/94 15729 16,426 12,568
5/31/94 15848 16,569 12,577
6/30/94 15742 16,468 12,619
7/31/94 16002 16,769 12,654
8/31/94 16066 16,828 12,704
9/30/94 15857 16,581 12,738
10/31/94 15576 16,286 12,747
11/30/94 15252 15,991 12,764
12/31/94 15616 16,343 12,764
1/31/95 16069 16,810 12,815
2/28/95 16466 17,299 12,866
3/31/95 16617 17,498 12,909
4/30/95 16650 17,519 12,951
5/31/95 17082 18,078 12,977
6/30/95 16982 17,921 13,003
7/31/95 17076 18,091 13,003
8/31/95 17261 18,321 13,037
9/30/95 17370 18,436 13,063
10/31/95 17616 18,703 13,106
11/30/95 17879 19,014 13,097
12/31/95 18051 19,197 13,088
1/31/96 18133 19,342 13,165
2/29/96 18014 19,211 13,207
3/31/96 17818 18,965 13,276
4/30/96 17792 18,912 13,328
5/31/96 17797 18,904 13,353
6/30/96 17992 19,110 13,361
7/31/96 18140 19,284 13,386
8/31/96 18114 19,280 13,412
9/30/96 18374 19,550 13,455
10/31/96 18540 19,771 13,498
11/30/96 18835 20,133 13,523
12/31/96 18777 20,049 13,523
1/31/97 18784 20,087 13,567
2/28/97 18936 20,271 13,609
Total Return 89.36% 102.71% 36.09%
</TABLE>
GRAPHIC MATERIAL (28)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 4.91% and the taxable equivalent rate of 8.68%.
GRAPHIC MATERIAL (29)
The following line graph hypothetically compares the performance of the fund's
Class II shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9904 10000 10,000
5/31/95 10162 10319 10,020
6/30/95 10098 10229 10,040
7/31/95 10157 10326 10,040
8/31/95 10261 10458 10,066
9/30/95 10330 10523 10,086
10/30/95 10470 10676 10,120
11/30/95 10620 10853 10,112
12/31/95 10717 10957 10,105
1/31/96 10769 11041 10,165
2/29/96 10684 10966 10,198
3/31/96 10565 10825 10,251
4/30/96 10544 10795 10,291
5/31/96 10551 10791 10,310
6/30/96 10661 10908 10,316
7/31/96 10744 11008 10,336
8/31/96 10715 11005 10,356
9/30/96 10864 11159 10,389
10/31/96 10955 11286 10,422
11/30/96 11122 11492 10,442
12/31/96 11080 11444 10,442
1/31/97 11079 11466 10,475
2/28/97 11172 11571 10,508
Total 11.72% 15.71% 5.08%
Return
</TABLE>
GRAPHIC MATERIAL (30)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 42.2%
AA 22.6%
A 19.4%
BBB 14.7%
Below Investment Grade 1.1%
</TABLE>
GRAPHIC MATERIAL (31)
This bar chart shows the comparison between the fund's Class I shares
distribution rate of 5.17% and the taxable equivalent rate of 9.41%.
GRAPHIC MATERIAL (32)
The following line graph hypothetically compares the performance of the fund's
Class I to that of the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 9/1/87 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/1/87 9575 10000 10,000
9/30/87 8896 9631 10,052
10/31/87 8906 9665 10,078
11/30/87 9217 9917 10,087
12/31/87 9368 10061 10,087
1/31/88 9792 10419 10,113
2/29/88 9894 10529 10,140
3/31/88 9721 10407 10,183
4/30/88 9757 10486 10,236
5/31/88 9785 10456 10,271
6/30/88 9967 10609 10,315
7/31/88 9975 10678 10,359
8/31/88 10032 10687 10,402
9/30/88 10238 10881 10,472
10/31/88 10455 11072 10,506
11/30/88 10373 10970 10,515
12/31/88 10532 11082 10,533
1/31/89 10752 11311 10,585
2/28/89 10659 11183 10,629
3/31/89 10626 11156 10,690
4/30/89 10850 11420 10,760
5/31/89 11106 11658 10,821
6/30/89 11251 11816 10,847
7/31/89 11323 11977 10,873
8/31/89 11249 11859 10,891
9/30/89 11174 11824 10,925
10/31/89 11268 11968 10,978
11/30/89 11417 12178 11,004
12/31/89 11512 12277 11,022
1/31/90 11436 12220 11,135
2/28/90 11554 12329 11,188
3/31/90 11553 12332 11,249
4/30/90 11442 12243 11,267
5/31/90 11695 12510 11,293
6/30/90 11827 12620 11,354
7/31/90 12016 12807 11,397
8/31/90 11745 12622 11,502
9/30/90 11721 12629 11,599
10/31/90 11902 12858 11,668
11/30/90 12164 13116 11,694
12/31/90 12151 13174 11,694
1/31/91 12347 13350 11,764
2/28/91 12496 13466 11,782
3/31/91 12554 13472 11,799
4/30/91 12717 13652 11,817
5/31/91 12822 13774 11,853
6/30/91 12821 13760 11,887
7/31/91 12976 13928 11,905
8/31/91 13118 14112 11,939
9/30/91 13298 14295 11,992
10/31/91 13382 14424 12,010
11/30/91 13430 14464 12,045
12/31/91 13686 14775 12,053
1/31/92 13722 14809 12,071
2/29/92 13716 14814 12,115
3/31/92 13759 14820 12,176
4/30/92 13853 14952 12,193
5/31/92 13998 15128 12,211
6/30/92 14194 15382 12,254
7/31/92 14658 15844 12,280
8/31/92 14460 15688 12,315
9/30/92 14492 15790 12,349
10/31/92 14305 15636 12,392
11/30/92 14622 15915 12,410
12/31/92 14850 16078 12,401
1/31/93 15026 16264 12,462
2/28/93 15480 16853 12,505
3/31/93 15394 16674 12,549
4/30/93 15506 16843 12,584
5/31/93 15579 16937 12,602
6/30/93 15774 17220 12,620
7/31/93 15807 17242 12,620
8/31/93 16044 17601 12,655
9/30/93 16253 17802 12,681
10/31/93 16313 17836 12,733
11/30/93 16209 17679 12,742
12/31/93 16472 18052 12,742
1/31/94 16625 18257 12,777
2/28/94 16307 17785 12,820
3/31/94 15722 17061 12,864
4/30/94 15765 17206 12,882
5/31/94 15865 17355 12,891
6/30/94 15781 17250 12,935
7/31/94 16038 17565 12,970
8/31/94 16097 17627 13,021
9/30/94 15883 17368 13,057
10/31/94 15582 17058 13,066
11/30/94 15266 16750 13,083
12/31/94 15662 17118 13,083
1/31/95 16103 17608 13,135
2/28/95 16532 18120 13,188
3/31/95 16682 18328 13,231
4/30/95 16714 18350 13,275
5/31/95 17134 18936 13,301
6/30/95 17002 18771 13,328
7/31/95 17110 18949 13,328
8/31/95 17325 19190 13,363
9/30/95 17419 19311 13,389
10/31/95 17651 19591 13,433
11/30/95 17899 19916 13,424
12/31/95 18025 20107 13,415
1/31/96 18136 20260 13,494
2/29/96 18046 20122 13,537
3/31/96 17862 19865 13,607
4/30/96 17865 19809 13,660
5/31/96 17884 19801 13,686
6/30/96 18077 20017 13,695
7/31/96 18191 20199 13,721
8/31/96 18209 20195 13,747
9/30/96 18421 20478 13,791
10/31/96 18569 20709 13,835
11/30/96 18814 21088 13,861
12/31/96 18801 21000 13,861
1/31/97 18821 21040 13,905
2/28/97 18971 21233 13,949
Total Return 89.71% 112.33% 39.49%
</TABLE>
GRAPHIC MATERIAL (33)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 4.70% and the taxable equivalent rate of 8.55%.
GRAPHIC MATERIAL (34)
The following line graph hypothetically compares the performance of the fund's
Class II shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9903 10000 10,000
5/31/95 10162 10319 10,020
6/30/95 10079 10229 10,040
7/31/95 10138 10326 10,040
8/31/95 10268 10458 10,066
9/30/95 10318 10523 10,086
10/30/95 10450 10676 10,120
11/30/95 10590 10853 10,112
12/31/95 10668 10957 10,105
1/31/96 10729 11041 10,165
2/29/96 10670 10966 10,198
3/31/96 10560 10825 10,251
4/30/96 10547 10795 10,291
5/31/96 10562 10791 10,310
6/30/96 10671 10908 10,316
7/31/96 10733 11008 10,336
8/31/96 10739 11005 10,356
9/30/96 10858 11159 10,389
10/31/96 10940 11286 10,422
11/30/96 11089 11492 10,442
12/31/96 11067 11444 10,442
1/31/97 11082 11466 10,475
2/28/97 11165 11571 10,508
Total 11.65% 15.71% 5.08%
Return
</TABLE>
GRAPHIC MATERIAL (35)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 53.9%
AA 10.2%
A 13.8%
BBB 22.1%
</TABLE>
GRAPHIC MATERIAL (36)
This bar chart shows the comparison between the fund's Class I shares
distribution rate of 5.53% and the taxable equivalent distribution rate of
9.42%.
GRAPHIC MATERIAL (37)
The following line graph hypothetically compares the performance of the fund's
Class I shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 3/1/87 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/87 9579 10000 10,000
3/31/87 9551 9894 10,045
4/30/87 8868 9397 10,099
5/31/87 8652 9350 10,135
6/30/87 8908 9625 10,170
7/31/87 8898 9723 10,197
8/31/87 8946 9745 10,251
9/30/87 8471 9385 10,304
10/31/87 8424 9418 10,331
11/30/87 8788 9664 10,340
12/31/87 9006 9804 10,340
1/31/88 9415 10153 10,367
2/29/88 9555 10261 10,394
3/31/88 9404 10142 10,438
4/30/88 9455 10219 10,493
5/31/88 9476 10189 10,528
6/30/88 9651 10338 10,574
7/31/88 9682 10405 10,618
8/31/88 9755 10414 10,663
9/30/88 9944 10603 10,734
10/31/88 10176 10790 10,770
11/30/88 10102 10690 10,778
12/31/88 10230 10799 10,797
1/31/89 10392 11023 10,850
2/28/89 10348 10897 10,895
3/31/89 10338 10871 10,958
4/30/89 10590 11129 11,029
5/31/89 10822 11360 11,092
6/30/89 10955 11515 11,119
7/31/89 11033 11671 11,146
8/31/89 10977 11557 11,163
9/30/89 10932 11522 11,199
10/31/89 11022 11663 11,253
11/30/89 11171 11867 11,280
12/31/89 11286 11964 11,298
1/31/90 11205 11908 11,414
2/28/90 11298 12014 11,468
3/31/90 11298 12018 11,531
4/30/90 11192 11931 11,549
5/31/90 11453 12191 11,576
6/30/90 11537 12298 11,639
7/31/90 11717 12480 11,683
8/31/90 11390 12299 11,790
9/30/90 11317 12307 11,889
10/31/90 11502 12530 11,961
11/30/90 11748 12781 11,987
12/31/90 11723 12838 11,987
1/31/91 11911 13010 12,059
2/28/91 11986 13123 12,077
3/31/91 12036 13128 12,095
4/30/91 12227 13304 12,113
5/31/91 12323 13422 12,150
6/30/91 12356 13409 12,185
7/31/91 12544 13573 12,203
8/31/91 12681 13752 12,238
9/30/91 12871 13930 12,292
10/31/91 12957 14056 12,311
11/30/91 13030 14095 12,346
12/31/91 13304 14398 12,355
1/31/92 13323 14431 12,374
2/29/92 13317 14436 12,418
3/31/92 13351 14441 12,481
4/30/92 13480 14570 12,499
5/31/92 13637 14742 12,516
6/30/92 13862 14990 12,562
7/31/92 14337 15439 12,588
8/31/92 14202 15288 12,623
9/30/92 14262 15387 12,658
10/31/92 14111 15237 12,703
11/30/92 14412 15509 12,721
12/31/92 14587 15668 12,712
1/31/93 14791 15849 12,774
2/28/93 15212 16423 12,819
3/31/93 15159 16249 12,864
4/30/93 15250 16413 12,900
5/31/93 15341 16505 12,918
6/30/93 15580 16781 12,936
7/31/93 15570 16802 12,936
8/31/93 15870 17152 12,972
9/30/93 16053 17347 12,999
10/31/93 16102 17380 13,052
11/30/93 16046 17227 13,062
12/31/93 16289 17591 13,062
1/31/94 16428 17791 13,097
2/28/94 16155 17331 13,141
3/31/94 15696 16625 13,186
4/30/94 15713 16767 13,205
5/31/94 15822 16912 13,214
6/30/94 15792 16809 13,259
7/31/94 16028 17117 13,294
8/31/94 16077 17177 13,348
9/30/94 15921 16924 13,384
10/31/94 15715 16623 13,393
11/30/94 15431 16322 13,410
12/31/94 15753 16681 13,410
1/31/95 16125 17158 13,464
2/28/95 16515 17658 13,518
3/31/95 16665 17861 13,563
4/30/95 16700 17882 13,607
5/31/95 17098 18453 13,635
6/30/95 17035 18292 13,662
7/31/95 17138 18466 13,662
8/31/95 17293 18700 13,697
9/30/95 17396 18818 13,725
10/31/95 17585 19091 13,770
11/30/95 17842 19408 13,760
12/31/95 18016 19594 13,751
1/31/96 18105 19743 13,832
2/29/96 18022 19609 13,876
3/31/96 17871 19358 13,948
4/30/96 17857 19304 14,003
5/31/96 17895 19296 14,029
6/30/96 18071 19506 14,038
7/31/96 18194 19684 14,064
8/31/96 18193 19680 14,091
9/30/96 18425 19955 14,136
10/31/96 18586 20181 14,181
11/30/96 18838 20550 14,208
12/31/96 18820 20464 14,208
1/31/97 18874 20503 14,254
2/28/97 19019 20691 14,298
Total Return 90.19% 106.91% 42.98%
</TABLE>
GRAPHIC MATERIAL (38)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 5.11% and the taxable equivalent rate of 8.70%.
GRAHPIC MATERIAL (39)
The following line graph hypothetically compares the performance of the fund's
Class II shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9903 10000 10,000
5/31/95 10140 10319 10,020
6/30/95 10098 10229 10,040
7/31/95 10154 10326 10,040
8/31/95 10241 10458 10,066
9/30/95 10307 10523 10,086
10/30/95 10413 10676 10,120
11/30/95 10550 10853 10,112
12/31/95 10658 10957 10,105
1/31/96 10705 11041 10,165
2/29/96 10651 10966 10,198
3/31/96 10557 10825 10,251
4/30/96 10543 10795 10,291
5/31/96 10571 10791 10,310
6/30/96 10659 10908 10,316
7/31/96 10737 11008 10,336
8/31/96 10721 11005 10,356
9/30/96 10852 11159 10,389
10/31/96 10951 11286 10,422
11/30/96 11092 11492 10,442
12/31/96 11075 11444 10,442
1/31/97 11102 11466 10,475
2/28/97 11182 11571 10,508
Total Return 11.82% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (40)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 31.3%
AA 1.2%
A 19.3%
BBB 48.2%
</TABLE>
GRAPHIC MATERIAL (41)
This bar chart shows the comparison between the fund's Class I shares
distribution rate of 5.39% and the taxable equivalent rate of 8.92%.
GRAPHIC MATERIAL (42)
The following line graph hypothetically compares the performance of the fund's
Class I shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 3/1/87 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/87 9576 10000 10,000
3/31/87 9559 9894 10,045
4/30/87 9168 9397 10,099
5/31/87 9015 9350 10,135
6/30/87 9137 9625 10,170
7/31/87 9251 9723 10,197
8/31/87 9331 9745 10,251
9/30/87 8809 9385 10,304
10/31/87 8848 9418 10,331
11/30/87 9108 9664 10,340
12/31/87 9227 9804 10,340
1/31/88 9629 10153 10,367
2/29/88 9731 10261 10,394
3/31/88 9548 10142 10,438
4/30/88 9605 10219 10,493
5/31/88 9643 10189 10,528
6/30/88 9805 10338 10,574
7/31/88 9834 10405 10,618
8/31/88 9912 10414 10,663
9/30/88 10114 10603 10,734
10/31/88 10347 10790 10,770
11/30/88 10211 10690 10,778
12/31/88 10349 10799 10,797
1/31/89 10537 11023 10,850
2/28/89 10449 10897 10,895
3/31/89 10420 10871 10,958
4/30/89 10671 11129 11,029
5/31/89 10893 11360 11,092
6/30/89 11036 11515 11,119
7/31/89 11149 11671 11,146
8/31/89 11087 11557 11,163
9/30/89 11015 11522 11,199
10/31/89 11098 11663 11,253
11/30/89 11254 11867 11,280
12/31/89 11358 11964 11,298
1/31/90 11284 11908 11,414
2/28/90 11411 12014 11,468
3/31/90 11400 12018 11,531
4/30/90 11336 11931 11,549
5/31/90 11572 12191 11,576
6/30/90 11680 12298 11,639
7/31/90 11865 12480 11,683
8/31/90 11636 12299 11,790
9/30/90 11581 12307 11,889
10/31/90 11747 12530 11,961
11/30/90 12014 12781 11,987
12/31/90 11969 12838 11,987
1/31/91 12171 13010 12,059
2/28/91 12295 13123 12,077
3/31/91 12340 13128 12,095
4/30/91 12512 13304 12,113
5/31/91 12604 13422 12,150
6/30/91 12616 13409 12,185
7/31/91 12778 13573 12,203
8/31/91 12895 13752 12,238
9/30/91 13060 13930 12,292
10/31/91 13154 14056 12,311
11/30/91 13225 14095 12,346
12/31/91 13437 14398 12,355
1/31/92 13457 14431 12,374
2/29/92 13453 14436 12,418
3/31/92 13498 14441 12,481
4/30/92 13604 14570 12,499
5/31/92 13771 14742 12,516
6/30/92 13977 14990 12,562
7/31/92 14394 15439 12,588
8/31/92 14268 15288 12,623
9/30/92 14290 15387 12,658
10/31/92 14112 15237 12,703
11/30/92 14412 15509 12,721
12/31/92 14637 15668 12,712
1/31/93 14800 15849 12,774
2/28/93 15182 16423 12,819
3/31/93 15076 16249 12,864
4/30/93 15190 16413 12,900
5/31/93 15291 16505 12,918
6/30/93 15497 16781 12,936
7/31/93 15495 16802 12,936
8/31/93 15769 17152 12,972
9/30/93 15977 17347 12,999
10/31/93 16012 17380 13,052
11/30/93 15969 17227 13,062
12/31/93 16247 17591 13,062
1/31/94 16392 17791 13,097
2/28/94 16116 17331 13,141
3/31/94 15552 16625 13,186
4/30/94 15630 16767 13,205
5/31/94 15736 16912 13,214
6/30/94 15634 16809 13,259
7/31/94 15880 17117 13,294
8/31/94 15960 17177 13,348
9/30/94 15773 16924 13,384
10/31/94 15499 16623 13,393
11/30/94 15198 16322 13,410
12/31/94 15551 16681 13,410
1/31/95 15920 17158 13,464
2/28/95 16377 17658 13,518
3/31/95 16474 17861 13,563
4/30/95 16556 17882 13,607
5/31/95 16991 18453 13,635
6/30/95 16792 18292 13,662
7/31/95 16918 18466 13,662
8/31/95 17105 18700 13,697
9/30/95 17216 18818 13,725
10/31/95 17448 19091 13,770
11/30/95 17667 19408 13,760
12/31/95 17810 19594 13,751
1/31/96 17925 19743 13,832
2/29/96 17794 19609 13,876
3/31/96 17680 19358 13,948
4/30/96 17687 19304 14,003
5/31/96 17694 19296 14,029
6/30/96 17920 19506 14,038
7/31/96 18036 19684 14,064
8/31/96 18057 19680 14,091
9/30/96 18316 19955 14,136
10/31/96 18481 20181 14,181
11/30/96 18759 20550 14,208
12/31/96 18708 20464 14,208
1/31/97 18715 20503 14,254
2/28/97 18867 20691 14,298
Total Return 88.67% 106.91% 42.98%
</TABLE>
GRAPHIC MATERIAL (43)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 4.98% and the taxable equivalent rate of 8.25%.
GRAPHIC MATERIAL (44)
The following line graph hypothetically compares the performance of the fund's
Class II shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9904 10000 10,000
5/31/95 10155 10319 10,020
6/30/95 10031 10229 10,040
7/31/95 10110 10326 10,040
8/31/95 10216 10458 10,066
9/30/95 10277 10523 10,086
10/31/95 10410 10676 10,120
11/30/95 10543 10853 10,112
12/31/95 10615 10957 10,105
1/31/96 10686 11041 10,165
2/29/96 10603 10966 10,198
3/31/96 10521 10825 10,251
4/30/96 10530 10795 10,291
5/31/96 10520 10791 10,310
6/30/96 10648 10908 10,316
7/31/96 10712 11008 10,336
8/31/96 10730 11005 10,356
9/30/96 10870 11159 10,389
10/31/96 10962 11286 10,422
11/30/96 11112 11492 10,442
12/31/96 11076 11444 10,442
1/31/97 11084 11466 10,475
2/28/97 11169 11571 10,508
Total Return 11.69% 15.71% 5.08%
</TABLE>
GRAPHIC MATERIAL (45)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 9.0%
AA 7.8%
A 19.1%
BBB 59.0%
Below Investment Grade 5.1%
</TABLE>
GRAPHIC MATERIAL (46)
This bar chart shows the comparison between the fund's shares distribution rate
of 4.93% and the taxable equivalent rate of 8.16%.
GRAPHIC MATERIAL (47)
The following line graph hypothetically compares the performance of the fund's
shares to that of the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 9/23/92 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
9/23/92 9775 10,000 10,000
9/30/92 9785 10,019 10,007
10/31/92 9746 9,917 10,042
11/30/92 9932 10,099 10,056
12/31/92 10010 10,216 10,049
1/31/93 10094 10,388 10,098
2/28/93 10395 10,769 10,133
3/31/93 10420 10,611 10,169
4/30/93 10496 10,712 10,197
5/31/93 10531 10,750 10,211
6/30/93 10687 10,962 10,226
7/31/93 10744 10,989 10,226
8/31/93 10931 11,216 10,254
9/30/93 11038 11,354 10,276
10/31/93 11105 11,373 10,318
11/30/93 11040 11,279 10,325
12/31/93 11280 11,520 10,325
1/31/94 11408 11,661 10,353
2/28/94 11205 11,342 10,388
3/31/94 10855 10,908 10,424
4/30/94 10912 11,028 10,438
5/31/94 11000 11,117 10,445
6/30/94 10972 11,069 10,481
7/31/94 11124 11,255 10,509
8/31/94 11203 11,299 10,551
9/30/94 11111 11,146 10,580
10/31/94 10965 10,983 10,587
11/30/94 10820 10,776 10,601
12/31/94 10975 10,970 10,601
1/31/95 11229 11,254 10,643
2/28/95 11440 11,572 10,686
3/31/95 11543 11,729 10,721
4/30/95 11570 11,743 10,757
5/31/95 11862 12,115 10,778
6/30/95 11801 12,040 10,800
7/31/95 11907 12,217 10,800
8/31/95 12070 12,383 10,828
9/30/95 12178 12,462 10,849
10/31/95 12319 12,606 10,885
11/30/95 12473 12,774 10,878
12/31/95 12560 12,852 10,870
1/31/96 12635 12,982 10,934
2/29/96 12573 12,929 10,969
3/31/96 12477 12,769 11,026
4/30/96 12472 12,724 11,069
5/31/96 12455 12,688 11,090
6/30/96 12579 12,809 11,097
7/31/96 12656 12,932 11,118
8/31/96 12663 12,932 11,139
9/30/96 12788 13,065 11,175
10/31/96 12925 13,230 11,210
11/30/96 13099 13,497 11,232
12/31/96 13094 13,436 11,232
1/31/97 13102 13,489 11,268
2/28/97 13217 13,615 11,303
Total Return 32.17% 36.15% 13.03%
</TABLE>
GRAPHIC MATERIAL (48)
This chart shows in pie format the quality breakdown of the fund's securities on
2/28/97, based on total net assets.
<TABLE>
<CAPTION>
Quality Breakdown on February 28, 1997
<S> <C>
AAA 25.0%
AA 4.3%
A 4.8%
BBB 37.8%
Below Investment Grade 28.1%
</TABLE>
GRAPHIC MATERIAL (49)
This bar chart shows the comparison between the fund's Class I distribution rate
of 6.26% and the taxable equivalent rate of 10.36%.
GRAPHIC MATERIAL (50)
The following ling graph hypothetically compares the performance of the fund's
Class I shares to the Lehman Brothers Municipal Bond Index and the Consumer
Price Index (CPI), based on a $10,000 investment from 3/1/87 to 2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
3/1/87 9579 10000 10,000
3/31/87 9526 9894 10,045
4/30/87 9301 9397 10,099
5/31/87 9274 9350 10,135
6/30/87 9402 9625 10,170
7/31/87 9522 9723 10,197
8/31/87 9597 9745 10,251
9/30/87 9371 9385 10,304
10/31/87 9372 9418 10,331
11/30/87 9639 9664 10,340
12/31/87 9803 9804 10,340
1/31/88 10094 10153 10,367
2/29/88 10163 10261 10,394
3/31/88 10085 10142 10,438
4/30/88 10154 10219 10,493
5/31/88 10234 10189 10,528
6/30/88 10477 10338 10,574
7/31/88 10589 10405 10,618
8/31/88 10681 10414 10,663
9/30/88 10856 10603 10,734
10/31/88 11044 10790 10,770
11/30/88 11012 10690 10,778
12/31/88 11161 10799 10,797
1/31/89 11315 11023 10,850
2/28/89 11309 10897 10,895
3/31/89 11326 10871 10,958
4/30/89 11560 11129 11,029
5/31/89 11751 11360 11,092
6/30/89 11911 11515 11,119
7/31/89 11983 11671 11,146
8/31/89 11955 11557 11,163
9/30/89 11916 11522 11,199
10/31/89 12024 11663 11,253
11/30/89 12166 11867 11,280
12/31/89 12253 11964 11,298
1/31/90 12183 11908 11,414
2/28/90 12346 12014 11,468
3/31/90 12334 12018 11,531
4/30/90 12240 11931 11,549
5/31/90 12501 12191 11,576
6/30/90 12645 12298 11,639
7/31/90 12826 12480 11,683
8/31/90 12595 12299 11,790
9/30/90 12583 12307 11,889
10/31/90 12694 12530 11,961
11/30/90 12904 12781 11,987
12/31/90 12879 12838 11,987
1/31/91 13043 13010 12,059
2/28/91 13093 13123 12,077
3/31/91 13157 13128 12,095
4/30/91 13349 13304 12,113
5/31/91 13465 13422 12,150
6/30/91 13518 13409 12,185
7/31/91 13701 13573 12,203
8/31/91 13846 13752 12,238
9/30/91 14045 13930 12,292
10/31/91 14138 14056 12,311
11/30/91 14192 14095 12,346
12/31/91 14476 14398 12,355
1/31/92 14435 14431 12,374
2/29/92 14421 14436 12,418
3/31/92 14491 14441 12,481
4/30/92 14642 14570 12,499
5/31/92 14866 14742 12,516
6/30/92 15084 14990 12,562
7/31/92 15600 15439 12,588
8/31/92 15365 15288 12,623
9/30/92 15387 15387 12,658
10/31/92 15178 15237 12,703
11/30/92 15547 15509 12,721
12/31/92 15786 15668 12,712
1/31/93 15999 15849 12,774
2/28/93 16464 16423 12,819
3/31/93 16412 16249 12,864
4/30/93 16524 16413 12,900
5/31/93 16621 16505 12,918
6/30/93 16916 16781 12,936
7/31/93 16938 16802 12,936
8/31/93 17298 17152 12,972
9/30/93 17488 17347 12,999
10/31/93 17525 17380 13,052
11/30/93 17594 17227 13,062
12/31/93 17882 17591 13,062
1/31/94 18077 17791 13,097
2/28/94 17877 17331 13,141
3/31/94 17341 16625 13,186
4/30/94 17360 16767 13,205
5/31/94 17460 16912 13,214
6/30/94 17495 16809 13,259
7/31/94 17726 17117 13,294
8/31/94 17779 17177 13,348
9/30/94 17649 16924 13,384
10/31/94 17467 16623 13,393
11/30/94 17187 16322 13,410
12/31/94 17423 16681 13,410
1/31/95 17847 17158 13,464
2/28/95 18289 17658 13,518
3/31/95 18530 17861 13,563
4/30/95 18616 17882 13,607
5/31/95 19066 18453 13,635
6/30/95 19085 18292 13,662
7/31/95 19209 18466 13,662
8/31/95 19404 18700 13,697
9/30/95 19565 18818 13,725
10/31/95 19814 19091 13,770
11/30/95 20066 19408 13,760
12/31/95 20265 19594 13,751
1/31/96 20375 19743 13,832
2/29/96 20358 19609 13,876
3/31/96 20160 19358 13,948
4/30/96 20180 19304 14,003
5/31/96 20219 19296 14,029
6/30/96 20425 19506 14,038
7/31/96 20576 19684 14,064
8/31/96 20651 19680 14,091
9/30/96 20936 19955 14,136
10/31/96 21203 20181 14,181
11/30/96 21528 20550 14,208
12/31/96 21511 20464 14,208
1/31/97 21571 20503 14,254
2/28/97 21766 20691 14,298
Total Return 117.66% 106.91% 42.98%
</TABLE>
GRAPHIC MATERIAL (51)
This bar chart shows the comparison between the fund's Class II shares
distribution rate of 5.83% and the taxable equivalent rate of 9.65%.
GRAPHIC MATERIAL (52)
The following line graph hypothetically compares the performance of the fund's
Class II shares to that of the Lehman Brothers Municipal Bond Index and the
Consumer Price Index (CPI), based on a $10,000 investment from 5/1/95 to
2/28/97.
<TABLE>
<CAPTION>
Period Ending Fund Index Index
<S> <C> <C> <C>
5/1/95 9,899 10000 10,000
5/31/95 10,138 10319 10,020
6/30/95 10,152 10229 10,040
7/31/95 10,221 10326 10,040
8/31/95 10,319 10458 10,066
9/30/95 10,399 10523 10,086
10/31/95 10,525 10676 10,120
11/30/95 10,662 10853 10,112
12/31/95 10,762 10957 10,105
1/31/96 10,814 11041 10,165
2/29/96 10,800 10966 10,198
3/31/96 10,692 10825 10,251
4/30/96 10,697 10795 10,291
5/31/96 10,712 10791 10,310
6/30/96 10,816 10908 10,316
7/31/96 10,890 11008 10,336
8/31/96 10,925 11005 10,356
9/30/96 11,070 11159 10,389
10/31/96 11,205 11286 10,422
11/30/96 11,371 11492 10,442
12/31/96 11,357 11444 10,442
1/31/97 11,392 11466 10,475
2/28/97 11,489 11571 10,508
Total 14.89% 15.71% 5.08%
Return
</TABLE>
